The World Bank has stressed on the fact that India needs to reduce import tariffs and implement regulatory reforms in order to enhance foreign investments and sustainable economic development. In its latest Economic Memorandum on India, the global financial institution said that high trade costs—which are mainly attributed to high import tariffs and non-tariff barriers—are restricting India’s trade openness and its participation in global value chains (GVCs).
As stated by the World Bank, the Gross National Income (GNI) per capita in India was $2,540 in 2023. To achieve the high-income country status by 2047, the per capita income of the country has to rise to almost eight times the current levels. The report also pointed out that high economic growth rate for at least 2 decades is rather rare and rather elusive phenomenon that has eluded most countries.
It has been observed that over the past decade, India’s trade openness has decreased; exports and imports of goods and services as a share of GDP was 46% in 2023, lower than its peak of 56% in 2012. This is despite the fact that the country has made significant improvements in Information Technology and Business Process Outsourcing (BPO) services, the overall trade share has dropped due to restrictive trade policies.
The World Bank stressed that countries moving up the income levels to high from low and middle income categories have been more open in trade. It advised India to cut down on time lost in customs, enhance policy consistency and eliminate policy induced constraints to create a better business environment.
The World Bank/IFC thus believes that, by easing trade restrictions and promoting an open economy, India has a lot of potential to enhance investments, participate more effectively in GVCs and sustain economic development in the long run.
