India and the United Arab Emirates signed an agreement that the two countries hope to increase bilateral trade to US$ 100 billion in five years. It is the first of several free trade deals New Delhi is racing to complete this year to expand its pandemic-hit economy.
Economists say this reflects a significant change from the past, when India, which protected many sectors of its economy with high tariffs, was slow to conclude free trade pacts.
The Comprehensive Economic Partnership Agreement was signed during a virtual summit between Indian Prime Minister Narendra Modi and UAE Crown Prince Mohamed bin Zayed al Nahyan.
“This reflects the emerging new world order, the post-COVID world, which will see new alignments and realignments in which we see the UAE and India as strong partners,” Indian Commerce Minister Piyush Goyal said following the signing.
The UAE is India’s third largest export partner after the United States and China, with bilateral trade of around US$60 billion. While the UAE hopes the pact will help make it a business hub, India says it will give access to markets in Africa and West Asia and create more than a million jobs in labor-intensive sectors.
In 2019, concerns about cheap imports from China led India to pull out of the Regional Comprehensive Economic Partnership, the world’s biggest trade pact, which took effect this year between Australia, China, Japan, South Korea, and 10 other Asian countries. This prevented India from gaining preferential access to fast-growing markets and led to concerns that one of the world’s leading economies was becoming more protectionist.
Goyal said that India is no longer signing trade pacts to join a group, but rather seeking agreements with nations that have values of democracy, transparency, and mutual growth.
“We are not talking about closing India’s doors, but opening India’s doors even more for greater international engagement,” he said. New Delhi hopes that the bilateral trade pacts it is negotiating with countries such as Britain, Australia, the European Union, and Israel will help it gain greater market access.
For many of these countries, building closer economic ties with New Delhi would help reduce their huge trade dependence on China, which they want to do amid unease over Beijing’s rise in many countries. After suffering a major contraction last year, India’s economy grew by around 9% last year, the fastest among major economies.
India aims to strike trade deals with Australia and Britain by the end of this year to boost exports to $500 billion by 2023.
Even before striking a more comprehensive deal, New Delhi hopes to strike a limited trade pact, dubbed an “early harvest deal”, with Australia next month. Both countries are members of the Quadrilateral or Quad Security Dialogue along with the United States and Japan, formed with an eye on China.
The grouping has also given a boost to trade relations between member countries, Australian Trade, Tourism, and Investment Minister Dan Tehan said in New Delhi earlier this month during a visit to discuss the free trade pact.
British Secretary of State for International Trade Anne-Marie Trevelyan also visited India last month to start negotiations on a free trade agreement between the two countries. While Britain hopes to double its exports to India by 2035, taking advantage of its large middle class, New Delhi wants greater opportunities for Indians to study and work there.
“The government has taken an exciting path for agreements with Great Britain and Australia. They are trying to make an early harvest deal for sectors that are ready at this point to accept reciprocal market access as they are confident to face import competition,” said Dhār. “This will lead to some headway in working towards broader free trade agreements,” he added.