- Monday, January 13, 2025
By: Shubham Ghosh
After several years of scepticism over free trade deals, India has suddenly started signing a series of fresh pacts with a number of countries to curb trade barriers, slash tariffs and gain preferential access to markets across the world.
Earlier in 2022, New Delhi entered into a comprehensive economic agreement with the United Arab Emirates besides inking another one, an ambitious one, with Australia, committing to cutting tariffs by a whopping 85 per cent. Negotiations are also underway to reach free trade agreements (FTAs) with the UK and the European Union.
With the UK, India is reportedly working “intensively” to conclude a “majority of talks on a comprehensive and balanced FTA by the end of October 2022,” sources in London said last week.
Indian commerce and industry minister Piyush Goyal even said earlier in August that India is working on FTAs with many other nations while there are more who have shown interest in partnership with India but his ministry lacked adequate resources to negotiate simultaneously with more countries.
About the re-launch of FTA negotiations with the EU after a wait, Goyal said it reflected the “new India which wishes to engage with the developed world as friends, from a position of fairness”, BBC reported.
These agreements are expected to cover a range of services and products besides subjects such as labour movement, intellectual property enforcement and protection of data.
These agreements mark a sharp U-turn from India’s earlier hesitant stance about trade liberalisation.
In 2019, India came out of the Regional Comprehensive Economic Partnership, called the world’s largest trade pact between China and 14 Asian nations, despite being a part of the negotiations for more than seven years.
According to the report by BBC, India was worried that the agreement would further reduce duties on imported goods by 80-90 per cent and widen New Delhi’s large trade imbalance with Beijing, hurting its domestic producers by exposing them to harsh competition with foreign companies.
The Narendra Modi government’s assessment of the country’s existing FTAs and preferential trade pacts is not too favourable, the report added.
According to India’s public policy think tank NITI Aayog, bilateral trade with partner nations such as Japan, South Korea and the Association of South East Asian Nations region grew after inking of the trade deals but imports exceeded exports, causing “unfavourable gains” for the partner nations.
According to Goyal, New Delhi’s approach is to achieve a “fair and balanced” FTA with complementary economies and is focused more on collaboration than competition.
There are also strategic reasons for the renewed interest in FTAs.
For example, why nations such as Britain look to expand supply chains towards the Indo-Pacific post Brexit and international firms try to avoid only in China and diversify their businesses elsewhere, it has given India an opportunity to find itself integrated more with the global economy.
However, there is also an inconsistency between India’s enthusiasm about FTAs and the call for promoting indigenous goods over the foreign ones, something which the Modi era has seen extensively.
The challenges are no less when it comes to New Delhi’s new-found love for FTA.
Can it find a balance in dealing with them?
