The government is weighing a proposal to set up an inter-ministerial panel comprising senior officials to iron out differences across various ministries and departments on proposals relating to free trade agreements (FTAs), an official source told FE.
The move assumes significance, as the country is either negotiating or planning to start talks for a flurry of high-stake FTAs with key economies, such as the EU, the UK, Canada, Israel, members of Gulf Co-operation Council (GCC) and Australia. While New Delhi has clinched an interim deal with Canberra, talks for a full-fledged FTA could start soon. Together these economies (excluding the UAE, a part of the GCC, with which an FTA is already signed) contributed as much as $108 billion, or 26%, to India’s merchandise exports in FY22.
“A final decision on the panel will be taken soon,” said the source.
An inter-ministerial committee for FTAs will come in handy, as differences on crucial and sensitive issues within ministries that oversee different sectors tend to delay negotiations. Often stakeholders with conflicting interests across sectors make the job difficult for negotiators, who are required to have clarity of purpose when they get into such high-stake talks, more so because these FTAs are going to guide the country’s trade policies for years. For instances, while the dairy sector resisted India’s RCEP entry the most, some other sectors were less hesistant to join the block.
Moreover, such a panel will bolster co-ordination among ministries and departments and improve the quality of negotiations as well, said the source.
The country is also seeking a review of its existing FTAs with key partners, including Asean group, Japan and South Korea, to restore greater degree of trade balance.
Following its exit from the Beijing-dominated RCEP in November 2019, New Delhi has stepped up efforts to forge “fair and balanced” trade pacts with key countries.
In February, India signed an FTA with the UAE, the first such pact by New Delhi with any economy in over a decade. Then followed an interim trade deal with Australia in April; both the sides are expected to soon resume negotiations for a broader FTA. Last week, India and the EU resumed negotiations for an FTA after a gap of about nine years and are planning to launch the next round of talks in September. Similarly, New Delhi and London have concluded four rounds of negotiations and are aiming to clinch a deal by Diwali in October. Similarly, India and Canada are eyeing an interim deal by the end of 2022.
After the deal with the UAE, the other GCC members have evinced interest in hammering out an FTA with India. The country is also planning to launch talks with Israel. The GCC comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE.
India remained cautious for about a decade before signing the FTA with the UAE in February, as five of its six prominent FTAs that came into force between 2006 and 2011, had exacerbated New Delhi’s trade balance, according to an FE analysis. These are India’s trade deals with Asean group, South Korea, Japan, Singapore and Malaysia. Only the South Asia Free Trade Area agreement, which replaced a 1993 preferential trade pact, turned out to be a clear winner for India.