India is rushing to sign a series of rapid-fire trade deals by the end of March, officials said, as economic need drives a departure from New Delhi’s usual slow-fire approach to trade deals.
The postponement also means Prime Minister Narendra Modi’s government is giving “early harvest” pacts over comprehensive free trade deals with partners, a move that has left some countries at a loss, officials said, asking not to be named as the talks are private .
Modi’s office is pushing government departments, particularly foreign and trade ministers, to sign initial deals with countries like Australia and the UK, several officials said. India left Asia’s largest multilateral agreement in 2019 and has so far shown little interest in a Trans-Pacific Pact.
For Modi’s ruling Bharatiya Janata Party, historically wary of being tied to overseas business and angering its loyal small vendor voter base, the emphasis on quick one-on-one trade deals is sort of an about-face after pressing on the need be self-employed. Much is at stake politically as Modi seeks to revive a pandemic-battered economy and attract more investment from the US and its allies as India seeks to counterbalance China.
The urgency to close deals quickly stems from the recognition that the window of time to capitalize on realigning global supply chains can be short-lived, officials said.
New Delhi is currently negotiating bilateral trade deals with 20 nations and expects to conclude half a dozen deals by Christmas and March next year, including those with Australia and Great Britain. This push for one-on-one trade deals with an emphasis on early harvest deals rather than full-scale free trade deals has baffled at least two countries, officials, who knew about the talks, said, asking not to be identified as the talks were ongoing.
There was no immediate response from the Prime Minister’s Office or the Foreign Ministry.
India’s recognition of the need to prioritize trade as a geopolitical strategy has, in turn, led to a greater focus on higher exports and rapid trade deals that can fuel GDP growth, officials said. In August, Modi himself emphasized the urgency when he addressed the heads of India’s diplomatic missions abroad, calling on them to help realign global supply chains to boost exports.
While India announced production-related incentives such as production-related incentives to attract global supply chains and create jobs, it could take longer to show results, said Amitendu Palit, an economist specializing in international trade and investment at the National University of Singapore worked for the Indian finance ministry in the past.
Pressure is growing on the Commerce Department to scrutinize the proposed agreements, officials said. Minister of Commerce and Industry Piyush Goyal has now set a lofty target of $ 400 billion for India’s annual goods exports for the fiscal year ending April 2022 – almost 38% more than the previous year’s $ 290 billion. He also aims to grow that number to $ 2 trillion by the end of this decade.
The goal is a first for New Delhi after circumventing multilateral trade pacts since Modi came to power in 2014. His government has pushed for more independence and less dependence on imports. This was one of the reasons India left the China-backed Regional Comprehensive Economic Partnership.
India gained “more trust” from trading partners during the pandemic by making sure not a single supply chain was disrupted, which has led to a surge in interest in signing deals given the country’s economic growth plans, a senior Commerce Department official said asked not to be named as he was not allowed to speak to the media.
The official added that early harvest deals “ensure things move faster” in areas where there is an easy settlement, while negotiating issues that require more time can be continued before final, sweeping ones Agreement to be signed.
The resumption of trade by Modi’s nationalist government is due to the fact that a border conflict with China that has lasted more than a year and that regional security is now being threatened again by the Taliban takeover in Afghanistan. New Delhi intends to boost trade with G-7 countries with strong Indo-Pacific strategies and those with growing influence in Central Asia such as the United Arab Emirates.
The UK and India are negotiating tariff cuts and market access for around 600 products each to reach an interim deal by March, People said. Topics discussed include Indian textile products, leather, shoes and chemicals, they said.
In return, India can provide access to processed foods, some agricultural products, as well as fintech, life sciences and the medical technology industries.
“Strategic and economic connections are mutually reinforcing. Right now, countries and companies are looking for alternatives to China with partners they can trust, ”said Tanvi Madan, director of The India Project at Brookings Institution. “But these are difficult political issues in India and partners have heard this rhetoric before. It would greatly improve India’s credibility if one of these deals were made. “
This would mean a departure from current trade policies that have protected the interests of small domestic traders.
“We are nowhere against bilateral trade deals,” said Ashwani Mahajan, co-convener of Swadeshi Jagran Manch, a group allied with Modi’s party that has influence among traders and which supported the decision to leave the RCEP in 2019. “Still, we believe that strategic relationships cannot be at the expense of national interests.”
Gaps in reform
The government’s reluctance to sign comprehensive agreements is due not only to the risk of political capital but also to a lack of reforms. Regulation in critical areas such as investment protection, e-commerce, data protection and even agriculture must be in line with those in European and OECD markets.
It is a void that the South Asian country needs to fill before major trade deals can be concluded.
The current craze for quick deals could be linked to a pandemic-induced decline in India’s global goods trade deficit to $ 88 billion by November 2020, said Richard Rossow, Wadhwani chairman of US-India policy studies at the Center for Strategic and International Studies in Washington, citing its own data.
The deficit, which rose to 133 billion by August 2021, could probably move forward with a trade deal with light commitments, but a world-class deal doesn’t seem likely, “Rossow said in an email. “I don’t have much hope.”