India secures better FTA rates than Bangladesh, Vietnam in major markets: Indian commerce minister

India has secured tariff rates better than those of competitors such as Bangladesh and Vietnam in almost all developed markets through a series of free trade agreements (FTAs), Indian Commerce Minister Piyush Goyal said today (3 September).

Speaking at an event in New Delhi, Goyal said India had for years struggled to compete with Bangladesh and Vietnam in developed markets, as Bangladesh benefited from its least developed country (LDC) status while Vietnam gained preferential access through FTAs.

These advantages allowed the two countries to access developed markets at zero or lower tariffs, while Indian exporters often faced higher duties, he said.

"That situation has now changed," Goyal said, adding that India had secured better rates than competing countries in almost all developed markets.

He said the tariff advantage meant Indian exporters now had to focus on scale, quality, diligence, customer trust and timely delivery, leaving "no excuse except performance".

India currently has nine FTAs covering economies representing around $60 trillion in GDP, providing preferential access to nearly two-thirds of global trade, Goyal said.

He said India expects to conclude additional trade agreements over the next few months and years with Canada, Mexico, Chile, Mercosur, the Southern African Customs Union, the Gulf Cooperation Council and Israel.

India is also working to review its trade arrangements with ASEAN, South Korea and Japan, he said.

Together, these agreements and reviews could give India preferential access to around 75% of global trade at rates lower than those faced by its competitors, according to Goyal.

He said the objective of a preferential trade agreement, FTA or bilateral trade agreement was ultimately to secure a tariff advantage over India's competitors.

"The absolute tariff number is immaterial. It has to be seen in relation to the competition," he said.

Goyal said the United States and European Union had different trading patterns and significantly different operating and labour costs. India therefore needed to assess the tariffs paid by competing exporters such as Bangladesh and Vietnam in individual markets, he added.

FTAs with UK, UAE, Australia already in force

Goyal said India had set an ambitious export target for the current year, with FTAs playing an important role in achieving it.

The trade agreements with the UK, Mauritius, Oman, the UAE and Australia are already in force, while agreements with the four European Free Trade Association countries, New Zealand and the European Union's 27 member states are expected to become operational soon, he said.

Regarding the proposed bilateral trade agreement with the United States, Goyal said India would finalise it once Washington provides a preferential tariff rate compared with India's competitors. The finer details would then be announced, he said.

India on course for $1 trillion export target

Goyal said India appeared to be on course to achieve its $1 trillion export target for the current year, which would represent around 16% growth.

India's exports reached around $317 billion during the first four months of the current year, compared with $280 billion in the corresponding period last year — an increase of around $36-37 billion, he said.

Exports typically accelerate as Christmas approaches and peak during the January-March quarter, Goyal said.

"The current trend was a good sign and emphasised the need to sustain the growth," he said.