RESTRICTED WT/TPR/G/403 25 November 2020 (20-8527) Page: 1/22 Trade Policy Review Body Original: English TRADE POLICY REVIEW REPORT BY INDIA Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), the policy statement by India is attached. Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on India. WT/TPR/G/403 • India - 2 - Contents 1 INTRODUCTION .......................................................................................................... 4 2 ECONOMIC ENVIRONMENT .......................................................................................... 5 2.1 Domestic Economy ...................................................................................................... 5 2.1.1 Recent growth record ................................................................................................ 5 2.1.2 Savings and investment ............................................................................................ 6 2.1.3 Inflation .................................................................................................................. 6 2.1.4 Employment and labour market scenario ..................................................................... 6 2.2 Trade Performance ...................................................................................................... 6 2.2.1 Merchandise Exports, Imports and Trade Balance ......................................................... 6 2.2.2 Direction of merchandise trade ................................................................................... 8 2.2.3 Services trade .......................................................................................................... 8 2.3 Investment Profile ....................................................................................................... 9 2.3.1 Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) .......................... 9 2.3.2 Outward investment by India ....................................................................................10 2.4 Monetary and Fiscal Policy ...........................................................................................10 3 REFORMS: ECONOMIC POLICY AND OTHER INITIATIVES .......................................... 10 3.1 Economic Reforms and Better Delivery of Services ..........................................................10 3.1.1 Goods and Services Tax (GST) ..................................................................................10 3.1.2 Insolvency and Bankruptcy Code ...............................................................................10 3.1.3 Merger of public sector banks ....................................................................................11 3.1.4 Government e-marketplace .......................................................................................11 3.1.5 Make in India ..........................................................................................................11 3.1.6 Digital India ............................................................................................................11 3.1.7 Startup India ...........................................................................................................12 3.1.8 Skill Development ....................................................................................................12 3.1.9 Direct Benefit Transfer .............................................................................................12 3.1.10 Mudra Mission .......................................................................................................12 3.2 Labour Policy Reforms .................................................................................................13 4 EASE OF DOING BUSINESS AND TRADE FACILITATION ............................................. 13 5 TRADE AND INVESTMENT POLICIES .......................................................................... 15 5.1 FDI Policy .................................................................................................................15 5.2 Intellectual Property Rights (IPRs) ................................................................................16 6 INDIA AND THE WTO: STRENTHGETHING MULTILATERAL SYSTEM ........................... 16 6.1 Appellate Body ...........................................................................................................16 6.2 WTO Reform ..............................................................................................................16 6.3 Special and Differential Treatment ................................................................................17 6.4 Fisheries Subsidies .....................................................................................................17 6.5 Services ....................................................................................................................17 7 INDIA'S BILATERAL TRADE ENGAGEMENTS: UNLOCKING MUTUAL BENEFITS ........... 17 WT/TPR/G/403 • India - 3 - 7.1 South Asia Region ......................................................................................................18 7.2 South East and East Asia .............................................................................................18 7.3 Australia and New Zealand ..........................................................................................18 7.4 Americas ...................................................................................................................18 7.5 Europe ......................................................................................................................18 7.6 CIS ...........................................................................................................................18 7.7 Middle East and Africa .................................................................................................19 7.8 Other Agreements and Negotiations ..............................................................................19 8 CHALLENGES ............................................................................................................. 19 8.1 Manufacturing Challenge .............................................................................................19 8.2 Infrastructure Development .........................................................................................19 8.3 The COVID-19 Challenge .............................................................................................20 8.4 Government's Response to COVID-19 ...........................................................................21 9 CONCLUSIONS AND LOOKING AHEAD ....................................................................... 22 WT/TPR/G/403 • India - 4 - 1 INTRODUCTION 1.1. The Seventh Trade Policy Review of India is taking place at a time when the world is witnessing an unprecedented health crisis with the contagious COVID-19 hitting economies across the world in rapid succession. Global growth has been severely affected and substantial risks of more severe outcomes remain. In its June 2020 update, the International Monetary Fund (IMF) has projected that global output would contract by 4.9% in 2020-21.1 1.2. After a brief period of moderation, the Indian economy had begun to regain momentum towards the end of 2019 with the Index of Industrial Production (IIP) rebounding from negative growth at the end of 2019 to 5.2% in February 2020, the highest level observed since July 2019. The pandemic and the preventive country-wide lockdown in late March 2020 however affected this revival, and has linked India's economic recovery to the containment of COVID-19, within its own territory as well as globally. 1.3. During the period under review, the Government has focused on carrying out structural reforms and ensuring inclusive growth. These reforms, along with a host of measures taken by the government after the outbreak of COVID-19, should enable the country to bounce back on its targeted growth path. 1.4. The fundamentals of the Indian economy are strong and this has ensured macroeconomic stability. Inflation is within limits and FDI inflows have increased substantially in the recent years with the highest ever FDI inflow of USD 74.39 billion during the financial year 2019-20. Improvement in the trading environment has enabled the country to better its position in the World Bank’s Doing Business ranking from 142 in 2015 to 63 in 2019.2 India’s position in the Global Innovation Index has also risen from 81 in 2015 to 52 in 20193, while its ranking in World Bank Logistics Performance Index changed from 54 in 2014 to 44 in 20184. These developments clearly suggest an improved confidence of the global business and trade in the Indian economy. 1.5. The Government envisions that India would be a USD 5 trillion economy by 2024-25. The ability to boost investments and an improved performance in trade would substantially contribute towards the success of this endeavour. India’s low debt leverage, progress made in financial inclusion and formalization of the economy can result in credit becoming a key contributor to driving the economic growth. Infrastructure development is a cornerstone of the Indian growth strategy, with its strong backward and forward linkages that can fuel the economy and improve