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Free Trade Agreements leading to increased imports and exports for India

| | Feb 27, 2016, at 12:58 am
#Free Trade Agreements # increased imports # exports # India
New Delhi, Feb 26 (IBNS) Since the mid- 2000s, India’s Free Trade Agreements have doubled to about 42 as of Friday, resulting in increased trade with these FTA countries, more than would have happened otherwise, according to the Finance Ministry.
Increased trade has been more on the import than export side because India maintains relatively high tariffs and hence had larger tariff reductions than its FTA partners. 
 
In case of the ASEAN FTA,India benefited on both sides of trade flows with a statistically significant 33 per cent increase in exports and 79 per cent increase in imports. 
 
The trade increases have been much greater with ASEAN than other FTAs and they have been greater in certain industries, such as metals on the import side. 
 
On the export side, FTAs have led to increased dynamism in apparels, especially in ASEAN markets. 
 
The overall effect on trade of an FTA is positive and statistically significant. 
 
The cumulative effect between the year of the FTA and 2013 on trade with ASEAN, Japan, and Korea is approximately equal to 50 per cent. 
 
India’s increased trade with FTA countries is not due to diversion of imports from more efficient non-FTA countries. 
 
On the import side, a 10 per cent reduction in FTA tariffs for metals and machinery increased imports by 1.4 per cent and 2.1 per cent, respectively, compared to other products from FTAs or all products from non-FTA countries. 
 
In the current context of slowing demand and excess capacity with threats of circumvention of trade rules, progress on FTAs, if pursued, must be combined with strengthening India’s ability to respond with WTO-consistent measures, such as anti-dumping and conventional duties and safeguard measures, according to a note by the Finance Ministry. 
 

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