India needs to invest in education and skill development to address the shortage of high-skilled labour and support growth in advanced manufacturing, according to Ralph Ossa, Chief Economist of the World Trade Organization (WTO).
In an interview with *BusinessLine*, Ossa noted that while no major changes in world trade growth projections were expected immediately, the WTO is increasingly concerned about growing geopolitical tensions and early signs of trade fragmentation.
Ossa highlighted India's existing strengths, particularly its position as a global leader in services, ranking fifth in commercial services exports. However, he pointed out that the country’s merchandise exports, currently ranked 13th, show potential for growth.
“To boost its share in global trade, India could benefit from investing in education and skills training to address the gaps in high-skilled labour, which may support growth in advanced manufacturing. This could help diversify its trade base and enhance its position in global trade,” Ossa said.
Regarding global trade growth, Ossa stated that the WTO’s updated projections would be released next month. While some regional trends may shift, the overall numbers are expected to remain largely consistent with the April forecast. In April, the WTO projected world trade growth at 2.6% in 2024 and 3.3% in 2025, following a decline of 1.2% last year.
“I don’t expect major corrections to the aggregate numbers, but there may be some adjustments to regional trends. Europe, for instance, is underperforming, while Asia is doing better than expected,” Ossa explained. He emphasised that significant changes were not anticipated overall.
The WTO is closely monitoring growing geopolitical tensions, which have started to impact global trade. For example, the Middle East conflict has significantly altered shipping routes, affecting trade flows through the Suez Canal.
“Around 12% of world trade used to pass through the Suez Canal, but that figure has dropped significantly. Ships are now taking the longer route around the Cape of Good Hope, increasing travel costs and freight expenses, particularly impacting trade between Asia and Europe,” Ossa said.
While these conflicts have not yet had a major impact on energy markets or the global economy, the WTO remains concerned about the broader implications of trade fragmentation.
Ossa cited the ongoing trade tensions between the US and China, noting that trade between the two countries has grown 30% less quickly compared to trade between each country and third-party nations, signalling a shift in trade patterns.
“We are seeing signs of decoupling,” Ossa stated, adding that the WTO had studied the potential fragmentation of the global economy. “We divided the world into hypothetical geopolitical blocs and found that trade between these blocs is growing slower than trade within them. This is a concerning first sign of fragmentation.”
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