India Resumes Free Trade Agreements (FTAs)

November 27, 2024

India resumed signing Free Trade Agreements (FTAs) in 2021 after a decade-long hiatus. The country has since completed agreements with Mauritius, the UAE, Australia, and EFTA countries. However, India is now adopting a more cautious approach to FTAs. This shift aims to achieve better outcomes and avoid previous pitfalls.

Current Negotiation Status

Negotiations with the UK, Oman, and Peru are ongoing but have slowed. Key issues include calls to join the RCEP and a review of the UAE FTA. India is also staying out of the IPEF Trade Pillar, focusing on simplifying trade policies.

Pressure to Join RCEP

There is increasing pressure for India to reconsider joining the Regional Comprehensive Economic Partnership (RCEP). Supporters argue it would deepen economic ties in Asia and enhance export competitiveness. Critics warn of potential trade deficits and increased competition for local businesses.

Impact of the India-UAE FTA

The India-UAE FTA, effective from May 1, 2022, aimed to boost trade by eliminating tariffs. However, it has led to increase in imports of precious metals from Dubai. India has responded by reducing import duties on gold and silver, but this is a temporary measure.

India faces pressure to join the IPEF Trade Pillar ahead of the US presidential election. Joining could compromise India’s control over digital data. Staying out allows India to protect its digital sovereignty and economic interests.

Need for Enhanced Negotiation Skills

India currently has 14 trade agreements with 25 countries. To improve these deals, the government should evaluate their effectiveness. Expanding the team of trade negotiators is crucial. Larger teams can facilitate learning and experience sharing.

India must build expertise in sustainability, labour, and gender issues. These areas are increasingly relevant in trade agreements. Without this knowledge, India risks accepting unfavourable regulations from other countries.

Important Facts for Exams:
RCEP: The Regional Comprehensive Economic Partnership is a trade agreement involving Asian nations. Critics warn it may increase India’s trade deficit and competition for local businesses.
IPEF: The Indo-Pacific Economic Framework focuses on trade and digital cooperation. India has opted out of the Trade Pillar to maintain control over its digital data and sovereignty.
NITI Aayog: NITI Aayog is India’s policy think tank. It provides strategic and technical advice to the central and state governments to encourage economic growth and development.
EFTA: The European Free Trade Association consists of four countries. It promotes free trade and economic integration among its members, which include Norway, Iceland, Liechtenstein, and Switzerland.

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