Building bilaterals over trading blocs

GoI's first comprehensive free trade agreement (FTA), with the UAE since the Modi government came to power in 2014 expects to more than double bilateral trade to $100 billion in the next five years, from $43.3 billion in 2020-21. Two-way trade with the country's third-largest trading partner (after the US and China) had peaked at $59 billion in 2019-20 before the pandemic struck. India expects $26 billion of exports, including gems and jewellery, textiles, leather, engineering, pharmaceuticals and automobiles, will receive a fillip once the 5% import duty is waived by the Gulf nation. The UAE has offered to eliminate duty on more than 97% of the products it imports from India, and big gains are seen in the gold and textiles trade.

This treaty departs from the previous ones India has signed by incorporating safeguards against import surges and channelling third-country products through the duty-free route. The deal with the UAE is the first of a series of FTAs GoI is negotiating as it targets $500 billion exports by March 2023. Timelines have been advanced for talks with Britain and Australia, and negotiations are on with Canada, Israel and the Gulf Cooperation Council (GCC). The bilaterals represent a shift in strategy from joining trading blocs that has delivered mixed results. India's experience with its treaty with the Asean led it to pull out of the larger Regional Comprehensive Economic Partnership (RCEP), a grouping of Asia Pacific nations that would serve as a free market for Chinese manufacturers. India is now targeting bilateral agreements with its biggest trading partners. While this may not be optimal from a world trade perspective, it holds out the prospect of putting its exports on a faster track.