New Delhi: The Modi government provides a new encouragement to conclude several Delayed UPA era -free trade agreements (FTA) and even won a few new ones. The aim is to achieve an export target of $ 2 trillion in 2030, and overcome disturbances in the global supply chain made by Pandemi and the ongoing Russian-Ukraine War.
In his first term (2014-2019), the Modi government was reluctant to reach FTA even when he sought direct foreign investment (FDI) by opening all the UPA era trading pact to be reviewed to increase its exports. The existing pact, the government believes, only encourages more imports.
However, with the increase in strategic harmony with several partner countries, especially Australia, France and the United Kingdom, India is now also focused on increasing economic ties, which is also a demand for partner countries, the official source told The Print.
According to sources, another reason why the government gave a new encouragement to the delayed pact was the emergence of some minilateral arrangements after the accelerated pandemic by the Russian-Ukraine War.
Sources say India, which is not part of a mega-trade pact such as Regional Comprehensive Economic Partnership (RCEP), is now increasingly entering minilateral settings but there is no market access guaranteed under such a framework, and they are mostly focused on ensuring the smooth operation Smooth supply chain by maintaining a security frame.
The Modi government will now make a full throttle to negotiate several key FTAs with fast tracking negotiations with partner countries. All ministries concerned – Finance, Trade, and External Affairs – have been assigned by the Prime Minister’s Office (PMO) to achieve this agreement the earliest, Sumber added.
In August last year, Prime Minister Narendra Modi gave a mandate to all Indian missions abroad to find ways to help add Indian exports to the countries where they were.
An official said the war now has “emphasized trade issues”, causing risks such as food vulnerability and high energy costs. As a result, India now accelerates the FTA process so that it can cause strong trade relations with friendly countries.
Among other things, this has been done by paying attention to China. Apart from border tension, Chinese imports to India reached nearly $ 100 billion in 2021.
Some old FTA, some new ones
The trade pact is free to remove the obstacles to entry for goods and services between two trading partners.
Under the agreement, goods and services can be purchased and sold across international borders with minimal or government or government subsidies, quota or subsidies.
While the government has continued the talks about several FTA delayed from the era of the upa-such as those who have Australia and the European Union (EU)-have also begun discussions about new, such as the proposed Indian FTA.
In an effort to accelerate the discussion, the Ministry of Trade has taken an approach to sign an initial harvest agreement in which both parties signed an agreement on an easier aspect while the main negotiations regarding tariff elimination on various products are stored for the next period, the source said.
The first FTA signed under the Modi government was the India-Uee Comprehensive Economic Partnership Agreement (CEPA) in February 2022. The pact came into force in May 2022.
This agreement is expected to double bilateral trade to $ 100 billion in the next five years, up from $ 50-60 billion at this time, while eliminating tariffs on various products exported by India and UAE.
After this, India and Australia signed the first part of what is now known as the Australian-Indian Economic Cooperation and Trade Agreement (AI ECTA), a free trade agreement previously called the Comprehensive Economic Cooperation Agreement (CECA).
After this, India and Australia signed the first part of what is now known as the Australian-Indian Economic Cooperation and Trade Agreement (AI ECTA), a free trade agreement previously called the Comprehensive Economic Cooperation Agreement (CECA).
Talks for ECTA began in 2011. In April, both parties signed phase 1 from the Pact as an initial harvest agreement – Australia then headed for the election and also needed an alternative market to China, its biggest trading partner.
The conversation with the EU, which began in 2007 and stopped afterwards, continued last month.
Likewise, talks with England are also running smoothly now. Both parties have even set a deadline for the Diwali time to sign an agreement, but the source said that fulfilling the time line would be difficult now because of the resignation of British Prime Minister Boris Johnson.
Some other FTAs in the pipeline are with countries including Israel, Canada, New Zealand, Indonesia and Thailand.
Jayant Dasgupta, a trade expert and former Indian ambassador to the World Trade Organization (WTO), said “The fundamental reason for having and accelerating this FTA is that we want to access the bigger market in the complementary economy”.
“Today you cannot rely on WTO to give you more market access. In addition, India has realized that we need to export more not only to get forex but also for the employment generation. Without exports, there is no country that is able to substantially grow and grow fast, “he added.
“China is slowly strangling the supply chain and find as many profitable businesses as possible in China. Such trends can only be overcome by India by signing more FTA. “
Challenges and obstacles
According to sources, the biggest obstacle that will be faced by the government – something that also haunts past administration – is “dismantling tariff walls” for easier access to the Indian market.
The government is worried that the pressure from the industry can “force” India not to choose “ambitious tariff cuts”, as requested by almost all major trading partners, including Britain, Australia and EU, official sources told The Print on Anonymity.
Because of the nature of FTA, the domestic industry is exposed to large -scale competition, and faces the risk of loss of market share.
India has the highest average rate – 15 percent – in the Asia -Pacific region. The average import tariff increased to 15 percent in 2020, from 13.5 percent in 2016, crossing industrial and agricultural products, according to the WTO based in Geneva.
“This industry has opposed (during the UPA era) and they will oppose even now. But now there is more clarity about how and why FTA is important in realizing a strategic value full of relationships, “said an official.
Because the pressure from the industry believed by India has come out of RCEP.
Australia has sought a major reduction in import tariffs on their agricultural products and wine and spirits.
Likewise, under the Talks of India-UK FTA, one of the main demands is cutting tariffs on British whiskey. Similar demands will also appear in talks for trade agreements with 27-EU block countries, which will also look for elimination of tariffs in cars and car parts.
Talks for FTA India-Eu, which began in 2007, continued in June 2022 after a short break under the Modi government.
Both the British also the European Union had told India that they would not like to enter the initial harvest agreement but wanted the entire agreement to be signed in one way, said the source.
India, officials added, were negotiating various forms of tariff reduction with partner countries.
It takes a two-branch approach, where the country will gradually reduce tariffs in some cases and with direct-immediately effects after the pact will take effect-on others.
It is this inward orientation of the Atmanirbhar campaign that has got the trading partners worried and also restricts the negotiating abilities of the Indian authorities,” a source said.
There are also concerns, the sources added, regarding the “erosion of market access that India may face with the existence of major trade pacts” where New Delhi is not a party.
This could be restrictive for Indian firms in terms of their export prospects, they said.