India has signed 13 free trade agreements so far1, which include the free trade agreements with Japan, Korea and ASEAN. Agreements with Mauritius, the United Arab Emirates and Australia have recently been concluded. To examine the impact of FTAs and their changing architecture and assess the benefits, EY brought together industry leaders and policymakers for a virtual roundtable. The panel was moderated by Uday Pimprikar, National Indirect Tax Leader, EY, and panellists included Ajay Srivastava, Former Adjunct General Manager (Foreign Trade); Bipin Menon, Development Commissioner, Noida SEZ; and Agneshwar Sen, Associate Partner, Tax and Economic Policy Group, EY.
The panellists noted that the architecture of the previous FTAs with Japan, Korea and ASEAN and the more recent FTAs with the United Arab Emirates, Australia and the one on negotiations with the UK has changed. The free trade agreements of the United Arab Emirates and Australia have created specific opportunities for Indian companies. There are higher expectations in the ongoing negotiations with Great Britain, the EU and Canada.
The previous FTAs were a mixed bag for India. While the overall result was even with Japan, Korea and ASEAN, India did not gain much with ASEAN on exports, although imports increased. India’s global imports increased by 63% in 2010-21, but imports from ASEAN alone increased by about 120%. Exports did not see a similar increase, largely due to the fact that countries like Singapore and Malaysia do not levy tariffs on many products. Hence, Indian exports, where tariffs are zero, did not benefit from the free trade route. India’s exports to South Korea doubled global exports after signing FTA. However, due to the lack of post-FTA outreach initiatives related to new market opportunities, among other reasons, the benefits could not be increased.
Based on previous insights and changing dynamics of global trade, Indian FTA architecture has changed. While previous FTAs under the Look East policy focused on Eastern countries, recent FTAs are more focused on Western regions such as the US, UK, EU and Eurasia. The bulwark of this shift is India’s need to seek credible and resilient supply chain partners that simultaneously offer investment and access to technology. Given the strong political will and diplomatic ties with these regions, such a change can be a win-win.
Another difference is that FTAs have traditionally focused on trade in goods and related policies. However, the new free trade agreements aim for deeper economic integration and reflect the changing paradigm of international trade agreements. Through the new agreements, India expresses its understanding of these changes and embraces the imperatives that drive the modern economic trading order.
While the Free Trade Agreements with Australia and the United Arab Emirates are a mix of traditional and modern elements, the agreements with the UK and the EU feature more modern elements. The agreement with Australia has a two-tier structure in terms of tariff concessions and robust rules of origin, panellists noted. The UK Free Trade Area not only negotiates on tariffs or domestic barriers and services, but also talks about sustainability, labour, supply chain resilience and digital trends such as unhindered data flow. The agreements with the UK and the EU will cover more than 20 policy areas2.