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FTA With EU, UK, Australia Need Of The Hour: Adarsh Sharma, Primus Partners
The government has also made significant efforts to reciprocate these outreach efforts and coordinate to develop a more comprehensive trade partnership that would help India increase its exports, said Sharma
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India and the European Union (EU) concluded the first round of negotiations for India-EU Trade and Investment Agreements, including the Geographical Indicators (GI) in New Delhi on July 1.
The Ministry of Commerce and Industry in a press statement said that the week-long negotiations were held in a hybrid fashion – with some of the teams meeting in Delhi and the majority of officials joining virtually hybrid fashion.
The way things are progressing between the two negotiating teams, a free trade agreement (FTA) between India and the UK could be ready by Diwali without the need for an interim early harvest agreement, said Commerce and Industry Minister Piyush Goyal during a visit to the UK.
Speaking to BW Businessworld, Adarsh Sharma, Managing Director, Primus Partners said that it would be interesting to see how things move forward amid the resignation of Boris Johnson as the Prime Minister of the UK.
Here are edited excerpts from the interaction:
Do you think the ongoing geopolitical crisis in Ukraine is giving more opportunities to India to increase its exports?
Yes, most definitely. The pandemic and the war have certainly had a significant impact on the existing world order. The initial lockdown in China had completely disrupted global supply chains and made many countries rethink their dependence on China and the more recent lockdowns imposed by the Chinese government just reinforced that belief.
Most countries have now adopted a ‘China +1’ model and are looking at alternate destinations to diversify supply chains and reduce heavy dependency on China. India, along with countries like Vietnam and Bangladesh, has benefitted from that.
The significant outreach from nations which view India as an alternate market and a critical supply chain node could be seen in the flurry of high-level visits to the country we saw just after the Russia- Ukraine war began.
On the other hand, the government has also made significant efforts to reciprocate these outreach efforts and coordinate to develop a more comprehensive trade partnership that would help India increase its exports.
What is the current status of the export sector of India?
India has seen record export growth over the past year, with merchandise exports touching a record USD 420 billion in 2021-22, breaching the government’s already the ambitious target of USD 400 billion in merchandise exports for FY 21-22.
We recorded a growth of 44 per cent over the previous year. This was mainly led by robust growth in petroleum products, engineering, gems and jewellery, chemicals, and pharmaceuticals.
While high commodity and food prices have certainly played a role in achieving this target, we cannot discount the massive push received from the production-linked incentive schemes that have helped to enhance domestic manufacturing and export capacity.
What are the major changes you have witnessed in the export pre and post-Covid-19 pandemic?
The main change we have seen has been the increased emphasis from the government on promoting domestic exports in the aftermath of the pandemic. These efforts have been ongoing and in development for a while but just take time to show results. We have managed to capitalise on the opportunity that presented itself from the disruptions in global markets to increase our share of exports in the global market.
Our share of exports as a percentage of GDP had been declining since 2013 (when it reached its peak). We have managed to reverse this trend and are now actually gaining market share. We are seeing key export segments such as electronics, textiles and pharma recording major growth over the previous months. There has also been an increase in the export of finished or intermediate goods, from us being exporters of just primary goods earlier.
What are the steps that are needed for export development and promotion to enable a business environment?
A few more steps to boost export development could include improving our competitiveness in more labour-intensive manufacturing sectors such as garments and textiles, where we have lost a little ground to Bangladesh and Vietnam.
Apart from the emphasis on the export policy at the central level, we can work to improve our export preparedness at the level of the states by introducing a few key state-level reforms in areas of power, land and labour to increase exports and employment, especially in the low skill labour-intensive manufacturing space.
India and the EU finally restarted the negotiations for the long-pending trade and investment agreement after a gap of over eight years. What are your views on this?
It is a good decision that was much needed. Since the previous negotiations ended almost eight years ago, a lot has changed. As I mentioned earlier, the pandemic and the Russia-Ukraine war have placed India as an important piece of the global supply chain network.
Further, compared to the previous time, I believe we are in a better bargaining position than we were eight years ago and will stand to benefit from the agreement, which will give a boost to our exports, especially in agriculture, pharma and textiles segment, which is a labour-intensive sector.
With the government moving with the early negotiations with the UAE and Australia relatively quickly, India has momentum on its side and increased bargaining power to come out with a good deal that is a win-win for both sides.
Which are the countries which India should target first to fast-track FTA negotiations?
Well, I think we should first work on ratifying the interim free trade agreement we signed with Australia in April as quickly as possible. After that, I feel the United Kingdom (UK) is the one country we are already negotiating a free trade agreement with and should try to fast-track that, as it is already in its fourth phase of negotiations.
The India-UK FTA negotiations have been going relatively well and the agreement will be a lot more comprehensive than the ones we signed with the UAE and Australia, so it is bound to take some time.
However, it would be important to also observe if the resignation of Boris Johnson would lead to delays in those negotiations, but I do not think there will be any change in the stance of the UK government regarding the FTA. Despite some delays, I do hope we can wrap up the FTA with the UK by year-end or by early next year.
What is the way forward for the export ecosystem in India?
Indian exports had begun rising at the end of FY21 and have managed to continue that momentum, rising almost every month since. Currently, our export ecosystem is placed at a critical juncture, with the opportunity to play a much greater role in the global export market.
The government has been providing all the necessary support to the export sector and schemes such as the Production linked incentive (PLI), among other measures to boost domestic manufacturing capacity have begun showing results in the form of increased exports of finished products, the rise in exports in the electronics and technology sector where there is tremendous potential for growth as we currently hold a small share of the global market.
Our defence exports are also on the rise, touching a record of Rs 13,000 crore in the 2021-2022 fiscal with the government setting a target of Rs 35,000 crore (USD 5 billion) export in aerospace, and defence goods and services over the next five years in 2020.
With governments realising the importance and taking steps for the creation of a robust manufacturing and export ecosystem, India gaining more share of the global export market, and new avenues of growth opening up, we are headed in the right direction and are set for a good run in exports over the longer term.