India Urged to Seal EU Trade Deal for Economic Boost

Arvind Panagariya Urges India to Seal EU Trade Deal and Revive Land, Labour Reforms for Economic Leap

In a compelling address at the BT India@100 summit, renowned economist Arvind Panagariya emphasized the urgent need for India to accelerate its economic reforms to achieve ambitious growth targets. Panagariya, a former vice-chairman of NITI Aayog and a key architect of India's policy landscape, highlighted that the country stands at a pivotal juncture where decisive actions in trade, land, and labour sectors could propel it towards becoming a developed economy by 2047, marking the centenary of India's independence. His insights underscore the importance of integrating India more deeply into global value chains while addressing domestic bottlenecks that have long hindered industrial expansion and job creation.

Central to Panagariya's recommendations is the imperative to finalize a free trade agreement (FTA) with the European Union (EU). He argued that such a deal is not merely a diplomatic milestone but a strategic necessity for boosting India's exports and attracting foreign investment. The EU, with its vast market of over 440 million consumers and a combined GDP exceeding $18 trillion, represents an untapped opportunity for Indian goods and services. Panagariya pointed out that negotiations have been ongoing since 2007 but have stalled due to issues like tariff reductions, intellectual property rights, and sustainable development clauses. He stressed that resolving these hurdles promptly could open doors for sectors such as textiles, automobiles, pharmaceuticals, and information technology, where India holds competitive advantages. By sealing the deal, India could diversify its trade dependencies away from traditional partners like the US and China, mitigating risks from geopolitical tensions and supply chain disruptions. Moreover, Panagariya noted that an EU FTA would align with India's broader strategy of pursuing bilateral and multilateral trade pacts, including those with the UK, Australia, and potentially re-engaging with the Regional Comprehensive Economic Partnership (RCEP). He warned that delays could allow competitors like Vietnam and Bangladesh to capture market share, especially in labor-intensive industries.

Beyond trade, Panagariya called for a reboot of land and labour reforms, describing them as the "twin engines" of India's growth story. On land reforms, he critiqued the current Land Acquisition Act of 2013, which, while aimed at protecting farmers' rights, has inadvertently created cumbersome processes that deter large-scale infrastructure and industrial projects. Panagariya advocated for amendments to streamline land acquisition, reduce litigation, and introduce market-oriented mechanisms like land pooling or leasing models. He drew parallels with China's rapid urbanization, where efficient land use facilitated massive manufacturing hubs. In India, he argued, outdated land laws contribute to fragmented holdings and high costs, stifling the development of special economic zones (SEZs) and industrial corridors. Reviving these reforms, he suggested, would not only boost manufacturing but also support the government's "Make in India" initiative, potentially creating millions of jobs in sectors like electronics and renewable energy. Panagariya emphasized that without easier access to land, India's ambition to become a global manufacturing powerhouse remains elusive, especially as multinationals seek alternatives to China amid the "China Plus One" strategy.

Equally critical, according to Panagariya, are labour reforms. He lamented the rollback of progressive changes attempted in recent years, such as the four Labour Codes introduced in 2019-2020, which aimed to consolidate 29 central labour laws into a more flexible framework. These codes sought to simplify compliance, allow greater flexibility in hiring and firing, and promote fixed-term contracts to encourage formal employment. However, opposition from trade unions and political hurdles have slowed their implementation at the state level. Panagariya argued that India's rigid labour laws, with their emphasis on job security over productivity, have led to a predominance of informal sector jobs, where workers lack social security and benefits. He cited data showing that only about 10% of India's workforce is in the organized sector, limiting overall economic efficiency. By rebooting these reforms, India could incentivize firms to scale up operations, invest in skill development, and generate high-quality employment. Panagariya referenced successful models from countries like South Korea and Taiwan, where labour flexibility coincided with rapid industrialization and rising wages. He also tied this to India's demographic dividend, noting that with a young population entering the workforce, failure to create jobs could lead to social unrest and wasted potential.

Panagariya's vision extends to broader economic policies, including fiscal discipline and infrastructure development. He praised recent government initiatives like the Production-Linked Incentive (PLI) scheme and the National Infrastructure Pipeline but urged for deeper integration with global standards. On the fiscal front, he recommended maintaining a prudent deficit while investing in education and healthcare to build human capital. He also touched on the need for agricultural reforms to complement industrial growth, suggesting that freeing up farm markets could enhance productivity and rural incomes, indirectly supporting urban migration and labour supply.

In essence, Panagariya's message at the BT India@100 event was one of optimism tempered with urgency. He believes India has the potential to achieve an annual growth rate of 8-10% over the next two decades, potentially reaching a $10 trillion economy by 2035 and developed status by 2047. However, this requires bold leadership to overcome vested interests and implement these reforms without delay. He cautioned against complacency, pointing out that global economic shifts, including deglobalization trends and technological disruptions like AI, demand proactive measures. By sealing the EU trade deal and reviving land and labour reforms, India can position itself as a resilient, innovative economy on the world stage. His call to action resonates with policymakers, businesses, and citizens alike, reminding them that the window for transformative change is now, as India navigates its path to centennial prosperity. (Word count: 842)

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https://www.businesstoday.in/latest/economy/story/arvind-panagariya-at-bt-india-100-india-must-seal-eu-trade-deal-reboot-land-and-labour-reforms-now-488535-2025-08-08