From UK to Peru, every nation wants to sign FTA with India to gain access to growing market, says report

India’s rapidly growing market and economy have made it a lucrative option for developed as well as developing countries for free-trade agreements (FTAs), and countries such as Oman, Peru, Europe, and the UK are keen on signing the pact, according to a report by economic think tank Global Trade Research Initiative (GTRI).

The economic think tank said that a trade deal with India would let countries get access to the Indian market with less or no import duties on substantial trade, GTRI said in its report.

The agreement will also give their companies an advantage over getting access to the Indian market. Another reason that makes FTA an appealing option for other countries is the import India does from other countries without a trade agreement. The report highlighted that India does over 75% of imports from other countries without FTA.

“Everyone wants to do an FTA with India. Countries ranging from large economies like the US, Europe, Japan, and the UK to smaller ones like Oman, Peru, and Mauritius either already have or actively seeking an FTA with India. The main reason is India’s high import duties, which make it difficult for these countries to access India’s large and rapidly growing market,” it said.

The report also diminished the possibility of a rise in exports of India from FTAs under negotiations. The countries with which India is negotiating trade agreements already have low import duties.

“For example, the UK’s duties are 4.1 per cent, Canada’s 3.3 per cent, and the USA’s 2.3 per cent. In contrast, India’s import duties are higher at 12.6 per cent,” GTRI Co-Founder Ajay Srivastava said.

A substantial share of imports from these nations is already happening at zero MFN (most favoured nation) duties, he said.

Canada’s 70.8 per cent of imports are already happening at zero MFN duty. The same is the case with Switzerland (61 per cent), the US (58.7 per cent), the UK (52 per cent), EU (51.8 per cent).

“In contrast, in India, only 6.1 per cent of global imports are undertaken at zero MFN duty. Given this, India might not see a big increase in exports after these FTAs because these countries already have low or no import duties,” Srivastava added.

UK and Canada could benefit more from FTAs

The report stated that countries such as the UK and Canada could benefit more from the FTAs, as they will be able to sell their products in India without the high duties that it imposes on other nations.

To reduce the impact of FTA on local businesses, the report mentioned six steps the government can take while negotiating these deals. These steps include the creation of a common exclusion list for merchandise trade negotiations, and focusing on obtaining real market access on the ground.

Another suggestion focuses on sectoral agreements with poor and developing nations instead of trade deals involving goods, services, and investments.