Form of words:
New Delhi: India is in the midst of fast-tracking its free trade agreement (FTA) talks with several countries and groups such as Australia, the United Kingdom and the European Union, as it pursues an ambitious goal $2 trillion in exports, which includes $1 trillion in merchandise exports and $1 trillion in services by 2030.
Two weeks ago, India and Australia announced that they would the final cut A free trade agreement by the end of 2022. Negotiations began in 2011, but missed several deadlines.
The developments are part of the Narendra Modi government’s current approach to FTAs, a stark contrast to its previous strategy, when it actively shunned them.
When it first took power in 2014, the Modi government began reviewing all existing trade agreements. Some that came under that review were Singapore (signed in 2005), South Korea (2010), Malaysia (2011), Japan (2011) and an FTA for goods with the ASEAN Group (2010).
As of October 2014, the then commerce minister Nirmala Sitharaman said with the review process almost finalized, it was found that some FTAs were benefiting partner countries unlike India.
And when the government signed pending agreements on services and investment with ASEAN that year, in 2015, it set up another committee under the then Chief Economic Adviser (CEA). Arvind SubramaniamTo review other existing FTAs.
A year later, a government meeting of various ministries, chaired by the then Finance Minister Arun Jaitley, was held To discuss the preliminary findings of a report on these agreements.
Analysts say the government’s current approach to FTAs may be driven by Huge Business imbalance and pandemic.
According to statistics From the commerce ministry, between 2014-15 and 2019-20, India’s total exports increased from $310.33 billion to $313.36 billion – an increase of less than one percent.
During the same period, India’s total imports increased from $448.03 billion to $474.70 billion – an increase of 5 percent.
India’s trade deficit also increased during this time, from $118.37 billion in 2014-15 $161.34 billion in 2019-20.
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Exiting RCEP, struggling to build trade relationship with US
The Modi government’s stand on FTAs remained more or less unchanged till the Covid pandemic.
In November 2019, PM Modi announced that India would not to join ASEAN-led Regional Comprehensive Economic Partnership (RCEP) on the grounds that it will affect livelihoods in the country. Soon after, Commerce and Industry Minister Piyush Goyal announced that India would review the RCEP agreement. “Fix the Inequality” in its trade with some ASEAN countries.
The first term of the Modi government was marked by “a visible pivot” towards more intensified trade and investment ties with the US. report good by Mumbai-based foreign policy think-tank Gateway House. However, the report noted that like in other trade negotiations, India failed to make use of its most competitive trade advantage – services.
“India first signed a free trade agreement (FTA) for goods with ASEAN, and then followed it up with an FTA on services five years later. In the interim, India faced a negative trade balance… Had India signed the FTA for both goods and services simultaneously, the outcome could have been different,” it added.
Review pending FTAs
The government seems to have revisited that strategy now.
Goyal at the G20 ministerial meeting in Italy on Tuesday Allegedly Met around 15 foreign ministers to take forward India’s trade position. This is an extension of how the Modi government reviewed pending FTAs with Australia, the UK, the European Union and the United Arab Emirates this year. In some cases, it is open for interim trade deals or mini deals.
With whom is New Delhi planning to finalize an interim agreement? canberra This year by Christmas. In the case of the UK, services accounting for 71 percent of its GDP, so it plans FTA talks with India to begin next month, and are eyeing an early harvest deal by March 2022.
India has also resumed Broad-based Trade and Investment Agreement (BTIA) negotiations with the EU, which have been in the pipeline since 2007, and hopes To open new markets and expand opportunities for Indian and EU businesses.
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‘Irregular trade, pandemic’ behind new strategy?
According to Ajay Sahai, director general and CEO of Federation of Indian Export Organizations (FIEO), a trade promotion body under the commerce ministry, this change in the government’s FTA strategy could be driven by several factors.
“In all our FTAs, a clear trend has emerged that the export market has not grown in proportion to the proportion of imports from these countries. It may have prompted a change in strategy,” Sahai said.
Asked whether the Covid-19 pandemic has played any role, he said, “Today, China Plus One is becoming a strategy for all countries. India has emerged on the radar of trading companies as an alternative to China.
china plus one strategy refers to the Investors and countries are not completely dependent on China for manufacturing.
Dheeraj Nayar, chief economist at Vedanta Resources and president of ASSOCHAM’s National Council on Trade, said India’s trade suffered in the initial years due to partnerships with competing countries.
“The initial FTAs that India signed were with more competitive countries, especially when it came to manufacturing. The reason our exports have not grown is not because companies are not performing, but because the infrastructure and policy environment were not providing adequate support,” Nayar told ThePrint, adding that India’s FTA services tend to focus more on objects in comparison, even though the latter was its strength.
“We chose the wrong countries and the wrong terms. Now, we have chosen the right people like the EU and the US,” he said. “They are the high cost economies for large scale manufacturing which are now looking for an alternative to China. India may have the opportunity but so do Vietnam and Bangladesh.
(Edited by Arun Prashant)
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