Union Budget and the Trade Sector

The Union Budget for 2020–21 emphasised the need to restrict imports. A number of measures were proposed to realise this objective. These include the use of tariffs and non-tariff measures, making Rules of Origin agreed upon in the free trade agreements work efficiently, and effective monitoring of imports and exports. The finance minister spoke of modifying import tariffs for creating a level playing field for micro, small and medium enterprises in several product sectors and using import tariffs to promote the domestic production of electric vehicles and mobile phones.

The Union Budget of 2020–21 was presented against the backdrop of growing concerns about India’s ability to maintain its position as a meaningful participant in the process of global integration. In early November 2019, India withdrew from the 16-member mega

regional trade agreement, the Regional Comprehensive Economic Partnership (RCEP). The government’s decision came on the back of an all-round opposition by domestic enterprises whose main plank was that they would not be able to face import competition stemming from the steep reduction in tariffs being negotiated in the RCEP (Dhar 2019). This apprehension of the domestic enterprises was fuelled by two factors: First, the steep increase in imports, resulting from the implementation of the three free trade agreements (FTAs) with the Association of South East Asian Nations (ASEAN), Korea and Japan that had adversely affected domestic businesses, and second, the presence of China in the RCEP could increase India’s imports from its northern neighbour.