New Delhi's efforts to reinvigorate its global relations will pave the way for major economic growth in the long run, unlocking new opportunities for investors.
In May 2021, Indian Prime Minister Narendra Modi attended a virtual meeting with 27 European Union (EU) leaders to resume negotiations on the long-stalled Free Trade Agreement (FTA), connectivity partnership, sustainable development and digitalization. The move will help India to strengthen its ties with the EU in the fields of health, connectivity and trade. The EU being India’s largest trading partner, the cooperation will have integral trade implications.
Following Brexit, India and the UK have also agreed to a new Enhanced Trade Partnership (ETP), along with a common goal of doubling trade by 2030, up from over $15.4 billion in 2019-20.
The UK and India are in fact intensifying talks to remove non-tariff barriers and foster greater market access as they work to stitch together the latter’s first major free trade pact in a decade. The two countries have zeroed in on a list of achievable items that would help the UK showcase the benefits of leaving the European Union while also allowing India to forge new bilateral ties after Prime Minister Modi’s government pulled out of a multilateral Asia trade pact in 2019.
India’s commitment to enhance its strategic alliances will not only increase its presence globally but will also bring positivity and encouragement among the domestic manufacturers who are struggling with the weakened demand of goods and services, say analysts.
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“A renewed focus on India-EU ties will boost the growth momentum of the Indian economy, which has slowed down due to pandemic-induced business and trade restrictions,” said Ankita Roy, retail Analyst at GlobalData. “The deal brings positive news for textile, garment and leather manufacturers to export at lower tariffs and get access to the EU duty-free markets. The move will also help India to protect its domestic apparel manufacturing base which has been facing strong competition from countries such as Bangladesh and Vietnam as they enjoyed preferential tariff treatment.”
In March, the Indian Government announced a ‘fresh package’ to the US Trade Representative (USTR) under the Biden administration – proposing to expand the trade ties for both products and services through the removal of non-trade barriers and other mutual recognition agreements. Furthermore, the US, India, Japan and Australia engaged in resolving the issue of Chinese influence by strengthening trade relations among themselves.
“While India battles the second COVID-19 pandemic wave, its efforts to operationalize its global ties will pave the way for economic growth in the long run. As China’s bilateral trade soured with its major trading partners including the US in 2020, there exists a huge opportunity for India to capitalize on the situation and strengthen its trade relations with major partners such as the US, the EU and other ASEAN countries. This will help in reviving the Indian economy, give a boost to the export-oriented industries and establish diplomatic relations at a global level,” Roy said.