Are free trade agreements benefiting India?

Free trade agreements (FTA) have been among the popular trade tools for many countries, with over 350 agreements currently in existence globally. While several nations have gained from these deals, many like India are yet to see any reasonable rise in exports despite being signatories to several such pacts for years.

India has signed 13 FTAs with economies such as Japan, South Korea, Mauritius, the UAE, Australia, and countries in the Association of Southeast Asian Nations (ASEAN) and South Asian Association for Regional Cooperation (SAARC). But not all FTAs — deals that bind signatories to reduce import and export barriers, increasing trade between the countries — have been a win-win deal for India, show data.

A report published by the Delhi-based think tank Global Trade Research Initiative (GTRI) in November 2022 shows a comparison of the data from pre-and post-FTA periods of 2007-09 and 2019-21, respectively: the first FTA was signed in 2010. The report evaluates FTAs with Japan, South Korea and ASEAN and calls these the most comprehensive FTAs of India. During this period, India’s merchandise trade deficit with these three key FTA partners increased at a faster pace than its global trade deficit. The rise was the sharpest for ASEAN (201.5%), followed by South Korea (142.5%) and Japan (120.6%). India’s overall trade deficit grew by 43.1%.

What this means is that the agreements seem to have increased our imports more than our exports. Traditionally, India has been more of an importer from eastern nations and more of an exporter to western nations. These FTAs gave the eastern economies a wider door to import. So, our imports increased faster than our exports.

So, have these deals really helped India? Or has the country overvalued FTAs?

The results of these FTAs vary from product to product, says Ajay Srivastava, co-founder of GTRI and a former Indian Trade Service (ITS) officer. “While earlier FTAs resulted in lowering of import tariffs, new obligations will dictate how our domestic regulations should be in conformity with the developed country's practices.”

Notably, 80% of the global trade happens through the non-FTA route. FTA allows signatories to offer tariff concessions which are lower than the respective county's MFN tariffs.

The MFN status refers to a pact that expects participating nations to offer the same trade terms or customs duties to all World Trade Organization (WTO) partners.

Read More at https://economictimes.indiatimes.com/small-biz/trade/exports/insights/are-free-trade-agreements-benefiting-india/articleshow/101503792.cms