India needs to design policies that will raise FTA utilisation rates
Complete. Here is the key summaryIndia needs to enhance the utilization rates of its free-trade agreements (FTAs) to address its balance of payments issues, including a rising current account deficit and depreciating rupee. The government emphasizes the importance of a comprehensive approach, as many FTAs are yet to be ratified or implemented. Key factors affecting FTA usage include the preference margin and the complexity of rules of origin. A review of India's tariff structure is essential to align with comparator economies and facilitate better FTA benefits for Indian exporters.
India has signed several free-trade agreements (FTAs) over the last couple of years, including relatively deep ones with the European Union (EU) and the United Kingdom (UK). The government, in its recent interactions with industry, has repeatedly emphasised the need for increasing the utilisation rates of these FTAs. This is most appropriate, given the growing pressure on India’s balance of payments arising from a combination of factors, including a rising current account deficit, which is expected to widen further due to the persistent West Asian crisis and high prices of imported oil and gas, declining net foreign investment inflows over the past two years, and a fast-depreciating rupee.