No. PR- 144 November 23, 2020 New Delhi
FTA with USA will be a major breakthrough to double India-USA bilateral trade to USD 300 billion by FY 2025-26: PHD Chamber
FTA with USA will be gainful as compared with RCEP economies, merchandise trade with RCEP economies grew at an annual rate of 3% (Y-o-Y average) during 2015-16 to 2019-20 whereas trade with USA grew at 7% during the same period, says the industry body PHDCCI
The signing of India-USA Free Trade Agreement (FTA) could play a cornerstone role in the long-standing bilateral trade and investments relations between the world’s two largest democracies, said Shri Sanjay Aggarwal, President, PHD Chamber of Commerce and Industry in a press statement issued here today.
PHD Chamber of Commerce and Industry has come out with a Research Paper: The Future of Expanding India-USA Bilateral Relations; Strengthening bilateral ties through Free Trade Agreement to discuss the ever-expanding complementarities and synergies between India and the US.
The continued spread of pandemic COVID-19 and the associated global supply chain disruptions have greatly impacted economic activities and created an unusual degree of uncertainty in almost all the countries. At this crucial juncture, dynamic economies such as India and USA hold immense potential for refuelling global growth to a higher trajectory in the coming times, said Shri Aggarwal.
The election of Mr. Joe Biden as the new President of USA would help in reinvigorating the bilateral economic agenda between India and USA thereby facilitating economic growth, job creation, promotion of small businesses and rising trade and investment exchanges. The talks of concluding a broad-based India-USA FTA would also get a significant boost encompassing a wide variety of sectors and removing market access barriers to unleash a higher trade trajectory, said Shri Sanjay Aggarwal.
Combining goods and services together, the bilateral trade between India and USA has increased from around USD 96 billion in FY2014 to around USD 143 billion in FY2020, said Shri Sanjay Aggarwal.
Based on strong complementarities and growth prospects, bilateral trade between India and USA has the potential to more than double from the present level of around USD 143 billion to reach USD 300 billion by 2025-26 and increase even further after signing of a comprehensive India-USA FTA, he added.
India decided not to sign the mega trade deal Regional Comprehensive Economic Partnership (RCEP) due to differences over tariffs, its trade deficit with other countries and non-tariff related barriers.
The decision of Hon’ble Prime Minister of India of not signing the RCEP agreement is a very bold and a welcome step as the MSMEs sector would have been badly affected particularly in electronics, chemicals, metals, textiles, and dairy sector as other member nations of RCEP did not address various key concerns expressed by India, said Shri Sanjay Aggarwal.
Currently, India’s trade with 15 RCEP economies stands at around USD 220 billion; India runs a trade deficit with 11 of out 15 RCEP economies.
FTAs must be signed keeping two things in mind viz., mutually reciprocal terms and focusing on products and services with maximum export potential. The focus should not be just on free trade but also fair trade that promotes a strengthened stance of India in various FTAs with its partner countries, he said.
At this juncture, India should expedite trade talks with large markets like the US on signing a broader or full-fledged FTA. India- USA FTA will be gainful as compared with the FTA with RCEP economies. The growth of merchandise trade has also been recorded high with USA at 7% (Y-o-Y average) as compared with 3% with RCEP economies during the last 5 years period of FY 2015-16 to FY 2019-20, said Shri Sanjay Aggarwal.
Growth of Merchandise trade with USA and RCEP countries
Description FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 Average Growth rate Y-o-Y (%) India’s merchandise trade with 15 RCEP economies (USD billion) China, Singapore, Republic of Korea, Indonesia, Australia, Japan, Malaysia, Vietnam, Thailand, Philippines, Myanmar, New Zealand, Brunei, Darussalam, Cambodia, Lao PDR. 196 180 188 211 241 220 3% Growth rate Y-o-Y(%) -8% 5% 12% 14% -9% India’s merchandise trade with USA (USD billion) 64 62 65 74 88 89 7% Growth rate Y-o-Y(%) -3% 4% 15% 18% 1% Source: PHD Research Bureau, PHDCCI, compiled from Ministry of Commerce & Industry, GOI
FTA with USA will be significant step as India has a trade surplus of USD 23 billion of the total bilateral trade with USA of around USD 143 billion, said Sh. Sanjay Aggarwal
There is a need to outline the contours for a sustainable full-fledged FTA between the two countries which is broad based and encompasses wide ranging potential sectors of development, said Shri Sanjay Aggarwal.
A comprehensive FTA with an advanced economy such as the US would prove to be equally gainful for India resulting in manifold increase in bilateral trade and investments and progressive economic growth of both the economies, he said.
India-USA FTA when concluded can act as an effective mechanism for unlocking additional trade liberalization in goods & services both bilaterally and multilaterally and do away with trade related distortions such as high tariffs and complex non-tariff measures, he added,Considering the vibrant trade and economic complementarities, an FTA could boost trade and economic welfare in both the economies by removing trade barriers, increasing market access and providing a stable framework for comprehensive growth of the various sectors of mutual interest such as defence, space, energy, aviation, insurance, infrastructure, engineering, agriculture & food processing, manufacturing, entrepreneurship, healthcare & pharmaceuticals, water & environment, financial services, ICT & digital infrastructure including frontier technologies of 5G, big data analytics, quantum computing, blockchain and Internet of things, among others, said Shri Sanjay Aggarwal.
Being one of the most dynamic emerging market economies, India has been continuously considered as one of the top attractive destinations for inbound investments. Keeping in view the rapidly changing global trade and investment dynamics, India should use this golden opportunity by further offering Red Carpet to global investors and provide the most favourable terms for setting up manufacturing bases in India.
Greater efforts are already underway to facilitate trade, industry and investments and become AatmaNirbhar Bharat with enhanced capacities and strong economic base, said Shri Sanjay Aggarwal.
Trade facilitative reform measures such as the launch of Geographic Information System (GIS)-enabled land bank and development of a single-window system for clearances would provide increased avenues for greater business and investment opportunities and ensure seamless engagement of US investors in India’s growth story, said Shri Sanjay Aggarwal.
Going forward, India’s large consumer base, improved infrastructure, highly skilled & semi-skilled manpower, enhanced transparency, expanded digitization, greater innovation, more policy stability, among others will significantly boost the sentiments of businesses to further enhance the trade and investments trajectory between the two economies, added Shri Sanjay Aggarwal.
Since India and USA are natural partners, the trend of widening economic and trade relations between New Delhi and Washington will continue in the coming years on the back of strong complementarities and mutual synergies, he added.
Efforts should be made to further deepen trade and investment relations between India and USA and ensure greater market access with a focus on promising sectors of mutual interest, said Shri Aggarwal.
Research Paper on The Future of Expanding India-USA Bilateral Relations; strengthening bilateral ties through Free Trade Agreement attached.
Ends Media Division PHD Chamber of Commerce and Industry