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Is There Any Dichotomy between India’s New FTA Strategy and Its Trade Policy?
India’s recalibrated free trade agreement strategy lacks appropriate coherence to its trade policy that vouches for domestically produced goods over imported goods. The increased proclivity towards signing the free trade agreements is more driven by its geostrategic interests and prominently addressing the supply-chain vulnerabilities.
The infrastructural support provided by the FORE School of Management, New Delhi in completing this study is greatly acknowledged. Views expresses in this article are personal.
India’s annual merchandise exports have crossed the mark of $400 billion just before the end of the financial year 2021–22. These exports have increased from $290 billion in 2020–21 to $417 billion in 2021–22, reflecting an increase of more than 40% on an annual basis. As part of its broader Self-reliant India initiative (Atmanirbhar Bharat), India has set an ambitious export target of $1 trillion by 2030 (Economic Times 2022). To achieve this target, it is widely felt that India needs to adopt a proactive approach toward free trade agreements (FTAs) and enter into trade pact with countries that not only contribute to improved market access for goods but deepen strategic trade and investment linkages to make its supply chain much more resilient (RBI bulletin 2021; Palit 2021).
Remarkably, India’s new-found enthusiasm for FTAs is shaped by two important factors: first, the developed countries such as the United States (US), the United Kingdom (UK), Europe, Australia, and Canada are eventually addressing their supply-chain vulnerabilities and vigorously pursuing policies that reduce their dependence on China. This provides opportunities for India to emerge as an alternative supplier of goods and capitalise on this development (Banerjee 2021). This naturally creates the need to foster deeper economic and trade engagement with these developed economies through bilateral and multilateral trade deals to generate business opportunities for Indian firms (Banerjee et al 2021). Second, from an economic and strategic perspective, India is not a part of any of the two mega-regional trading blocs—the Regional Comprehensive Economic Partnership Agreement (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This shuts the door for preferential market access in these rapidly growing markets. However, India has free trade pacts with selected member countries of both these mega-regional trade agreements. But there are concerns regarding the erosion of market access due to the aggregate impact of mega-trade agreements and their ability to divert the geography of value chains, thereby displacing Indian firms from the existing production networks.
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