FTA with India: GTRI Report on Growing Demand

New Delhi, Jan 2 (PTI) Countries ranging from large economies like Europe, and the UK to smaller ones, including Oman and Peru, want to have a free trade agreement with India due to the country's large and rapidly growing market, a report by economic think tank GTRI said.

The Global Trade Research Initiative (GTRI) said that by implementing a trade deal (FTA) with India, countries can access the Indian market with less or no import duties on substantial trade.

This gives their companies an advantage over others in selling to the Indian market.

Additionally, since India currently does most of its importing (over 75 per cent) from countries it does not have FTAs with, these agreements are particularly appealing as they offer a significant new market opportunity in India.

"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.

However, it said that India may not see a big increase in exports 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.

Also, a substantial share of imports from these nations are 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.

On the other hand, countries like 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 India usually imposes.

The report suggested the government six steps while negotiating these deals and that includes creation of common exclusion list for merchandise trade negotiations; and focusing on obtaining real market access on the ground.

The other suggestions include doing sectoral agreements with poor and developing countries instead of trade deals involving goods, services, and investments; and negotiate new subject areas such as environment, labor, data governance, digital trade, gender, small and medium enterprises, anti-corruption, and sustainable food systems, carefully.