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OJAANK IAS ACADEMY

‘Free Trade Agreement’ Giving New Direction To Indian Trade

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Indian Prime Minister Narendra Modi, while speaking in Denmark, said that there is a possibility of a free trade agreement between India and the European Union, before this he said in Berlin, after the Covid epidemic, India remains the base of the world economy with a fast economic recovery.

The way India has made efforts to promote trade commerce for some time now. As a result of this, India’s exports grew by a record 24.2% in April this year to $ 38.19 billion.

At present, free trade agreements are being entered into by the government with various countries to promote trade. More recently, the Free Trade Agreement with the United Arab Emirates and Australia has been finalized.

The Free Trade Agreement between India and UAE has come into force from May 1. The United Arab Emirates is India’s third largest trading partner and second largest export hub after the US. India and the United Arab Emirates have set a target of increasing their trade from $60 billion to $100 billion in the next five years and also aiming to take the services trade to $15 billion.

This will benefit the Indian textile industry, pharmaceutical industry, gems, jewellery, autos, processed dairy products, etc. It is also expected that this will create about one million new employment opportunities in India.

After this agreement, 80% of the goods of India will be exempted from duty, while 65% of the products of ‘UAE’ will be exempted from duty in India.’

Similarly, last month, after ten years of talks between India and Australia, the Economic Cooperation and Trade Agreement was signed. Through this agreement, India will be able to export 96% to Australia with duty exemption. The same Australia will export 85% of its excise duty free to India.

The two countries have set a target to increase their trade from the current $27 billion to $50 billion in the next five years. The goods on which India has made a provision of zero duty for Australia. Chief among them are coal, minerals etc.

But keeping in mind the interests of its farmers, India has kept agriculture, dairy, sugar etc.

Shortly before, when the British Prime Minister Boris Johnson came to India, the issue of free trade was reviewed by both the countries. So far, three rounds of talks have taken place between the two countries and a target has been set to conclude an interim agreement on free trade between the two countries by Diwali this year.

After Brexit, the UK continues to strengthen its trade and economic ties with India, for this Prime Minister Johnson is ready to grant visas to more Indian professionals in the UK.

In the interim agreement between India and the UK, 65% of the goods will be exempted from import duty, while in the final agreement this limit may be closer to 90%. A target has also been set by both the countries that by the year 2030, trade between both the countries will achieve the target of $100 billion.

Negotiations are also in progress on India’s free trade agreement with the European Union, Canada, six countries of the Gulf Cooperation Council (GCC), South Africa, America, Israel. This country is also encouraged to enter into a free trade agreement with India. This is very encouraging for India as it will provide a new market for Indian trade and products.

When India distanced itself from the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade agreement that came into existence in 2020, it was criticized by many scholars and called it a short-sighted step taken by India. Similarly, India did not consider it appropriate to join the regional trade agreements being done by China.

In its place, it was decided by India to move on the path of free trade agreement and this step of India is also visible now because India can clearly put its side in such agreement and according to its domestic needs. Can take decisions like in the agreement with UAE and Australia, India has kept agriculture and dairy products out of free trade.

Although trade negotiations are sometimes hindered by abusing the rules of the World Trade Organization (WTO), but despite this, free trade agreements between different countries have increased continuously.

Free trade agreements (FTAs) are agreements under which two or more countries give exemption to each other in the import of goods and services, customs duties on exports, regulatory laws, subsidies and quotas etc.

Free trade agreement can provide a new direction to India’s economy. Exports of goods are expected to reach $ 500 billion and export of services to $ 300 billion in the year 2022-23, and these free trade agreements can play an important role in making India a five trillion dollar economy.


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