India should expedite trade talks with large markets, says PHDCCI
A Free Trade Agreement (FTA) with the United States will boost bilateral trade to US$300 billion by 2025-26, given that India has enjoyed a 7% year-on-year growth in trade with the American market from 2015-16 to 2019-20, said Sanjay Aggarwal, President of the PHD Chamber of Commerce and Industry (PHDCCI).
As such, India-US would gain more from bilateral trade compared to the 3% y-o-y growth recorded in merchandise trade with the Regional Comprehensive Economic Partnership (RCEP) economies during 2015-16 to 2019-20, PHDCCI pointed out.
India has opted out of RCEP due to differences over tariffs, its trade deficit with other countries and non-tariff related barriers. Signed in November 2020 by 15 Asia Pacific economies and designed and dominated by China, RCEP is a market of 2.2 billion people or 30% of the global population.
The signing of the India-USA FTA could play a cornerstone role in the long-standing bilateral trade and investment relations between the world’s two largest democracies, Sanjay Aggarwal said in New Delhi on 23 Nov 2020.
He made the comments on a PHDCCI Research Paper: The Future of Expanding India-USA Bilateral Relations; Strengthening bilateral ties through FTA to discuss the ever-expanding complementarities and synergies between India and the US.
The talks of concluding a broad-based India-USA FTA would also get a significant boost encompassing a wide variety of sectors and removing market access barriers to unleash a higher trade trajectory, said Sanjay Aggarwal.
Joe Biden as the new President would help in reinvigorating the bilateral economic agenda between India and the USA thereby facilitating economic growth, job creation, promotion of small businesses and rising trade and investment exchanges.
The continued spread of pandemic COVID-19 and the associated global supply chain disruptions have greatly impacted economic activities and created an unusual degree of uncertainty in almost all the countries. At this crucial juncture, dynamic economies such as India and the USA hold immense potential for refuelling global growth to a higher trajectory in the coming times, said Aggarwal.
Combining goods and services together, the bilateral trade between India and USA has increased from around US$96 billion in FY2014 to around US$143 billion in FY2020. The US-India FTA will be a significant step as India has a trade surplus of US$23 billion of the total bilateral trade of around US$143 billion.
Based on strong complementarities and growth prospects, bilateral trade between India and the USA has the potential to more than double from the present level of around US$143 billion to reach US$300 billion by 2025-26 and increase even further after the signing of a comprehensive India-USA FTA, he said.
India’s decision to not sign the RCEP agreement is a very bold and a welcome step as the MSMEs sector would have been badly affected particularly in electronics, chemicals, metals, textiles, and the dairy sector as other member nations of RCEP did not address various key concerns expressed by India, said Sanjay Aggarwal.
Currently, India’s trade with 15 RCEP economies stands at around US$220 billion with a trade deficit with 11 of out 15 economies in the newly formed grouping.
FTAs must be signed keeping two things in mind viz., mutually reciprocal terms and focusing on products and services with maximum export potential. The focus should not be just on free trade but also fair trade that promotes a strengthened stance of India in various FTAs with its partner countries, he stressed.
At this juncture, India should expedite trade talks with large markets like the US on signing a broader or full-fledged FTA, he added.
But there is a need to outline the contours for a sustainable full-fledged FTA between the two countries which is broad-based and encompass wide ranging potential sectors of development, underlined Sanjay Aggarwal.
A comprehensive FTA with an advanced economy such as the US would prove to be equally gainful for India resulting in a manifold increase in bilateral trade and investments and progressive economic growth of both the economies, he said.
India-USA FTA when concluded can act as an effective mechanism for unlocking additional trade liberalization in goods & services both bilaterally and multilaterally and do away with trade-related distortions such as high tariffs and complex non-tariff measures.
Considering the vibrant trade and economic complementarities, an FTA could boost trade and economic welfare in both the economies by removing trade barriers, increasing market access and providing a stable framework for the comprehensive growth of the various sectors of mutual interest such as defence, space, energy, aviation, insurance, infrastructure, engineering, agriculture & food processing, manufacturing, entrepreneurship, healthcare & pharmaceuticals, water & environment, financial services, ICT & digital infrastructure including frontier technologies of 5G, big data analytics, quantum computing, blockchain and Internet of things, among others, said Sanjay Aggarwal.
Being one of the most dynamic emerging market economies, India has been continuously considered as one of the top attractive destinations for inbound investments. Keeping in view the rapidly changing global trade and investment dynamics, India should use this golden opportunity by further offering Red Carpet to global investors and provide the most favourable terms for setting up manufacturing bases in India.
Greater efforts are already underway to facilitate trade, industry and investments and become AatmaNirbhar Bharat with enhanced capacities and a strong economic base, said Sanjay Aggarwal.
Trade facilitative reform measures such as the launch of Geographic Information System (GIS)-enabled land bank and development of a single-window system for clearances would provide increased avenues for greater business and investment opportunities and ensure seamless engagement of US investors in India’s growth story.
Going forward, India’s large consumer base, improved infrastructure, highly skilled and semi-skilled manpower, enhanced transparency, expanded digitization, greater innovation, more policy stability, among others will significantly boost the sentiments of businesses to further enhance the trade and investments trajectory between the two economies, elaborated Sanjay Aggarwal.
Since India and the USA are natural partners, the trend of widening economic and trade relations between New Delhi and Washington will continue in the coming years on the back of strong complementarities and mutual synergies, he believes.
Efforts should be made to further deepen trade and investment relations between India and the USA and ensure greater market access with a focus on promising sectors of mutual interest, he said. #trade #exports #investment #projects #manufacturing #FTA /fiinews.com
