A recent report by the Global Trade Research Initiative (GTRI) highlights high tariffs as a significant reason behind the underperformance of India’s exports through its Free Trade Agreements (FTAs) with ASEAN, South Korea, and Japan. According to GTRI, the discrepancy in tariffs between India and its FTA partners has contributed to an increased merchandise trade deficit with these countries, surpassing the growth of its global trade deficit.
The report, released on Monday, points out that Indian businesses often bypass FTAs for imports due to the relatively low Most Favored Nation (MFN) duties, rendering the FTA-related compliance costs unjustifiable against the tariff benefits. This trend is particularly noted in cases where imports from FTA partners enter India at zero or minimal MFN duties.
In contrast, the higher import duties in India mean that removing these tariffs under FTAs provides a competitive edge to products originating from FTA partner nations, further explained by GTRI.
An analysis within the report reveals that India’s trade deficits with its key FTA partners have escalated significantly more than its overall trade deficit. Specifically, the trade deficit surged by 302.9% with ASEAN, 164.1% with South Korea, and 138.2% with Japan, in comparison to an 81.2% increase in India’s global trade deficit. This comparison uses data spanning from the pre-FTA period (2007-09) to the recent period (2020-22).
Furthermore, the growth rate of India’s exports to these FTA partners has been slower than the rate of import growth from the same countries. For example, exports to ASEAN saw a 123.9% increase, while imports from the bloc rose by 175.7%. Similarly, exports to Japan and South Korea grew by 56.4% and 89.1%, respectively, whereas imports from these countries increased by 98.5% and 127.3%.
The GTRI report sheds light on the challenges faced by India in leveraging its FTAs to boost export performance, emphasizing the need for a balanced approach to tariff structures to enhance the benefits of such trade agreements.
Discover supply chain news insights on The Supply Chain Report. Enhance your international trade knowledge at ADAMftd.com with free tools.
#IndiaExports #TradeAgreements #ASEAN #SouthKorea #Japan #GTRI #TariffImpact #TradeDeficit #GlobalTrade #EconomicPolicy #FTABenefits #ExportPerformance
