Preferential trade agreements

Abstract

While remaining committed to multilateralism, India like many other countries, has negotiated a series of free trade agreements (FTAs), notably with trading partners in Asia. Since the mid-2000s, India’s FTAs have doubled to about 42 today. At a time of seismic changes in the international landscape in the form of mega-regional agreements, involving the largest traders—USA, Japan, and the European Union—we review the experience of a few of India’s FTAs. Using updated data and methodologies, we find that the economic impact is what might be expected. FTAs have led to increased imports and exports, although the former has been greater. We find that the average effect of an FTA is to increase overall trade by about 50 percent over roughly four years. We also find that the ASEAN FTA has had the greatest impact, possibly because tariff reduction by India has been greater under it. The results also suggest a bigger impact on metals on the importing side and textiles on the exporting side. More work is required to enrich this analysis and to extend it to services so that a definitive assessment can be made of the overall impact of India’s FTAs.