QUES . “Free trade agreements with important economies of the world are good for India”. Discuss. UPSC IES/ISS EXAM 2023 General Studies. 200 Words. 5 Marks.
HINTS:
A Free Trade Agreement (FTA) is a treaty between two or more countries to reduce or eliminate trade barriers such as tariffs, import quotas, and export restrictions on goods and services. The goal is to encourage trade and investment between the member countries by creating a more favorable trading environment.
Governments with free-trade policies or agreements in place don’t necessarily abandon all control of imports and exports or eliminate all protectionist policies. Only few free trade agreements (FTAs) result in completely free trade in modern international trade.
The concept of free trade is the opposite of trade protectionism or economic isolationism.
As of 2022, India has preferential access, economic cooperation and FTA with more than 50 individual countries.
Benefits of Free Trade Agreement (FTA)
India’s FTAs provide several benefits, including:
● Easier access to foreign markets for Indian goods and services.
● Increased export and import activities boost economic growth.
● Greater market access attracts foreign direct investment.
● Lower tariffs reduce the cost of importing raw materials and components.
● Expanded trade opportunities can lead to job creation in export-oriented industries.
● Improves the competitiveness of Indian businesses in the global market.
● Specific sectors like textiles, IT, and pharmaceuticals experience growth due to reduced trade barriers.
● FTAs generally benefit Indian consumers by:
1 . Reduced tariffs lead to lower prices for imported goods.
2 . Increased variety of goods and services available.
3 . Access to higher-quality imported products.
Thus, Free Trade Agreement (FTA) allows businesses in each country or location to focus on producing and selling the goods that best use their resources. Other businesses import goods that are scarce or unavailable domestically. This mix of local production and foreign trade allows countries to experience faster growth while better meeting the needs of their consumers.
The sectors that benefit the most from India’s FTAs include:
Textiles and Garments: Significant export opportunities and reduced tariffs.
Information Technology: Increased access to foreign markets for IT services.
Pharmaceuticals: Easier entry into regulated markets.
Automotive: Lower tariffs on components and finished goods enhance competitiveness.
Challenges of Free Trade Agreement (FTA)
India faces several challenges with FTAs, including:
Trade Deficits: Increased imports can lead to trade deficits with partner countries.
Protection of Domestic Industries: Difficulty in protecting sensitive sectors from foreign competition.
Complex Negotiations: Lengthy and complex negotiation processes.
Regulatory Barriers: Non-tariff barriers and differing regulatory standards.
Conclusion
The future outlook for India’s FTAs is promising, with ongoing negotiations for new agreements and updates to existing ones. India is actively seeking to expand its FTA network to include more countries and regions, which could further boost trade and investment. However, careful negotiation is needed to balance benefits with protecting domestic industries.
