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Business News/ Economy / Recalibrate India’s free trade agreements, parliamentary panel tells government
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Recalibrate India’s free trade agreements, parliamentary panel tells government

The Parliamentary panel asks govt to recalibrate existing FTAs to safeguard against negative trade balances

The Parliamentary panel also suggested the setting up of FTA facilitation centres for improving the availability of information regarding all FTAs for exporters.Premium
The Parliamentary panel also suggested the setting up of FTA facilitation centres for improving the availability of information regarding all FTAs for exporters.

At a time when India is negotiating free trade agreements (FTA) with highly competitive markets such as the United Kingdom (UK) and European Union (EU), a parliamentary panel has asked the Centre to recalibrate existing FTAs to safeguard against negative trade balances with partner countries to optimize the FTA advantages. 

Inverted duty structure in certain FTAs leads to higher raw material costs for manufacturers, while the import of finished product incurs lower duties, resulting in a disadvantage for manufacturers. 

India has already signed a limited trade deal with Australia and a comprehensive trade deal with the UAE, where duties are among the lowest in the world. 

The 14th and last round of negotiations with the UK is underway and expected to fructify with positive commitments, while the seventh round of negotiations with the EU is slated to begin on 19 February. 

Also, India and Asean member countries are set to revisit their free trade agreement and the dialogue for it to start next week. A delegation from Southeast Asia, comprising about 50 members, including high-ranking officials, will arrive in New Delhi for a three-day discussion starting 17 February.

The House panel, which is led by Congress parliamentarian Abhishek Manu Singhvi, said, in its report, that the government should actively engage in signing FTAs with countries that share high complementary interests to promote mutual benefits as free trade agreements plays a significant role in enhancing the country's exports and contributing to the growth of domestic industries.

The existence of an inverted duty structure not only restricts the competitiveness of exports but also contradicts the 'Make in India' initiative of the government. It also inadvertently promotes the import of finished goods by traders and end-use industries.

The Parliamentary panel also suggested the setting up of FTA facilitation centres for improving the availability of information regarding all FTAs for exporters.

In India-Asean FTA, the review will focus on the Asean Trade in Goods Agreement (ATIGA), which has been in place for over a decade, and will likely include more goods and services under non-tariff barriers.

ATIGA was signed in 2009 and it came into effect in 2010. The decision to review it came at the 16th Asean-India Economic Ministers Meeting in September 2019, following multiple requests from member nations. The scope of the review was finalized in September 2022, with the first meetings scheduled for February 2024.

India's trade deficit with Asean has grown significantly, from $7.5 billion annually when the agreement came into effect to approximately $44 billion in FY23. This fiscal year so far, India has exported goods worth $44 billion to the region, while imports stood at $87.57 billion.

The Asean comprises of Brunei Darussalam, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, and Vietnam. These countries represented about 11% of India's global trade in FY23.

In the case of India-UK FTA, both the nations are committed to developing a comprehensive and mutually beneficial trade relationship, as demonstrated by the ongoing discussions. India and the United Kingdom's bilateral trade grew from $17.5 billion in 2021–2022 to $20.36 billion in 2022–2023.

The India-UK FTA has encountered multiple obstacles during the negotiation process, resulting in the ambitious agreement being delayed by more than a year from its original deadline.

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Published: 09 Feb 2024, 04:27 PM IST
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