Indias Approach Changed
- Indias Approach is staying away from multilateral trade pacts
- Indias Approach is focusing on bilateral deals that progressively build on an early harvest scheme
- Actively pursuing specialized global supply chain arrangements (such as rare earths or pharmaceutical ingredients)
- Restricting multilateral exposure to focused agreements (tackling black money or cryptocurrency rules)
India’s Trade Partnerships are Reflective of this Indias Approach
- Bilateral trade pacts: India’s outlook on bilateral negotiations appears to be remarkably upbeat:
- India’s free trade agreement (FTA) with the United Kingdom is expected to be concluded soon. The talks with Canada are on advanced stages.
- India has already concluded a free trade agreement with the UAE and an early harvest deal with Australia.
- Indias Approach towards Multilateral trade partnerships: India’s Multi-lateral partnerships show a declining trend:
- RCEP: India withdrew from pan-Asian RCEP (Regional Comprehensive Economic Partnership), amid concerns of a surge in imports from China.
- Minerals Security Partnership (MSP): India was excluded from the new US-led 11-member partnership to secure supply chains of critical minerals. This exclusion is even though India is being included in grouping like I2U2 (India, Israel, the UAE and the US), Quad and the latest IPEF.
Why is IPEF different from other Multilateral Trade Deals that India has walked out of Previously?
- IPEF is not exactly a trade pact and has a provision of multiple pillars that give an option to participants to choose what they want to be a part of.
- The 14 members of the group are not obligated by all the four pillars despite being signatories.
- India has stayed out of trade part of the arrangement and has joined the other three pillars– supply chains, tax and anti-corruption and clean energy.
- The trade pillar does not incorporate sensitive issues such as tariff reduction or reciprocal commitments. In a way it envisages some degree of synergies with Quad members’ strategic priorities.
Reasons for Change in Indias Approach
- Indias Approach backtracking on multilateral engagement on commerce can be result of trade statistics. These statistics are beginning to turn inclement after a short, buoyant phase:
Indias Approach Towards Exports from India:
- India’s net exports to real GDP growth have fallen to minus 6.2% in April-June 2022-23, despite country’s trade deficit narrowed slightly to $28.7 billion in August from a record high of $30 billion in July.
- Global slowdown: India has been the most affected country due to global slowdown. Among all key exporters (excluding China) of textiles and garments to US, Vietnam, Bangladesh, and Indonesia – India’s growth in the first six months of 2022 is the slowest among the top five exporters.
- Reasons for Indias Approach for Declining Export:
- Recession in European Union: The European Union, a key export market for India, is headed into a sharp recession, triggered primarily by a worsening energy shock.
- Deferring shipments: Global buyers of goods from countries such as India are seeing deferrals in shipments of confirmed orders for Christmas.
- Inflation in the US: The continuing inflationary pressure in US is reducing consumer demand and large retailers are cutting back on inventories.
- Negative list for exports: India’s negative list of exports, that include wheat, steel, iron pellets etc. have affected the trade in these commodities.
- The addition of some variety of rice to the list has worsened the balance of trade.