‘There is a lot of focus on ensuring that agreements aren’t delayed by red tape; PMO is directly monitoring the work’.
NEW DELHI: By early this year, India and the United Kingdom are likely to agree on a comprehensive Free Trade Agreement (FTA). When this happens, this will be India’s first FTA with a member of the G-7 club.
Official sources told The Sunday Guardian, already six rounds of talks between the two, with the last being held on 16 December, have been completed, with the seventh round scheduled for early this year, during which the “minor” details will be ironed out. In the last round of discussions, officials covered 11 policy areas over 28 separate sessions.
These FTAs and Comprehensive Economic Partnership Agreement (CEPA) are being directly monitored at the level of the Prime Minister’s Office (PMO), which is pushing hard to achieve the task of India becoming a $5 trillion economy by 2025. “There is a lot of focus on ensuring that agreements don’t get delayed due to bureaucratic red tape. The PM staff is personally monitoring the work,” an official source told The Sunday Guardian, while responding to why India was pushing for trade agreements at such a quick pace.
Earlier in June, India and the European Union (EU) restarted the FTA discussion after a gap of eight years. On Thursday, Commerce Minister Piyush Goyal said that he was hopeful of the FTA with the EU being completed by the end of 2023, something that was also echoed by Swedish foreign trade minister Johan Forssell after Sweden took over the Presidency of the 27 nations grouping earlier this month.
Officials in the Commerce Ministry told The Sunday Guardian that a similar FTA with Canada was also going to be finalized by mid this year, with five rounds of talks on the issue already taking place. The FTA between India and Australia, which was signed in April, came into force from 29 December and it is likely to double bilateral commerce to $45-50 billion in around five years, as it aims to provide duty-free access to Indian exporters of over 6,000 broad sectors, including textiles, leather, furniture, jewellery, and machinery in the Australian market.
In May this year, the Comprehensive Economic Partnership Agreement (CEPA) between India and the United Arab Emirate (UAE) came into effect. It is important to note that UAE is currently India’s third-largest trading partner with bilateral trade in 2019-20 valued at US$ 59 billion. The UAE is also India’s second largest export destination, with exports valued at approximately US$29 billion for the year 2019-20. The UAE is also the eighth largest investor in India, with an estimated investment of US$18 billion, whereas Indian investments in the UAE are estimated at around US $ 85 billion. The CEPA is expected to increase the bilateral trade in goods to US$100 billion within five years of the signing and increase trade in services to US$15 billion.
CEPA, in comparison to FTA, is more comprehensive than an FTA. While a traditional FTA focuses mainly on goods; a CEPA is more ambitious in terms of a holistic coverage of many areas like services, investment, IPR, government procurement, disputes etc.
The Goyal-led commerce ministry has also revived FTA talks with the six-member Gulf Cooperation Council (GCC), which is one of India’s largest trading partners. Earlier, talks held in 2006 and 2008 had failed to arrive at a mutually agreed consensus. These talks are at the initial stage, but with Goyal pushing for it, officials are engaged in reaching an agreement by this year’s end.
The GCC, a union of six countries in the Gulf region, including Saudi Arabia, United Arab Emirates (UAE), Qatar, Kuwait, Oman, and Bahrain, is India’s largest trading partner with bilateral merchandise trade in 2021-22 standing at $154 billion and services trade at $14 billion.
In February last year, India and Mauritius signed a CEPA, the first trade agreement signed by India with a country in Africa. The said CEPA came into force on 1 April 2021. Earlier, this year, Goyal stated that India was going to review the “long-over-due” FTA that was signed with Japan in August 2011 citing trade imbalance. Recently Goyal, while responding to queries about FTA with New Zealand, said that India does not presently have the bandwidth to tend to with “minor” trade partners.
Significantly, when India walked out of the China-led Regional Comprehensive Economic Partnership (RCEP) in November 2020, it was described by global watchers as a “disastrous” step. Two years later, India has now signed a bilateral agreement with 13 of the 15 RCEP countries. The only country with which India does not have an agreement is China and New Zealand. According to officials, unlike certain media reports, India was not pushing “desperate” for a FTA with the United States. “Our mandate is to engage from the point of equality and ensure that both trading blocs walk away happy from the discussion. Unless our concerns are adequately addressed, we are not going to sign a FTA or a CEPA. The problem as far as the FTA with the US is concerned is that it is not addressing the imbalance of trade that will primarily arise in the present form. They have their domestic reasons. However, it also needs to understand that to counter the threat from China, it needs to have a good trade relationship with us,” an official, who is not authorized to speak to the media, told The Sunday Guardian.