India’s five-year plans (FYPs) highlighted the import substitution policy under India’s inward-looking strategy. This meant that the goods that can be produced domestically should be produced domestically rather than importing from the foreign market. The domestic producers could thus sell their products in the Indian markets without any foreign competition. The main aim here was to boost the economic growth of the nation and achieve self-sufficiency. Such an economy is also known as a closed economy. Up until the 1990s, India chose to remain as a closed economy.

The system of import substitution and import restrictions was implemented with the help of a number of different methodsー through the imposition of a) Tariffs, b) Quotas.

Extremely high tariffs were levied on imported goods making them very expensive for the Indian consumers. This eventually forced them to buy goods that have been made domestically rather than the imported items.

The quota system led to the fixing the maximum limit on the imports made by a domestic consumer. Only a certain amount of very essential items such as raw materials and capital equipment were allowed to be imported and used. That means, if the producers wanted extra materials, they had to fend for themselves.

No doubt that the inward looking strategy brought a rise in the foreign trade sector with the domestic producers gaining exponentially but towards the early 1990s, the Indian law makers realised that there are many loopholes in the current foreign trade policy that they adopted. The main problem was that the domestic producers made no sincere efforts to step up the quality of their products, forcing the Indian consumers to purchase whatever was supplied by them.

In 1962, a review committee was formed to discuss the changes required in the government’s existing foreign trade rules and hence, in 1985, then Finance Minister V.P. Singh announced the EXIM Policy (short for Export-Import Policy) which formulated the export and import policies of the country. Initially, the policy was meant to be followed for a period of three years. Later from 1991, the policies were revised every 5 years in view of the changing international economic context. The EXIM policy came into being to get a better view of the trade situation of the country and to correct trade deficits, if any.

In the year 1991, India received a major setback. The Indian government availed a loan of $7 billion from the IMF (International Monetary Fund) and the World Bank due to its inability to manage the economic condition of the country. In order to avail the loan, these international agencies expected India to liberalise, privatise and globalise its economy. The Indian government thus announced the New Economic Policy (NEP), popularly known as the LPG (Liberalisation, Privatisation, Globalisation) policies. Under the New Economic Policy, quantitative restrictions that were imposed after independence were substantially removed. For example, by the year 2001, import restrictions on manufactured consumer goods and agricultural products were completely eliminated. Similarly, tariffs were removed to a great extent in order to increase the competitiveness of the domestic goods in the foreign markets and to improve the quality of the products.

The first EXIM policy came into effect in 1992 and was effective until 1997. This policy aimed at removing the various protectionist measures that were taken by the Indian government previously. After that, the second EXIM policy started in the same year (1997) and stayed up until 2002. This time the focus was on making India a globally oriented economy through the adoption of a set of schemes such as the Export Promotion Capital Goods Schemes and Advanced License Schemes aimed at increasing investments from abroad. The next EXIM policy emerged after 2 years i.e. in 2004 up to 2009 (major trade decisions were taken under this EXIM policy which is why it is also called the ‘Trade Constitution’), under which newer policies such as Target Plus which focussed on providing incentives to producers and exporters with duty-free credit and Free Trade Zones. Soon after, the fourth EXIM policy came into effect from 2009 till 2014 which brought in new initiatives known as Focus Market scheme and product market scheme to help exporters compete in foreign markets and incentivise the export of those products which have high employment intensity. The fifth EXIM policy came after one gap year and came into effect in 2015 and stayed till 2020. This policy focussed on the export as well as the manufacturing services to improve the ease of doing business to increase India’s exports and thus increase its participation in the global market.

Fig 1. Imports of goods and services (% of GDP) – India | Source: World Bank

Fig 2. Exports of goods and services (% of GDP) – India | Source: World Bank

On March 31, 2020, the Government of India decided to extend the Foreign Trade Policy 2015-2020 for one year in light of the Covid-19 situation. It was to expire on March 31, 2021, but the Directorate General of Foreign Trade (DGFT) again extended FTP 2015-20 up to September 30, 2021, and it has been operational since.

References:

1. Arora, S. (2019). What are the objectives of Foreign Trade Policy in India? Legodesk. https://legodesk.com/legopedia/foreign-trade-policy-india/

2. India’s International Trade Policy – EXIM Policy. Economics Discussion. https://www.economicsdiscussion.net/international-economics/indias-international-trade-policy-exim-policy/4241

3. Soares, N. (2014). Foreign Trade Policy of India since 1980. Slideshare. https://www.slideshare.net/NikhilSoares/foreign-trade-policy-of-india-since-1980

4. Saluja, N. (2021). Govt extends current foreign trade policy till September. The Economic Times. https://m.economictimes.com/news/economy/foreign-trade/govt-extends-current-foreign-trade-policy-till-september/amp_articleshow/81777971.cms

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With the similar objective of promoting investments through transparent and expedient approvals by implementation of an online system, further delegation, rationalization and standardization of the process as part of ease of doing business in March 2020, the environment ministry proposed a draft notification to replace the 2006 EIA. Currently, the notification is at the stage of public comments. This draft raised key concerns among the communities as it primarily provides for a reduction of time period from 30 days to 20 days for the public to submit their responses during a public hearing for any application seeking environmental clearance.

It also requires that the public hearing process be completed in 40 days compared to 45 days under the 2006 notification. In addition to this projects can receive clearance post-facto, i.e. a project operating in violation of the EPA can now apply for clearance and it also increased the discretionary power of state government to waive the process of getting clearance for strategic projects (where it can include long list of projects).

Background of Environment Impact Assessment and Public Hearing

Saving our planet, lifting people out of poverty, advancing economic growth… these are one and the same fight. We must connect the dots between climate change, water scarcity, energy shortages, global health, food security and women’s empowerment. Solutions to one problem must be solutions for all.

– Ban Ki-Moon

India issued the country’s first Environment Impact Assessment (EIA) notification in 1994, under the Environment (Protection) Act (EPA) of 1986. This was later replaced by a modified draft in 2006. In both forms, the EIA performs the important function of assessing and regulating the impact of new projects on the environment and empowers the public to participate in the process of approvals.

The Environmental Impact Assessment report, Environment Management Plan and details of public consultations have to be submitted by the project proponents to the Expert Appraisal Committee (EAC) for appraisal of the project. The 2006 notification made clearance of a four-step procedure with screening, scoping, public consultation, and appraisal as mandatory steps to be followed by project proponents before clearance could be granted. After these four steps have been followed, the recommendation for acceptance or rejection of EC is sent to the regulatory authority, which is the MoEF for category ‘A’ and State Level Environment Impact Assessment Authority (SEIAA) for category B projects. Public consultation is the third step in the process of environmental clearance.

The enactment of this procedure was influenced by series of environmental problems which can be exemplified through the cases such as Bichri village where many villages, agricultural land water of the wells, surface water, cattle, and human beings were badly affected because of the industrial operation in the district of the Udaipur, state of Rajasthan and Tanneries case where public hearing before setting up of the factory was considered as an important measure. In the Samarth Trust Case, the Delhi high court had considered EIAs “a part of participatory justice in which the voice is given to the voiceless and it is like a jan sunwai, where the community is the jury”.

Sustainable Development

It is often argued that the process of environment clearance is leading to piling up of files and delays in projects. Developers complain that the EIA regime dampened the spirit of liberalization, leading to red-tapism and rent-seeking. This is the present state of implementation of existing mechanisms in Kerala, the administration took 1,049 days to clear the construction of the IT park project of M/s L&T Tech Park Ltd, instead of 105 days.

Amidst this, in the case of Vellore Citizens Welfare Forum vs UOI  it is held that companies are vital for the country’s development, but having regard to pollution, the doctrine of ‘Sustainable Development’ must be adopted by them as a balancing concept. If final clearance is granted after taking into account the environmental, social, and health concerns, then it can be said that the government is using this process as a tool to ensure sustainability which implies that the delay in clearance should be encountered while balancing it with the above concerns.

Reduced capacity to clearance and administrative inefficiency in granting clearance was often highlighted right from Sterlite to LG polymers’ case which has shown us the dampening spirit of the government towards already existing environmental laws.

Conclusion

A solution to development should also solve the problem of mounting environmental challenges. Introduction of environmental impact assessment is the hallmark of participatory governance in the country and dilution of this in any way hampers the primary aim of promoting a sustainable environment. Encountering bureaucratic inefficiency would always be a welcoming step but granting discretionary powers to the same authority would always raise concerns among the communities.

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Coronavirus (CoV) is a large family of viruses that causing illness ranging broadly in severity. It ranges from the common cold, fever to more severe diseases like Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV).

Along with all other serious problems related to the coronavirus, we can’t ignore the fact that outbreak of COVID-19 in China is expected to have a considerable impact on the global economy including economic slowdown, foreign trade, supply chain disruption, commodities, and logistics. 

Impact of the Coronavirus in India…

To control the toll, the Indian govt has taken some severe steps towards it. Govt has decided a complete social and economic lockdown of India for the next 21 days, i.e, from 24 Mar to 14 Apr, to contain the spread of coronavirus. The Indian economy was already staggering under a falling demand, high unemployment, and decrement of industrial output and profits, all of which happening together for several quarters. Now the lockdown would severely impact the supply side of the economy, i.e, production and distribution of goods and services, except for the essential items that are exempt. Both production and distribution of non-essentials have come to a suspension. This impacts at least 55% of the economy for 21 days lockdown or about Rs 2 lakh crore. It may even be more due to previous partial lockdowns by various state governments. The impact of the move will spill over to FY21, which begins on April 1. Although India may not fall into a recession, unlike the eurozone, the US or Asia-Pacific major trade contacts with china, yet the effect on the GDP growth will be significant. 

The quarterly GDP growth has been consistently falling since Q4 of FY18; from 8.1% in Q4 of FY18 to 4.7% in Q3 of FY20. 

Major rating agency like Moody’s sharply slashed its previous projection for India’s GDP growth in FY20 from 5.3% to 2.5%. Crisil slashed its base case GDP growth forecast for India in FY21 from 5.7% to 5.2%. It warned that there are greater downside risks if the pandemic is not contained by April-June 2020, or if it spreads rapidly in India, affecting domestic consumption, and investment(source). 

On Mar 26, Finance minister Nirmala Sitharaman announced a $23 billion package pointed at cushioning the panic. A day later, RBI and central banks also made a sharp interest rate cuts. CLSA reported pharmaceuticals, chemicals, and electronics businesses may face supply-chain problems and prices will rise by 10%. The report also tells that India could also be a recipient of positive flows since it appears to be the least-impacted market. 

Let us take a look at the sector-wise impact on Indian industry:

Chemical Industry: China is a major supplier of Indigo that is required for denim. It was found that 20% of the production has been impacted due to the disruption in raw material supply.

Shipping Industry: Coronavirus outbreak has impacted the business of cargo transportation service providers. Per day per vessel has declined by more than 75-80% in dry bulk trade. 

Auto Industry: Indian carmakers imports between 10-30% of auto parts from Chinese firms. It is expected to result in an 8-10% contraction of Indian auto manufacturing in 2020 if the threat of coronavirus stays longer.

Pharmaceuticals Industry: China is the world’s largest exporter of active pharmaceutical ingredient (APIs) and intermediates. Approx. 70% of India’s total API requirement is met by imports from China.

Textiles Industry: India exports around 20-25 million kg of cotton yarn a month to China. Due to the coronavirus outbreak, several industries in China have stopped operations. Cotton yarn prices have fallen by 3-4% in the domestic market. 

IT Industry: The 3 weeks lockdown period adversely impacted the revenue and growth of Indian IT companies.

Tourism and Aviation: Due to the coronavirus outbreak, airlines and tourism services are suspended that will impact the tourism sector and revenue.

The Federation of Indian Chambers of Commerce and Industry (FICCI) said (that there was a strong hope of economic recovery in the last quarter of the current fiscal. However, the coronavirus epidemic has made the recovery extremely difficult in the near to medium term(source). 

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