Context
A recent analysis highlights that India’s trade with several major Free Trade Agreement (FTA) partners, including ASEAN, Japan, South Korea and Singapore, has become increasingly import-driven, raising concerns over widening trade deficits and limited integration into Global Value Chains (GVCs).
Explanation
- A Free Trade Agreement (FTA) is an agreement between two or more countries to reduce or eliminate tariffs and other trade barriers on goods and services.
- FTAs aim to increase trade, investment, market access, technology transfer and participation in Global Value Chains (GVCs)—international production networks where different stages of manufacturing occur across countries.
- India has FTAs with ASEAN, Japan, South Korea, Singapore, UAE, Australia, and recently concluded one with the United Kingdom.
- A trade deficit occurs when a country’s imports exceed exports, while a trade surplus occurs when exports exceed imports.
- The effectiveness of FTAs depends not only on tariff reduction but also on domestic manufacturing competitiveness, logistics, standards compliance, infrastructure and ease of doing business.
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