Benefits of Integrated Common Market for India

Benefits of Integrated Common Market for India

Question: An integrated common market in India can boost inter-state trade based on comparative advantage. Discuss

- India needs to become an economic union

- For this, common currency is not enough

- Free trade areas must exist within Union of India

- India has one of the biggest markets within its own boundaries

- 1.25 billion strong market should be taken advantage of through inter-state trade

- 29 states and 7 UTs are diverse geographically and they should develop an agricultural and industrial framework to leverage comparative advantages

- In India, nearly 63% of the goods (a majority) are transported via a road network

- Biggest barrier to inter state agricultural trade are market distorting rules and guidelines such as ECA and APMC Act

- Also an impediment are the various tax regimes and varying rules and regulations in different states

- States must have industrial policy in association with comparative advantages; industry targeted policies have worked for different economies at different points in time:


- Britain’s capturing the wool industry of Netherlands in 16th century

- France targeting steel, Germany Machinery and US ship building industries of Britain in 19th century

- US automotive industry was targeted successfully in a similar manner by Japan, followed by other south east Asian economies recently

Facts and Stats

- Removal of inter state barriers is an important step for a fully integrated common Indian market

- Proposal of common national agricultural market and introduction of GST is just the first step

- India’s internal trade is less than 15% of its GDP as against EU(20%) and US(40%)
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