The objective of any country's trade policy must be economic growth.
As a developing economy, India must balance protectionism with free trade. India can benefit a great deal from free trade because of its unique resources. Specifically, India's large population of educated English-speakers is a great resource for it because it is the only place where such people are available at comparatively low wages.
On the other hand, it may be necessary for India to engage in some protectionism. This is so that it can protect its infant industries. So India must, for example, decide if (and how long) it will continue to ban foreign investment in retail businesses. And it must decide if it will continue to use anti-dumping measures to aggressively inhibit trade.
There will be various answers to this question. I would say that the overall trade policy of India would be to maintain a healthy balance between developing export avenues and generating imports. Since the 1990s, India has been an open market and its trade policy has undergone significant transformation. As it has grown in overall economic strength, India's desire for its trade policy is to drive towards a strong combination for both consumers and producers. This is reflected in its Foreign Trade Policy for 2004- 09 which states that India has to develop the import process that helps to continue economic growth. At this point in time, India is also looking to forge worldwide alliances with other nations that can help it fulfill its goals.
Any country as large as India has many different objectives of its trade policies and the relative priorities of these objective keep on changing from time to time with progress in the economy of the country, changing world economic scene and economic ideologies of the government laying down such policies. In general we can the main objectives of trade policy of India can be identified as the following.
- Rapid economic growth of the country that will lead to improvement of the living standards of people.
- Upliftment of the less privileged class of the people. Also greater emphasis is given to improvement of farming sector.
- Similarly special attention is paid to development of small scale sector.
- Balanced growth of different geographical regions of the country.
- Earlier the country had followed a policy of very strong public sector role in economic development. However, in last two decades there has been steady and rapid emphasis on private sector.
- Similarly, earlier India had followed a policy of providing high degree of protection to local industries from foreign competition. But now the economy has become more open to international trade including foreign direct investment.
- Also the role of central planning in regulating growth of different sectors of trade and industry has been progressively reduced.