Mint Primer: Why India must trade up to be a $30 tn economy
Mint looks at the significance of free trade agreements for India going forward. Unlike a possible deal with the European Union (EU) or the US, India’s largest trading partners, the India-EFTA deal is unlikely to boost bilateral trade by much. In the January-December 2023 period, India’s exports to EFTA, which comprises Iceland, Norway, Liechtenstein and Switzerland, was just $1.87 billion.
Its imports were $20.45 billion but if you remove gold imports worth $19.65 billion from Switzerland (effective duty on gold remains unchanged post the deal), this too is minimal. The significant part is that EFTA has committed to invest $100 billion and create 1 million jobs in India over a 15-year period. In June 2022, India and the EU resumed their trade negotiations, stalled for nine years since 2013.
The talks are currently on. Negotiations for a trade deal that first began in 2007 did not progress as there were differences in scope and expectations between the partners. The areas of disagreement were wide—tariffs on cars, wines, dairy products and liberalization of visa regime for Indian professionals.
A deal will, no doubt, help boost bilateral trade significantly from the current $120 billion as the EU is India’s second largest trading partner and India is the EU’s 10th largest trading partner. The US is India’s largest trading partner with bilateral trade in FY23 coming in at $129 billion. The US is also the third-largest source of foreign direct investment (FDI) into India, totalling $6.04 billion, or 9% of total FDIs in FY23.
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