The Commerce and Industry Ministry recently announced that India is in talks with Israel to conclude a Free Trade Agreement (FTA). The news comes as the two nations mark the 30th anniversary of their diplomatic relations.
Understanding Free Trade Agreements
An FTA is a pact between two or more countries aimed at reducing barriers to imports and exports. It allows goods and services to be traded across borders with minimal government tariffs, subsidies, prohibitions, or quotas. This concept stands in contrast to trade protectionism or economic isolationism.
India’s Participation in FTAs
After withdrawing from the Regional Comprehensive Economic Partnership (RCEP), a 15-member FTA grouping including Japan, China, and Australia, in November 2019, India seemed to halt its involvement in FTAs. However, in May 2021, it was announced that the stalled India-European Union talks would resume. Now, India is also negotiating bilateral free trade agreements with the United Arab Emirates, the United Kingdom, Australia, and Canada.
Other Significant Trade Agreements of India
India has a Comprehensive Economic Cooperation and Partnership Agreement (CECPA) with Mauritius and is part of the South Asia Preferential Trading Agreement (SAPTA) and Asia Pacific Trade Agreement (APTA). Additionally, the South Asian Free Trade Area (SAFTA) aims to reduce customs duties of all traded goods to zero by the year 2016.
Challenges in India’s Foreign Trade Policy
There are several issues plaguing India’s foreign trade policy, such as a struggling manufacturing sector, unfavorable FTAs, and increasing protectionism due to the Atmanirbhar Bharat campaign.
India-Israel Relations: A Brief History
Historically, strategic cooperation between India and Israel began during the Sino-India War of 1962. Economically, India is one of Israel’s top trade partners, with both countries trading over USD 4.14 billion worth of goods as of February 2021.
Defence and Agriculture: Key Areas of Cooperation
Aside from trade, defence is a significant area of cooperation between India and Israel. They are in talks to identify new areas of cooperation and have a solid history of military sales and acquisitions. In agriculture, a recent three-year program agreement was signed for development cooperation.
Joint Efforts in Covid-19 Response
In 2020, an Israeli team worked with Indian authorities on a mission codenamed Operation Breathing Space as part of the Covid-19 response. This further underlines the deep-rooted cooperation and shared interests between the two nations.
The Way Forward
Considering India’s current lack of involvement in any mega-trade deals, its ongoing dialogue with Israel regarding the FTA represents a positive step in its trade policy agenda. However, these efforts should be supported by broader economic reforms that lead to an open, competitive, and technologically innovative Indian economy.
