The reasons behind India’s weaker export performance include higher tariffs in India and lower tariffs in its FTA partner countries, think tank Global Trade Research Initiative (GTRI) said in a report on Monday.
“Many Indian firms choose not to use the FTA route when import duties are low, as FTA-related compliance costs do not justify the tariff benefits. For instance, in the case of India’s FTA partners, many imports occur at zero or low Most Favored Nation (MFN) duties,” the report said.
Conversely, India has higher import duties, so eliminating these duties under FTAs gives a price advantage to products from FTA partner countries, GTRI said.
The tariff discrepancy was among the factors why India’s three key Free Trade Agreements (FTAs) with ASEAN, South Korea, and Japan were not successful as per the think tank which resulted in India’s merchandise trade deficit with these partners increased significantly more than its global trade deficit.
“Specifically, the deficits grew by 302.9% with ASEAN, 164.1% with South Korea, and 138.2% with Japan, compared to a 81.2% increase in the global deficit. This comparison is based on data from the pre-FTA period (2007-09) and recent trade data (2020-22),” the report stated.
Second, India’s exports to these FTA partners have increased at a lower rate than its imports. For instance, with ASEAN, exports grew by 123.9% and imports by 175.7%; with Japan, exports grew by 56.4% and imports by 98.5%; and with South Korea, exports increased by 89.1% and imports by 127.3%, it said.
