Day 43 – Q.1 Do you think India needs to adopt a more liberal trade regime for its economy to prosper? Critically analyse.

  • IASbaba
  • January 9, 2023
  • 0
GS 3, Indian Economy, TLP-UPSC Mains Answer Writing
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Do you think India needs to adopt a more liberal trade regime for its economy to prosper? Critically analyse.

क्या आपको लगता है कि भारत को अपनी अर्थव्यवस्था की समृद्धि के लिए अधिक उदार व्यापार व्यवस्था अपनाने की आवश्यकता है? समालोचनात्मक विश्लेषण करें।


Start with basic intro on liberal trade regime and then critically analyze with various alternative arguments on liberal trade regime.


Liberal trade regime is the removal or reduction of restrictions or barriers on the free exchange of goods between nations. These barriers include tariffs, such as duties and surcharges, and nontariff barriers, such as licensing rules and quotas.


Easing or eradication of restrictions for promoting free trade:

  • Increased exports: A liberalized trade policy would allow Indian firms to access new markets and increase their exports, which would boost economic growth.
  • Improved relations with trading partners: Adopting a liberalized trade policy can also help to improve relations with other countries, as it shows a commitment to open and fair-trade practices. This can be beneficial in terms of building partnerships and strengthening international cooperation.
  • Increased foreign investment: A liberalized trade policy can also attract foreign investment, as it signals to foreign firms that India is open for business and willing to engage in international trade. This can help to create new jobs and drive economic growth.
  • Improved competitiveness: Liberalized trade can help Indian firms become more competitive by exposing them to international competition. This can drive innovation and improve the quality of their products and services.
  • Diversification of the economy: Liberalized trade can help to diversify the Indian economy, as it exposes the country to a wider range of goods and services. This can help to reduce the reliance on any one particular sector or industry, which can be beneficial in terms of economic stability.

Trade liberalization can negatively affect trade within a nation:

  • Poor working conditions: Outsourcing of Indian workers from countries without adequate labour protections will result in poor working conditions. Workers can work for long hours with low wage rates.
  • Threat from developed countries: Trade liberalization can affect the Indian economy of a developing nation due to stiff competition from other established nations. Stiff competition can affect local industry diversity.
  • Crowd out of local business: Promoting free trade will force Indian small-scale farmers out of the market because they can’t compete with subsidized agricultural products from well-developed nations.
  • Reduce tax revenue: Trade liberalization will make India struggle in order to replace revenue lost through import tariffs and other fees.
  • Destruct Indian native culture: Developments of a nation can led to the destruction of indigenous cultures. It may lead to the uprooting of local people due to the increased importation of foreign products.


India’s trade regime should work in a phased manner to address export constraints, review the regulatory and operational framework to reduce the transit costs and create a low-cost operating environment through developed logistics and utility infrastructure for making Indian trade globally competitive.

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