India’s approach to Free Trade Agreements (FTAs) has undergone a significant shift in recent years. After a decade-long hiatus, the country resumed FTA negotiations in 2021, swiftly finalizing deals with Mauritius, the UAE, Australia, and EFTA nations. However, a growing sense of caution has now permeated India’s FTA strategy, as policymakers seek to avoid the pitfalls of past agreements and secure more favourable terms.
RCEP Reconsideration:
A notable development in India’s FTA landscape is the renewed debate surrounding its potential membership in the Regional Comprehensive Economic Partnership (RCEP). While institutions like the World Bank and NITI Aayog have highlighted the benefits of deeper economic integration in Asia, critics warn of potential challenges, such as increased competition from cheaper imports and a widening trade deficit. India’s significant trade imbalance with China further complicates the decision, as joining RCEP could inadvertently facilitate easier entry of Chinese goods into the Indian market.
UAE FTA Under Scrutiny:
The India-UAE Comprehensive Economic Partnership Agreement (CEPA), which came into effect in May 2022, has drawn criticism for its provision of unlimited duty-free imports of precious metals. This has led to a surge in imports of gold, silver, and platinum from Dubai, straining India’s current account deficit. To address this issue, the government has considered reducing import duties and renegotiating the CEPA to revoke the zero-duty concessions.
IPEF Trade Pillar: A Prudent Decision:
India’s decision to opt out of the Trade Pillar of the Indo-Pacific Economic Framework (IPEF) has been widely applauded. This move has shielded the country from potential pressures to adopt more open data-sharing policies, which could compromise its digital sovereignty. By avoiding the IPEF Trade Pillar, India has retained its autonomy to assess foreign proposals related to digital trade and labour standards.
Strengthening India’s Negotiation Capabilities:
To effectively navigate the complexities of global trade, India needs to bolster its negotiation capabilities. This includes building a larger team of expert negotiators, developing comprehensive training programs, and creating a streamlined approval process for FTAs. Additionally, India must invest in building expertise in emerging non-trade areas like sustainability and labour standards to ensure its interests are adequately represented in future agreements.
A Balanced Approach:
India’s evolving FTA strategy reflects a delicate balance between promoting economic growth and protecting national interests. By adopting a cautious approach and implementing necessary reforms, India aims to secure favourable terms in its future trade agreements and safeguard its domestic industries.
