Stating the significance of free trade agreements, examine whether they have been as beneficial as expected for India.

Free trade agreements (FTAs) refer to an agreement between two or more nations wherein, countries reduce or eliminate tariff and non-tariff restrictions on certain or all products and services. Some important FTAs of India and other countries are SAFTA (South Asian Free Trade Area), FTA with ASEAN, APTA (Asia-Pacific Trade Agreement), CECA (Comprehensive Economic Cooperation Agreement) with Singapore & Thailand, CEPA (Comprehensive Economic Partnership Agreement) with Srilanka, CECPA (Comprehensive Economic Cooperation and Partnership Agreement) with Mauritius.

How has India benefited:

  • India’s trade with FDI countries has increased in both Imports and Exports.
  • India’s exports to SAFTA countries have expanded quicker than imports.
  • Signing FTAs has reduced duties on Indian exports to foreign markets significantly.

Benefits not as expected:

  • Indian exports to FTA have not increased more than its imports to non-FTA countries. The smaller manufacturing sector is one of the reasons.
  • The trade deficit with ASEAN countries has rather increased. India exports goods with minimal or no value addition.
  • Rules of origin, sanitary and phytosanitary measures have also played against India.

Recent steps taken by the Government of India:

  • Amendments to Bilateral Investment Treaty.
    • Changes made to CAROTAR pertaining to certificate of origin, etc.
    • Automatic Trigger clause in CECPA with Mauritius.

India has remained away from larger FTAs like RCEP given its significant trade deficit. However, India must develop its capabilities to not remain on the losing end.

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