India’s recent Free Trade Agreements (FTA) can prove to be a big change for the country’s economy. Brokerage firm Yes Securities believes that with the help of these agreements, PLI scheme and China + 1 strategy, India can achieve the target of merchandise export of 1 trillion dollars i.e. about Rs 95 lakh crore by 2030. FTAs will increase India’s participation in manufacturing, private investment and global supply chain. Electronics, pharma and engineering sectors are expected to benefit the most from this.
India has signed many important free trade agreements with UAE, Australia, UK and EFTA countries in the last few years. Apart from this, work on agreements is also going on with Oman, New Zealand and the European Union. According to Yes Securities, these agreements are not limited to just reducing import-export duties, but are a big step towards deeply connecting India with the global trade network.
Manufacturing sector will get big benefits
According to the report, sectors like electronics, pharmaceuticals, engineering and machinery can benefit the most from these agreements. Due to FTAs, Indian products will get better access to new markets, which can accelerate both production and exports. Along with this, investment in industrial corridors, port infrastructure and supply chain localization will also strengthen this process.
Private investment may get new support
Yes Securities believes that FTAs can revive India’s stalled private capex cycle. At present the capacity utilization in many industries is around 75 percent, due to which companies are avoiding big investments. If export-led demand continues to grow, companies’ confidence will increase and they can invest in new capacity building. This will also boost employment and industrial development.
New opportunities will also open in export of services
India has set a target of total exports of $2 trillion by 2030, in which the contribution of goods and services is expected to be equal. Agreements with markets such as the UK and EU could create new opportunities for IT services, consulting, engineering research and development and financial services. This will make better use of India’s technical and skilled workforce.
Challenges still remain
However, experts say that mere access to the market is not enough. India will also have to deal with challenges like logistics costs, expensive electricity, complex regulations and low labor productivity. If these problems are not resolved, imports may increase rapidly and there will be a risk of the trade deficit increasing. Therefore, to take full advantage of FTAs, it will be equally important to increase domestic competition.
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