Enough of FTA-Dragging

Context: India needs a progressive new economic relationship which would be desirable and its national security and strategic imperative deserves urgent attention.

Issues with India in Global Trade Agreement

• Out of any major trade agreements: Compared to other big economic players, India is out of any major trading arrangement.
• India has opted out of RCEP, given the skewed experience under the India-ASEAN FTA, and the worsening security dynamic with China.
• Imbalance in strategic and economic stability: 70% of India’s trade happens in goods that account for 30% global trade.
• Issues with Export: 80% FDI flowing into India is for manufacturing and sale in the domestic market, not further exports. Aatmanirbharta is yet to achieve traction with businesses to relocate supply chains. 
• China’s belligerence has forced India to start a complex decoupling process.
• Negligible benefit of higher duties: Either in terms of revenue or developing higher-end products. 
• India has always found easier political acceptability with the West: Because, India is always made sure it followed global standards as a democracy even if it never signed-off on them.
• Continue issues with West in Economic Conversation: Post-reform India found it easier to look East.

Way Forward: India must replace a tariff mindset with best practices in global trade

• Economic conversation of India globally needs a reboot to reflect the strategic realities of the day.
• Convey economic ambition and political intent to pursue the course.
• Needs to seal some of its FTAs agreement globally: India pursuing eight FTAs, but required to seal some of these deals and not let them fall by the wayside like in the past.
• Required to adopt the changing behaviour of trade deals globally: New-generation FTAs will have to deal with digital technologies, ecommerce, IPR, environment sustainability, labour, gender, etc.
• Need to refashioning its political approach on certain issues to position itself as a natural destination for Western value chains.
• India will have to diversify few areas like green technology, renewables, etc., for better strategic and economic stability in long term. It makes India capable to leverage its trading partners more effectively.
• Need to do away with certain old habits in keeping with the quality trends.
• Tariffs and Duties must be low in global perspective, for more acceptable and competitive levels.
• India must reopen the Economic Conversation with the West on the strength of democratic politics.