Trade agreement: Why India made a U-turn on free trade deals

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India has been signing a lot of new agreements with other countries to reduce trade barriers, eliminate tariffs and gain preferential access to global markets.

The country signed an ambitious trade pact with Australia and brought in a comprehensive economic partnership with the U.S. Free trade agreements with the UK and the EU are currently being negotiated.

A range of products and services from textiles to alcohol, automobiles, pharmaceuticals, as well as subjects like labour movement, intellectual property enforcement and data protection are expected to be covered by these deals.

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The UK said in a statement last week that officials from India and the UK are working hard to conclude a majority of talks by the end of October.

India's trade minister said last month that the re-launch of negotiations with the EU was reflective of a new India which wants to engage with the developed world as friends from a position of fairness.

Over the last decade, India has been hesitant about trade liberalisation.

The Regional Comprehensive Economic Partnership was supposed to be the world's largest trade agreement between China and 14 other Asian countries.

Delhi was worried that the agreement would further widen India's trade deficit with China and expose domestic producers to more foreign competition.

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The government's assessment of India's existing free trade agreements is not good.

According to NITI Aayog, the public policy think tank of India, after the signing of trade deals with partner countries, imports rose more sharply than exports, leading to "unfavourable gains" to India.

India's approach this time is to achieve a fair and balanced free trade agreement with other countries, focusing less on competition and more on collaboration.

It may be difficult to achieve this balance.

Fratelli is one of India's biggest winemakers and has been making wine for the last 15 years.

The company has grown over the last couple of years as Indians start to develop a taste for wine.

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As India fast-tracks free-trade negotiations with countries like the UK and the EU, he's worried about more competition from cheaper, imported brands.

The terms of the UK and EU deals are expected to be similar to those of Australia where duties on wines over $5 have been reduced.

Consumers will be more inclined to choose non- Indian wines because they are perceived to be of better quality.

The life of our vineyards is not as long as those in Europe. "For that reason alone, our costs will be higher and protection will be needed," says Mr. Sekhri.

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There is little opposition to trade liberalisation.

Textile and apparel firms, which recorded the highest ever exports in the last financial year, are excited about the possibility of lower tariffs.

A Mumbai based company that produces clothing for global fashion brands like Dolce and Gabbana and Emporio Armani is currently hit by a double whammy of tariffs.

Vietnam recently agreed to a free trade agreement with the EU. The need to act is more important for them.

European companies don't have to pay duties on their purchases from Vietnam. The import duties from India are between 9% and 16%. If the duty rates are slashed, I think we will see a lot of demand from the customers.

The reasons why India and its partners are interested in these trade talks are strategic.

A professor at the Centre for Economic Studies and Planning said that India's annual merchandise exports crossing the $400 billion mark in the last fiscal year has reduced the hesitation around giving additional market access.

Delhi has been presented with a rare opportunity to become globally integrated as global firms adopt a strategy in which they avoid investing only in China and instead focus on alternative markets.

Increased collaboration between countries like India, Australia, Japan and the US reflect their growing anxiety over China's control over supply chains and its ability to disrupt them, according to a senior research fellow.

The experts are worried about the "dichotomy" between India's trade policy and its free trade agreement.

The self-reliant India initiative, which promotes domestically produced goods over imported goods, seems to conflict with the new-found enthusiasm for the free trade agreement.

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According to the former economic adviser to the government, India has increased tariffs more than 3000 times.

The lack of synergy between trade policy and the free trade agreement strategy undermines the economic benefits of free trade.

It will be important to iron out the inconsistencies. The timing is going to be important.

These deals areambitious. The election cycle will start in the middle of next year, so India needs to keep up the pace.

It can be very long drawn if you lose momentum.