Till the conclusion and establishment of WTO, India was not showing much interest in regional trading arrangements. But now it has woken up to the reality.
It has realised the potential loss of not joining the race for forming preferential trade arrangements. Our immediate competitors in export markets are furiously forging regional trade arrangements. Non-participation in the new trend means losing exports and possibly inflow of investment capital as well.
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India started its Look East Policy in 1992 and it has gathered momentum over time. The situation is undergoing a rapid change backed by a continuous process of negotiations with several countries and groupings.
The first major breakthrough was the signing of BISTEC [Bangladesh, India, Sri Lanka, Thailand Economic Cooperation] agreement, with later addition of Myanmar and its conversion into BIMSTEC, in 1997.
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On 28 December 1998, India signed an FTA with Sri Lanka (ILFTA). It is proposed to extend this agreement to a more comprehensive economic cooperation. In 2003, it became a dialogue partner of ASEAN. In addition, India has signed an Indo-ASEAN framework agreement for the establishment of FTA by 2011.
By that time, all trade with ASEAN would be fully liberalised. ASEAN is a big market of 537 million people with vast trade link and a potential for the expansion of India’s external sector.
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This has given rise to a talk of establishing an Asian Economic Community by 2020. In October 2003, India also signed a Free Trade Area Agreement with Thailand which has a faster schedule of tariff reduction than that of India-ASEAN FTA. An important feature of this Agreement is that it provided for free trade between India and Thailand in both goods and senders.
On 6th January 2004, India and other SAARC countries signed agreement on the South Asian Free Trade Area, scheduled to come into effect on 1stJanuary 2006. More of such FTAs are in the pipeline including one with Singapore to be signed in the near future.
It is reported that India has also entered into a framework agreement with South Africa and, on Brazil’s initiative, into a framework agreement with Mercosur.
Within South-East Asia we are working towards a comprehensive economic cooperation with Sri Lanka, Myanmar and Thailand. There is also a talk of a possible FTA between India and China.
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Bilateral trade with China was expected to double to $ 10 billion by the end of 2004. India-China FTA is expected to be on lines similar to the pacts which both countries have signed with the 10-nation ASEAN countries (China had become a dialogue partner of ASEAN in 2002).
Negotiations are also taking place in Dhaka for a PTA/FTA with Bangladesh. These agreements will add to the bargaining strength of our country in multilateral negotiations under the aegis of the WTO. For India, all these developments mean strengthening of its external sector and growth multipliers.