ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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India’s Electronics Manufacturing Sector

The Indian electronics industry’s high dependence on imports can be directly linked to trade and investment policy liberalisation, in the absence of vertical industrial policy measures to improve productivity and capabilities. With the failure of passive industrial policies oriented towards attracting foreign direct investment, growth in domestic electronics manufacturing will have to come from a comprehensive policy approach encompassing trade, FDI, technology, taxation, infrastructure development, environmental protection, and education and skill development. Apart from significantly increasing the public fund outlay for research and development, such an industrial policy intervention must subsidise the cost of commercialising new innovations and expand the market for domestic electronics products by interlinking the demands of upstream industries with downstream manufacturers through incentives.

India's Comprehensive Trade Agreements

India's recent overlapping comprehensive trade agreements, which combine accelerated goods trade liberalisation with deeper and wider liberalisation in agriculture, "investment" and services, have wide ramifications on her development despite the extent of liberalisation that the country has undertaken over the last two decades. It is argued that the growing trade deficit and the changed nature of recent foreign direct investment inflows already throw up industrial policy and financial regulatory challenges before India for developing dynamic competitiveness and reducing financial fragility in the economy. The investment provisions in the recent comprehensive trade agreements compound the dissonance between India's development needs and industrial and macroeconomic policies by putting World Trade Organisation-plus constraints on the country's regulatory ability.

Changing the Investment Policy Menu

While there is a menu of options before host countries for regulating foreign investment, some of them might not be compatible with their obligations under the various international agreements signed up by them.

A Sectoral Impact Analysis of the ASEAN-India Free Trade Agreement

Under the asean-India Free Trade Agreement, the trade bloc's members will have increased access to the Indian market for semi-processed and processed agricultural products and close substitutes, which could adversely affect the country's agricultural sector. Indian small and medium enterprises in food and other agriculture-related products, some intermediate goods, and light manufacturing products are also likely to suffer. But import liberalisation in intermediate goods will encourage multinational corporations to undertake production rationalisation across the region in the transport equipment, machinery, chemicals and iron and steel sectors. This could lead to India's deeper integration in production networks in such sectors. All this, combined with the neglect of the development needs of domestic agriculture and a manufacturing base for the expected gains in service sector liberalisation with asean, is likely to make India's employment and livelihood issues even more challenging.

Foreign Direct Investment Concepts: Implications for Negotiations

Free trade agreements and bilateral investment treaties make privileges for and treatment of foreign direct investors legally binding. However, apart from the concerns of being able to capture the "real" fi nancial and economic contribution of foreign direct investment infl ows, developing country governments promoting such investment need to be aware that FDI defi nitions are also about protecting the "rights" of the so-defi ned investors in the host country. Keeping this in mind, the article analyses India's current FDI policy.
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