Ashoka Centre for Economic Policy Policy Paper No. 1 India’s Inward (Re)Turn: Is it Warranted? Will it Work? October 2020 Shoumitro Chatterjee, Pennsylvania State University Arvind Subramanian, Ashoka University https://ashoka.edu.in/ACEP India’s Inward (Re)Turn: Is it Warranted? Will it Work? Shoumitro Chatterjee, Arvind Subramanian*1 Ashoka Centre for Economic Policy Policy Paper No. 1 October, 2020 ABSTRACT India is turning inward. Domestic demand is assuming primacy over export-orientation and trade restrictions are increasing, reversing a 3-decade trend. This shift is based on three misconceptions, which we dispel: that India’s domestic market size is big, India’s growth has been based on domestic not export markets, and export prospects are dim because the world is deglobalizing. In fact, India still enjoys large export opportunities, especially in labour-intensive sectors such as clothing and footwear. But exploiting these opportunities requires more openness and more global integration. Abandoning export orientation is thus akin to killing the goose that lays golden eggs. Indeed, given constraints on public, corporate and household balance sheets, abandoning export orientation is akin to killing the only goose that can lay eggs. 1 *Chatterjee: The Pennsylvania State University, University Park, PA, USA. Email:
[email protected]. Subramanian: Ashoka University, Sonipat, HR, India. Email:
[email protected]. This paper builds upon a contribution to the Peterson Institute for International Economics (PIIE) volume on US-India trade relations. We are grateful to colleagues at PIIE and seminar participants at Ashoka University, the Center for Policy Research Delhi, and the Institute for Economic Growth Delhi for comments, and to Abhishek Anand, Sajjid Chinoy, Rana Hassan, Pravin Krishna, Rohit Lamba, T.N.