India: Trade Agreements as Trade Strategy?

Abstract: This paper reviews India’s experience with the free trade agreements (FTAs) that it signed over the last two decades. The trade outcomes under the agreements have been found to be quite modest: the trade shares of India’s FTA partners stayed nearly constant over the past decade, and trade deficits with FTA partners, as a share of the overall deficit, did not increase over time. The reasons for India’s limited success appear to be threefold—the limited reforms undertaken within the agreements, the slow phase- in of scheduled liberalization, and the complexity of the rules of origin within the agreements. It is argued that unilateral liberalization of imports of intermediate inputs to enhance export competitiveness, as well as well-designed trade agreements that enhance market access, will help India improve its trade performance and utilize global markets to support its own employment needs and fuel its development trajectory.

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