Government’s Hugely Change Trade Amid China-Taliban Dispute.
The change also means that the government of Prime Minister Narendra Modi is prioritizing “early harvest” pacts over comprehensive free trade agreements with partners.
India is rushing to close a handful of quick bilateral trade deals by the end of March, the officials said, as economic necessity prompts a shift from New Delhi’ usual focus on trade deals. The change also means that Prime Minister Narendra Modi’ government is prioritizing “early harvest” pacts over comprehensive free trade agreements with partners, a move that perplexes some countries, said officials, who asked not to be identified. because conversations are private.
Prime Minister Modi’ office is pressuring ministries, particularly those of Foreign Affairs and Trade, to honor initial agreements with countries such as Australia and the United Kingdom, several officials said. That’s even as India backed away from Asia’s biggest multilateral deal in 2019 and has shown little interest so far in a trans-Pacific deal.
For Prime Minister Modi, the ruler of the Bharatiya Janata Party, historically wary of being tied to overseas deals and upsetting his loyal vote base from small merchants, the emphasis on quick one-to-one trade deals is something of a U-turn. after pressing for the need to be self-sufficient. The stakes are high politically, as Prime Minister Modi seeks to revive an economy hit by the pandemic and attract more investment from the United States and its allies who look to India as a counterweight to China.
The urgency to close deals quickly stems from the realization that the window of opportunity to benefit from the realignment of global supply chains may be short-lived, according to officials.
New Delhi is currently negotiating bilateral trade deals with 20 countries and expects to complete half a dozen deals, including those with Australia and Britain by this Christmas and March of next year, respectively. This push for one-to-one trade deals with an emphasis on early harvest deals rather than comprehensive free trade deals has stumped at least two countries, said officials with knowledge of the talks, who asked not to be identified as the talks were in progress.
There were no immediate comments from the prime ministers office or the Foreign Ministry. Indias’ awareness of the need to prioritize trade as a geopolitical strategy, in turn, has led to an increased focus on driving higher exports and quick trade deals that can boost GDP growth, according to officials. In August, Prime Minister Modi himself conveyed the urgency by addressing the heads of India’s overseas missions, urging them to help boost exports as global supply chains are realigned.
While India announced manufacturing incentives, such as production-linked incentives to attract global supply chains and create jobs, these could take longer to show results, said Amitendu Palit, an economist specializing in international trade and investment at the National University of Singapore. he worked for the Indies. Ministry of Finance in the past.
There has been mounting pressure on the Commerce Ministry to take a closer look at the proposed deals, officials said. Trade and Industry Minister Piyush Goyal has set a lofty target of $ 400 billion for India’s annual merchandise exports for the fiscal year ending April 2022, nearly 38% more than $ 290 billion. dollars recorded last year. He’s also trying to bring that number to $ 2 trillion by the end of this decade.
The goal is a first for New Delhi after sidelining multilateral trade pacts since Prime Minister Modi came to power in 2014. His government has pushed for greater self-reliance and less dependence on imports. It was part of the reason India ended up walking away from the China-backed Regional Comprehensive Economic Association.
India has “gained more trust” from its trading partners during the pandemic by ensuring that not a single supply chain is disrupted, prompting increased interest in signing deals given the country’s economic growth plans, said a a senior official from the Ministry of Commerce, who asked not to be identified because he was not authorized to speak to the media. The official added that the early harvest agreements “will ensure that things move faster” in areas where there is an easy agreement, while negotiations may continue on issues that will need more time before final and comprehensive agreements are signed.
The new trade commitment by the nationalist government of Prime Minister Modis comes as a more than a year-long border conflict with China continues and regional security is now again threatened by the Taliban’s takeover of Afghanistan. New Delhi is looking to strengthen trade with G-7 nations with strong Indo-Pacific strategies and those with growing influence in Central Asia, such as the United Arab Emirates.
Britain and India are negotiating tariff cuts and market access for around 600 products each in a bid to strike an interim deal by March, the people said. Items under discussion include textiles, leather, footwear and chemicals from India, they said.
In return, India can grant access to processed foods, some agricultural products along with advanced technology industry, life sciences and medical equipment. “Strategic and economic ties 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 the Brookings Institution. “But these are tough political issues in India and partners have heard this rhetoric before. It would significantly enhance India’s credibility if one of these deals is achieved.”
This would imply a change in current commercial policy that has protected the interests of small national merchants.
“We are nowhere opposed to bilateral trade agreements,” said Ashwani Mahajan, co-convener of Swadeshi Jagran Manch, a group aligned with the Modis party that has influence among traders and had backed the decision to exit the RCEP in 2019. . “That said, we believe that strategic relationships cannot be at the expense of the national interest.”
In addition to risking political capital, governments’ doubts about signing comprehensive agreements are also due to the lack of reforms. Regulation in crucial areas, including investment protection, e-commerce, data protection and even agriculture, must be in line with those in force in European and OECD markets.
It’s a void that the South Asian nation will need to fill before comprehensive trade deals can be completed.
The current enthusiasm for quick deals may be linked to a pandemic-related drop in India’s global goods trade deficit to $ 88 billion in the year to November 2020, said Richard Rossow, Wadhwani chair in policy studies. between the United States and India at the Center for Strategic Studies and International Studies in Washington, citing their own data.
The deficit that soared to $ 133 billion in the year to August 2021 “will curb any attempt to craft a robust trade deal. India could probably go ahead with a trade deal that includes light commitments, but a world-class deal doesn’t seem like it. “. probably, “Rossow said in an email.” I’m not very hopeful. “