India and the United Arab Emirates signed an agreement Friday that the two countries expect will increase bilateral trade to $100 billion in five years. It is the first of several free trade deals that New Delhi is racing to conclude this year to expand its pandemic-hit economy.
Economists say it reflects a significant change from the past, when India, which has protected several sectors of its economy with high tariffs, was slow to conclude free trade pacts.
The Comprehensive Economic Partnership Agreement was signed during a virtual summit between Indian Prime Minister Narendra Modi and UAE Crown Prince Sheikh Mohamed bin Zayed al Nahyan.
“This is reflective of the new emerging world order, the post-COVID world, which will see new alignments and realignments in which we see the UAE and India as strong partners,” Indian Commerce Minister Piyush Goyal said after the pact was signed.
The UAE is India’s third-largest export partner after the United States and China, with bilateral trade of about $60 billion.
While the UAE hopes the pact will help make it a business hub, India says it will give it access to markets in Africa and West Asia and create more than a million jobs in labor-intensive sectors such as the auto industry.
In 2019, worries about cheap imports from China led India to exit the Regional Comprehensive Economic Partnership, the world’s largest trade pact, which took effect this year among Australia, China, Japan, South Korea and 10 other Asian countries. That prevented India from gaining preferential access to fast-growing markets and led to concerns that one of the world's major economies was turning more protectionist.
Goyal said that India is no longer signing trade pacts to join a group but looking at agreements with nations that have values of democracy, transparency and mutual growth.
“We are talking not of closing India’s doors but actually opening India’s doors wider for greater international engagement,” he said.
New Delhi hopes that the bilateral trade pacts that it is negotiating with countries such as Britain, Australia, the European Union and Israel will help it get greater market access.
For many of those countries, building closer economic ties with New Delhi would help reduce their huge trade dependence on China, which they want to do amid unease about Beijing’s rise in several countries.
After suffering a major contraction last year, India’s economy grew by about 9% last year, the fastest among major economies.
“Exports have been buoyant since the beginning of last year when India started coming out of the economic downturn and the government is trying to see what more can be done to get additional market access. They really want to push forward and aim for greater exports,” Biswajit Dhar, Professor at the Centre for Economic Studies and Planning at Jawaharlal Nehru University told VOA.
India aims to close trade agreements with Australia and Britain by the end of this year to boost exports to $500 billion by 2023.
Even before hammering out a more comprehensive deal, New Delhi hopes to clinch a limited trade pact, termed an “early harvest agreement,” with Australia next month. Both countries are members of the Quadrilateral Security Dialogue or Quad along with the United States and Japan, formed with an eye on China.
The grouping has also given an impetus to trade relations between the member countries, Australian Trade, Tourism, and Investment Minister Dan Tehan, said in New Delhi earlier this month during a visit to discuss the free trade pact.
“I think the Quad has just added to the strength of the relationship. My hope is within 30 days we will have an announcement [on an interim trade agreement] with India. Then we can start to build the economic cooperation within the Quad,” he said.
British Secretary of State for International Trade Anne-Marie Trevelyan also visited India last month to start negotiations on a free trade agreement between the two countries.
While Britain hopes to double its exports to India by 2035 by tapping into its large middle class, New Delhi wants greater opportunities for Indians to study and work there.
“The government has adopted a very interesting pathway for agreements with Britain and Australia. They are trying to do an early harvest agreement for sectors that are ready at this point to accept reciprocal market access as they are confident to face competition from imports,” said Dhar.
“This will lead to some forward movement in terms of working toward broader free trade agreements,” he added.
Suhasini Sood contributed to this story.