FTAs as India’s Growth Driver

Source: PIB
GS II: Bilateral, Regional and Global Groupings and Agreements involving India and/or affecting India’s Interests. GS III: Indian Economy

Overview

1. News in Brief
2. Significance of India’s FTAs with developed economies
3. India’s Expanding FTA Network
4. Factors supporting India’s FTA framework

Why in the News?

Union Commerce and Industry Minister Piyush Goyal addressed the 5th Annual  Meeting of India Global Innovation Connect in New Delhi, highlighting the role of India’s Free Trade Agreements (FTAs) with developed economies in driving growth, investment and innovation.

News in Brief

• The Minister stated that India’s FTAs with developed economies are aimed at accelerating long-term economic growth through deeper global engagement.
• The agreements are helping attract foreign investment, promote innovation, and technology collaboration, and improve quality standards.
• FTAs are also expected to boost employment generation, enhance India’s participation in global trade, and strengthen its integration into global value chains.

Significance of India’s FTAs with developed economies

India’s partnerships with developed countries are based on complementarity rather than competition.

India’s Advantages

• Young workforce with an average age below 30 years.
• Demographic dividend advantage expected for the next three decades.
• A growing market with capital and technology.
• Highly skilled workforce available at competitive costs.
• Large domestic market of 1.4 billion consumers.
• Growing startup ecosystem.
• Affordable infrastructure

Advantages of Developed Economies

• Advanced technology
• Large capital reserves
• Strong research capabilities
• High-income consumer markets

These strengths together create mutually beneficial partnerships.

India’s Expanding FTA Network

• India has signed 9 FTAs in the last three to three-and-a-half years.
• These agreements cover 8 countries.
• They facilitate access to new markets and emerging technologies while strengthening India’s position in global value chains.
• Benefits
  • Increased exports
  • Greater Foreign Direct Investments (FDI)
  • Employment generation
  • Technology transfer
  • Enhanced industrial competitiveness.

India-EFTA Trade and Economic Partnership Agreement (TEPA)

• India signed the Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA), comprising,
  • Switzerland
  • Norway
  • Iceland
  • Liechtenstein
• The agreement aims to deepen trade, investment and innovation partnerships between India and EFTA countries.

Major Commitments under TEPA

• EFTA countries have committed to invest USD 100 billion in India over 15 years.
• Expected to create 1 million direct jobs.
• Enhanced collaboration in technology, innovation, and industrial development.
• Greater access for Indian businesses to European markets.

Factors Supporting India’s FTA Framework

Reforms Supporting Investment

• Simplification of taxation
• Reduction in regulatory compliance burden.
• Insolvency and Bankruptcy reforms.
• Reduction of legal complexities.
• Improved predictable business environment.

Strengthened Infrastructure

• Unified National Power Grid
  • India now has a unified national electricity grid exceeding 500 GW capacity, improving efficiency and facilitating renewable energy integration.
• Renewable Energy Leadership
  • More than 50% of India’s installed electricity capacity comes from renewable sources.
  • India achieved its climate commitments under the Paris agreement ahead of schedule.
  • Ranks among the leading performers in climate action within the G20.

Data Centres

• India offers,
  • Stable democratic governance
  • Rule of Law
  • Data Protection frameworks
  • Intellectual property protection
  • Low data and infrastructure costs.

Strengthened Innovation Ecosystem

• Operationalisation of a rupees 1 lakh crore Research and Development Innovation Fund.
• Continuous review of intellectual property frameworks.
• Support for startups through public and private investments.

Conclusion

• India’s FTAs with developed economies are becoming a key driver of economic growth, investment and innovation.
• As a result, FTAs can play a crucial role in realising the vision of Viksit Bharat and transforming India into a developed economy.

UPSC Prelims Practice Question

Consider the following statements regarding India’s Free Trade Agreements (FTAs) with developed economies,

1. 1. India has signed nine FTAs covering 38 countries in the last three to three and a half years.
   2. Under the India-EFTA Trade and Economic Partnership Agreement (TEPA), EFTA countries have committed to invest USD 100 billion in India over 15 years.
   3. The EFTA comprises Switzerland, Norway, Iceland, Liechtenstein and  Germany.
   4. India’s engagement with developed economies is based on complementarity rather than competition.

Which of the statements given above are correct?

a) 1,2 and 4 only

b) 1and 3 only

c) 2,3 and 4 only

d)  1,2,3 and 4

Answer: 1, 2, and 4 only

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