With the India-UAE Free Trade Agreement (FTA) deal signing day nearing, India Inc is optimistic on the outcome of the proposed FTAs with the United Arab Emirates (UAE), United Kingdom and Australia. It seems that India now prefers country-specific FTAs rather than regional cooperation deals on trade and business.

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Recently, Union Commerce Minister Piyush Goyal said that India is no longer signing FTAs just to join a group. Instead, India is looking at reciprocal access, good market conditions and fair play in trade of both goods and services.

According to Goyal, India is looking at FTAs with nations which have values of democracy, transparency and mutual growth.

How significant is the FTA with the UAE?

The draft FTA between India and the UAE is almost finalised and both countries will sign it on February 18. The FTA with the UAE is key for India as it is the gateway to Africa and the European Union (EU).

India has already commenced talks on FTAs with the UAE, the UK, the European Union (EU), Australia, Canada and Israel. The UAE is the third-largest trading partner for India in bilateral trade and second-largest destination for Indian exports after the US. India-UAE bilateral trade was $59 billion and exports were $29 bn in FY20. The UAE is the eighth-largest investor in India.

FTAs with other countries

Formal negotiations for the India-UK FTA began on January 13, 2022. Several rounds of negotiations have been taken place. India is expecting £28 billion trade by 2035 as it expects to unlock a huge new market for British manufacturers engaged in several industry verticals. India-UK bilateral trade stood at £23 bn in 2019.

India and Australia are also closing in on an interim FTA, which is the India-Australia Comprehensive Economic Cooperation Agreement (CECA). India is keen on keeping dairy and agriculture products out of CECA and aims to focus more on the goods not produced in the country. India will look to assure its farmers that there will not be any negative impact on domestic agriculture and dairy products.

The interim FTA of India and Australia will reduce import duties and widen the trade basket for both the nations. India has a shortfall in pulses, grains and oil seeds and has shown interest in textiles, gems, jewellery and leather sectors.

Why country-specific FTAs?

India is also gearing up to finalise FTAs with the UK, Australia, EU, Canada and other major economies. The recent Economic Survey highlighted India's need for FTAs as it'll help diversify exports and explore new shores for promotion of its products.

It's observed that 40 percent of India's exports is limited to just seven countries. This indicates that India needs to do a lot more on widening its export basket, and give a further push to promoting exports to new shores, suggests the Economic Survey.

For the current financial year ending March 31, India is looking at an export target of $500 billion, against $291 bn achieved in FY21. India recorded $197.89 bn during April-September 2021, up 57 percent from the corresponding period of the previous year.

India’s concerns over RCEP

India has a trade agreement with ASEAN countries, but it failed to deliver the desired dividends. India has been demanding removal of non-tariff barriers, as well as lowering market restrictions for agriculture and automotive sectors. Citing the same reasons, India got out of Regional Comprehensive Economic Relationship (RCEP) in November 2019.

India was a part of the RCEP drafting committee since its beginning and the negotiations between the participating countries started in 2013. The regional trade agreement has been signed by 15 countries but India opted out of it. The major reason for India’s exit from RCEP was China’s dominance over the trade block and lack of measures to address India’s concerns. India’s apprehensions over safeguarding interests of industries, agriculture and dairy sectors were not addressed.

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(Edited by : Thomas Abraham)