Due to reasons including strict rules of origin (ROO) restrictions, high documentation expenses, and general ignorance of FTAs, India has historically had poor FTA utilisation rates.
A government official predicted that India’s utilisation rate of its free trade agreement with the UAE, a critical statistic that shows how much Indian exporters are profiting from tariff cuts, will be 50%.
Due to reasons including strict rules of origin (ROO) restrictions, high documentation expenses, and general ignorance of FTAs, India has historically had poor FTA utilisation rates. Notably, MSMEs account for close to 40% of India’s exports, hence raising awareness of FTAS among MSMEs is essential for optimal utilisation.
Six preferential trade agreements are among the 19 free trade agreements that India has signed. According to the Asian Development Bank, India’s FTA utilisation rate has stayed around 25%, making it one of the lowest in Asia. By comparison, wealthy nations typically use between 70 and 80 percent of FTAs. “India has asked the UAE to provide their data after sharing the customs data with them. Verification of the data will provide the precise FTA utilisation rate and assist us in identifying the industries where FTA is not being used to its full potential. However, the UAE agreement will be among the most used agreements based on the quantity of certificates of origin granted, the source said.
After the two nations exchanged data, the official FTA utilisation rate was supposed to be released last month.
We anticipate a 50% utilisation rate based on the COO’s announcement. The sector that uses us most is the gem and jewellery industry. Value-wise, the 50% instant benefit is huge. Data from COOs is a leading indication. Exports would occur the following month if COOs were issued this month, and that would be reflected afterwards, the official continued. A COO given to an Indian exporter confirms that the products have satisfied specific requirements to be recognised as being from India. COOs are a reliable indicator of how well an FTA is being used because they must be submitted in order to receive duty discounts.
