Commerce and Industry Minister Suresh Prabhu talks to Anilesh S. Mahajan about the strategy to make exports a big part of the plan to make India a $5 trillion economy and how India is resetting trade ties with China and other big powers. Edited excerpts.
Q: You talked about a plan to make India a $5 trillion economy and making exports a vital part of it. What is the progress?
If we grow at 7.5 per cent, we will touch $5 trillion in the next seven-eight years. I am very sure that in the next few years we will cross 8 per cent. Growing GDP is a function of several activities, including manufacturing, services and agriculture. But it is not as simple as that. It has to be sustainable growth, backed by a sound plan. Let's take manufacturing, which contributes 16 per cent to GDP. We want to take it to 25 per cent. Let's first focus on making it 20 per cent of $5 trillion first. This trillion dollar will depend on how much individual sectors contribute. Here, the role of industry and industry associations is important.
Is industry ready for this? This will require many changes.
After a lot of persuasion, industry has agreed. It recently released a paper on this. It also set up a task force comprising members from different industries, Niti Aayog and other stakeholders to prepare a strategic vision. We are working on a few things to make it happen, including our soon-to-be-released manufacturing policy.
Along with this, we have identified 12 areas in services. The next $1 trillion will come from agriculture. The prime minister has already committed to doubling farmers' income in five years. The contribution of agriculture to GDP will grow accordingly.
Can you share the blueprint of the micro plan?
We are preparing district-level plans. There are other building blocks too. One is industrial policy to increase manufacturing. The second is foreign trade, where we are overhauling strategy. For example, we are targeting new markets in Africa. The new products for these new markets are being decided on the basis of market research for which we have roped in EXIM Bank. Recently, I sent the commerce secretary to Uganda. I am going to Southern Africa in April-end. I plan to tour countries in Western, Central and North Africa. And I have already done Latin America, Central America and South America. I have met company heads. I have met 100 trade ministers to push exports.
Foreign trade and foreign policy will drive things. We are reviewing all our Foreign Trade Agreements, or FTAs, to look at ways to promote exports. We are taking a proposal to the cabinet for setting up trade promotion centres in at least 10 countries. The $5 trillion GDP is a vision, a mission.
India is caught in the crossfire in the trade war between the US and China. How do you see the situation?
It's a great opportunity for India. For example, we had a WTO mini-ministerial in New Delhi recently which 53 countries participated. In the previous WTO meeting, India was blamed for the deadlock. This time we took the lead to bridge differences. We are working on a two-pronged strategy - a) multilateralism, which is why we took this initiative and b) bi-lateralism, where we have offered many African countries a different kind of FTA. We are reviving talks for the FTA with the EU. We have offered FTAs to several Latin American and Central Asian countries too. I offered the Russians - they have a group called the Eurasia Economic Union with five other east European and central Asian countries - to start talks on an FTA. We are also pushing for improvement in standards for our services and products for larger acceptability.
The US has challenged the WTO. India is also indirectly challenging it. What is the future of the WTO?
We have to work cautiously and create a constituency for this in India. We had deliberations with stakeholders, and for me to decide the future of the WTO, I need to have a future agenda of the WTO that is agreeable in India.
We are bridging the trade deficit of $30 billion with the US by importing oil and gas. Boeings will also come. Do you think it is a big issue with the US?
It is a big issue. But we have to accept that there are things that cannot be done immediately about it. For example, oil went up to $72 a barrel suddenly. Secondly, we have no choice in the short term but to import planes. So, we are doing two things. One is diversifying the energy basket. Two, drones will be a trillion-dollar market, and so I have set up a task force under my deputy, Jayant Sinha, to prepare a plan for manufacturing drones in India. For airplanes, I am telling most manufacturers that they will have to manufacture in India over a period. Recently, I met a delegation from France's aviation sector. They will prepare an action plan by July for bringing French aeronautical manufacturing to India. In May, we will host a US-India aeronautical summit in Mumbai.
Last year, despite our efforts, the trade deficit with China rose to $58 billion. Where is India going wrong?
For the first time, we have a signed document in which the Chinese have said that they will work to balance trade with India. They have committed to opening industrial parks in India. It's a good time for India to step in as China will stop making some products because of rising labour costs there. Because of their surplus economy, there is no better investor than the Chinese. This will bring down the trade deficit. The Chinese have also agreed to give access to Indian products.
But regulatory issues are always one of the biggest hurdles in trade. They have said that Indian companies, regulators and other stakeholders can come to China for addressing regulatory issues G2G (government to government). On B2B, they said they will set up meetings so that Indian products can be sold in China. I have asked the ambassador in Beijing to meet Chinese officials and work out the details.
Indian exporters say the Chinese don't obey the rules of the game.
These are regulatory issues. They are signing on the dotted line. Even this time, they were not agreeing. Because of the (global) situation, they have assured to work with us.
How are you dealing with the rising trade deficit in the short term?
We can hardly do anything in the short term. The price of crude oil is rising. We have taken a number of steps to reduce gold imports but Indians appetite for the yellow metal is only increasing.