Updates on India’s FTAs in 2022
The India-UAE CEPA came into effect May 1, while the India-Australia ECTA (interim trade pact) was signed into force on April 2. Meanwhile, India-UK FTA negotiations entered a third round in April and new industry and business taskforces were created in May to support a trade deal by year-end. Finally, the EU has sought to reach a trade deal with India by 2024 – before the next electoral cycle.
India has been talking free trade agreements with several partners – both bilateral and regional – over the past two years in a bid to boost export-oriented domestic manufacturing. New Delhi has set an ambitious export shipment target of US$450-$500 billion by FY23, against US$291 billion in FY21. This explains why early harvest deals and full free trade agreements (FTAs) have assumed newfound importance to an otherwise trade conservative regime. Indian exports touched US$197.89 billion in the period from April to September 2021, up 57 percent from the same period in the previous year.
The growing list of countries and regional blocs negotiating trade deals with India includes UK, Russia, Canada, the GCC, and the Southern African Customs Union. Trade deals have already been reached with the UAE and Australia (more information below).
In multiple public addresses, the Indian commerce and industry minister, Piyush Goyal, asserted that India fully supported free trade within a rules-based multilateral trading environment. However, if India faced unfair treatment, it would reciprocate.
Goyal has called upon the ASEAN bloc to do away with its non-tariff barriers, saying that equitable trade between the two regions would see trade flows worth US$200 billion. India wants the ASEAN countries to lower market restrictions in the agriculture and automotive sectors as well as reciprocate its own FTA concessions. These concerns are also why India walked away from the Regional Comprehensive Economic Partnership (RCEP) in November 2019.
In the following sections, we spotlight developments in India’s economic and commercial engagement with the regions with whom it is currently negotiating free trade arrangements or seeking trade concessions.
India-UK FTA negotiations benefiting from strong political will
New industry, business taskforces created to push FTA negotiations over the line
On May 9, a new UK India Industry Taskforce was launched to improve industry collaboration between the two countries and positively influence FTA negotiations. Meanwhile, a new taskforce has been created by the Confederation of British Industry (CBI) and Confederation of Indian Industry (CII) called the UK-India Business Commission – part of an MoU to offer a “critical forum” to ensure the India-UK FTA supports business interests in both countries. The UK-India Business Commission is expected to continually monitor and address FTA sticky issues, such as assessing trade-offs, ways to minimize market access barriers, and provide on-the-ground business intelligence to facilitate ministerial discussions.
In recent talks and media reports, the clean energy sector and green exports have been heavily touted as important beneficiaries should the India-UK FTA negotiations come through.
Johnson and Modi unveil plans for finalizing FTA by end of 2022
On April 22, Prime Minister Narendra Modi and his British counterpart Boris Johnson agreed that the two countries would expand their defense ties and work on finalizing the India-UK FTA by the end of the year. The third round of negotiations on the deal will start April 25, Monday.
As reported in the Hindustan Times, Modi said [translation from Hindi]: “Teams of both countries are working on the free trade agreement. Negotiations are progressing well. And we have decided to do our best to conclude the FTA by the end of this year.” Meanwhile, Johnson asserted that the UK would hope to finalize the deal by Diwali.
It also appears that the UK government may make concessions on immigration/visas a part of the FTA – a move dismissed completely by previous UK governments. In remarks published by The Guardian, Johnson told ITV: “The UK actually has a massive shortage in some sectors like IT. Some estimates say we are hundreds of thousands of people short. So what you can have is controlled migration, which allows you to bring in talented people who can really help your economy… We won’t give these things away lightly – we want to make sure we get a proper deal. There is room to do a fantastic deal.”
India and the UK have adopted a 10-year road map (Roadmap 2030) to expand ties in trade and investment, defense and security, climate change, healthcare, and people-to-people ties.
Strengthening defense partnership between India and the UK
During Johnson’s official visit to Delhi, the two sides unveiled plans to make easier India’s access to British military hardware and technology.
The UK will set up an India-specific open general export licensing regime to reduce delivery time for defense procurements. India has also appreciated the UK’s decision to join the Indo-Pacific Oceans Initiative.
Round two of negotiations completed, third round in April to be hosted by India
Joint Statement: “On Thursday 17 March 2022, the Republic of India and the United Kingdom concluded the second round of talks for an India-UK Free Trade Agreement (FTA). A delegation of Indian officials undertook technical talks in London. The negotiations were conducted in a hybrid fashion, with some negotiators in a dedicated UK negotiations facility, and others attending virtually.
For this round of negotiations, draft treaty text was shared and discussed across most chapters that will make up the agreement. Technical experts from both sides came together for discussions in 64 separate sessions covering 26 policy areas. The third round of negotiations is due to be hosted by India in April 2022.” See official source here.
Background: Formal launch of trade talks
India-UK FTA negotiations formally launched on January 13, 2022 during the UK International Trade Secretary Anne-Marie Trevelyan’s two-day visit to India for the 15th UK-India Joint Economic and Trade Committee (JETCO).
The first round of negotiations involving trade experts from both countries will begin on January 17, and future rounds of negotiations will take place approximately every five weeks (see joint media statement here).
Upon completion, the India-UK trade pact could boost total trade by £28 billion by 2035 and nationwide wage growth by up to £3 billion, according to a statement released by the UK government. This will be achieved on account of unlocking a huge new market for British producers and manufacturers across numerous industries from food and drink to services, renewable tech, and automotive.
The UK is particularly keen on India reducing its import duties on Scotch Whiskey and cars, which is currently around 150 percent and 125 percent, respectively.
In May 2021, an Enhanced Trade Partnership (ETP) was established between the two countries – reflecting unusually rapid progress in bilateral trade talks. The 15th UK-India JETCO in January 2022 reviewed the progress made within the UK-India ETP.
Two-way trade between India and the UK was at £23 billion in 2019. International investment from Indian companies already supports 95,000 jobs across the UK; overall, the two countries reportedly support nearly 500,000 jobs in each other’s economies.
India-UK trade negotiations were previously slated to begin November 2021. An early harvest deal was to be reached by March 2022 as per this timeline, to be followed by a comprehensive agreement.
India-European Union FTA negotiations
- On April 25, 2022, India and the European Union (EU) set up a high-level Trade & Technology Commission to strengthen bilateral ties. Currently, only the United States has a technical agreement with the EU along these lines. The trade and technology commission will provide political-level oversight to India-EU ties, thereby ensuring improved coordination. The announcement was made on the occasion of President of the European Commission, Ursula von der Leyen’s two-day visit to India, where she held wide-ranging talks with Prime Minister Narendra Modi. The two sides mentioned closer cooperation on trade, climate, clean energy, digital technology, and people-to-people ties. Possible collaboration in areas like green hydrogen was also mentioned.
Market analysts speculate that the EU want India to consider it a credible alternative to Russia for trade and defense, triggered in light of the events in Ukraine. India has stopped short of explicitly condemning Russian actions in Ukraine except for calling for an immediate end to violence. Meanwhile the EU is navigating its own energy policies given its fossil fuel dependence on Russia, which contextualizes the emphasis on clean energy.
- India and the EU are to resume their FTA negotiations – the first round of talks will be in June followed by subsequent rounds later in the year. India and the EU want tp complete FTA negotiations before their next electoral cycle in 2024.
- The EU’s investment bank, European Investment Bank (EIB), plans to double its annual investments in India from the current level of about €500 million within the next two years, according to EIB vice president Christian Kettel Thomsen.
India and the EU restarted their FTA negotiations in goods and services in early 2021 after a gap of eight years. The two regions aim to work out pacts in investments and geographic indications parallel to FTA engagement.
In his official trip to India in 2021, the Danish Prime Minister Mette Frederikson supported New Delhi’s inclination for an early conclusion of the India-EU FTA negotiations. India and Denmark themselves agreed to expand bilateral collaboration across multiple areas like agritech, food safety, cold chain, food processing, fertilizers, and aquaculture. Newer areas of cooperation include smart water resource management and efficiencies in supply chain management.
For more information on India-EU FTA engagement, see our article “Can We Expect an India-EU FTA Soon? What Has Changed in the Bilateral Relationship”.
India-UAE CEPA in force from May 1, 2022
- The India-UAE CEPA is in effect from May 1, 2022. In a symbolic gesture, the commerce secretary BVR Subrahmanyam handed over Certificates of Origin to three exporters from the gems and jewelry sector, whose consignment [expected to reach Dubai by May 1] will attract zero customs duty under the Agreement. Source: Press Bureau of India
- India will not provide any kind of customs duty concessions on 1,157 goods under the treaty – given the sensitivities of India’s domestic industry. The products that are being excluded from the FTA include TVs, picture tubes, soaps, toys, footwear, instant coffee, sharbat, and petroleum waxes. More information can be gathered in an FAQs document uploaded by the Ministry of Commerce here: India-UAE CEPA (FAQs).
- The Central Board of Indirect Taxes and Customs (CBIC) and the Directorate General of Foreign Trade (DGFT) have also issued relevant notifications for the operationalization of the India-UAE CEPA. See the 22/2022-Customs gazette notification here. The amended list of agencies authorized to issue certificate of origin (preferential) under the India-UAE CEPA has been notified by the DGFT here. The DGFT has also published “Imports of Items under the TRQ of the India-UAE CEPA”, which can be accessed here. The DGFT also issued Trade Notice No.05/2022-2023: Electronic filing and Issuance of Preferential Certificate of Origin (CoO) for India’s Exports under India-UAE Comprehensive Economic Partnership Agreement (India-UAE CEPA) w.e.f. 01st May 2022.
- The Comprehensive Economic Partnership Agreement (CEPA) between India and the United Arab Emirates (UAE) was formally unveiled at a press conference held on March 28, 2022 during Union Minister for Commerce and Industry Piyush Goyal’s official visit to the United Arab Emirates. The Agreement is expected to enter into force on May 1, 2022.
- India and the UAE have concluded their CEPA. It is now undergoing constitutional and legal processes in the UAE. The pact could come in effect in less than 90 days / early May, as per India’s commerce and industry minister Piyush Goyal. For more information, read our article: India-UAE CEPA Signed at Virtual Summit, Prospects for US$100 Billion in Annual Bilateral Non-Oil Trade.
- “As of now only goods from both sides are to be covered in an India-UAE early harvest agreement”, as per a source quoted by the media. A partial FTA was to be signed on Modi’s planned visit to the UAE on January 6, 2022, but this was postponed due to a surge in Omicron / COVID-19 outbreaks. The source also told media that UAE and Indian trade representatives are currently working on finalizing the larger CEPA agreement that will include investment protection measures and special facilities for Indian labor and expatriates; the goal is to complete this by March 2022.
Formal negotiations for their bilateral FTA, called the India-UAE Comprehensive Economic Partnership Agreement (CEPA), began September 2021. The two countries wanted to conclude talks by December 2021 and close the deal by March 2022.
The UAE is India’s third-largest export destination and India is seeking duty free market access on a whole range of products, such as gems and jewelry, textiles and garments, engineering goods, etc. New Delhi is sensitive of Dubai emerging as a transshipment hub for the entry of Chinese goods into India and so strict rules of origin are expected to be negotiated into the CEPA, such as 35 percent value addition in UAE for products to qualify for trade concessions from India.
Currently, 87 percent of UAE imports are subject to five percent tariffs and 11 percent attract zero duty. Other items are subject to higher duties or are in prohibited or restrictive lists of goods. Textiles, garments, and jewelry are all taxed at five percent while 10 percent duty is levied on some steel products – cumulatively, they accounted for 34 percent of India’s US$16.7 billion exports to the UAE in FY 2020-21 and 43 percent in FY 2019-20. The UAE applies a much lower average tariff at 4.6 percent (2020 figure) as compared to India’s 15 percent. High duty items in the UAE are alcohol (50 percent) and tobacco (100 percent). This means that CEPA negotiations will necessitate much higher concessions from the Indian side.
Major Indian exports to the UAE are refined petroleum products, minerals, cereals, sugar, fruits, vegetables, tea, meat, seafood, textiles, engineering, machinery products, and chemicals. Major Indian imports from the UAE are petroleum and petroleum products, precious metals, stones, gems and jewelry, minerals, chemicals, and wood and wood products.
In FY 2019-20, the UAE was India’s second largest goods export market (US$29 billion in exports), after the US. In FY21, China replaced India due to the pandemic disruptions. The UAE has, however, long standing goodwill with India. It is the eighth largest foreign investor in India, accounting for US$11.3 billion in equity investments from April 2000 and March 2021. Investment by Indian entities in the UAE amounted to about US$85 billion (mostly in real estate) during the same period.
Meanwhile, the UAE hosts nearly three million Indian expats who remit home nearly US$3 billion annually. Dubai is the top most visited tourist destination for Indians.
Focus on growth potential of India-Australia trade and investment ties
India-Australia Economic Cooperation and Trade Agreement (IndAus ECTA) is signed
India and Australia signed their Economic Cooperation and Trade Agreement on April 2, Saturday – the interim trade agreement before a full trade pact is negotiated. It is expected to be implemented in about four months.
A government estimate has put the boost to bilateral trade in goods and services to be at US$45-50 billion over five years, up from US$27.5 billion in 2021. The ECTA could also generate over one million jobs in India.
Further, starting April 6, the Indian Commerce and Industry Minister Piyush Goyal will be leading a business delegation to Australia on a three-day trip to deepen economic ties. Goyal will be visiting Melbourne, Sydney, and Perth.
India’s goods exports to Australia were worth US$6.9 billion and imports about US$15.1 billion in 2021.
What are the goods benefiting from duty-free market access or lower tariffs under the India-Australia interim trade agreement?
The IndAus ECTA will provide zero-duty access to the bulk of India’s exports to Australia (96 percent), including engineering goods, gems and jewelry, textiles and apparel, and leather etc. After five years, this will be expanded to 100 percent of Indian goods.
Under the ECTA, 85 percent of Australian exports will enjoy zero-duty market access, including coal, LNG, alumina, metallic ores, sheep meat and wool; duties will lowered on Australian wines, cotton, almonds, lentils, and certain fruits – oranges, mandarins, apricots, and strawberries. Tariffs on Australian avocados, onions, pistachios, macadamias, cashews in-shell, blueberries, raspberries, and blackberries will be eliminated over seven years.
Following the implementation of the ECTA, Australian wines with a minimum import price of US$5 per 750 ml bottle will be reduced from 150 percent to 100 percent; it will come down to 50 percent over 10 years. Tariffs on Australian wine priced above US$15 per 750 ml bottle will be reduced to 75 percent and then further cut to 25 percent over 10 years. The two countries will set up a joint working group on wine to exchange information and cooperation on production and trade-related matters.
Key market protections
India will not relax tariffs on certain products considered as ‘sensitive sectors’, such as dairy products, wheat, rice, chickpeas, beef, sugar, apples, toys, and iron ore.
The ECTA contains strict rules of origin to prevent routing of products from other countries and a safeguard mechanism to address any sudden influx in imports of a product.
In services, Australia has offered 135 sub-sectors to India, while India offered 103 sub-sectors to Australia. Key areas of India’s interest like education, IT, business, professional services, health, audio-visual, etc. have been committed by Australia under ECTA.
Visas for Indians
Indian STEM graduates (Science, Technology, Engineering, and Mathematics) will be able to access extended post-study work visas and there will be a quota for Indian chefs and yoga instructors.
Further, a plan is reportedly in the works to facilitate working holiday visas (Work and Holiday arrangement) for Indians within two years of the ECTA coming in effect. This arrangement would grant 1000 visas to Indians over the age of 18 and younger than 31 years to stay in Australia for a year. This would be a multiple entry visa and allow applicants to enter and re-enter Australia multiple times, for the purpose of paid or unpaid employment for up to six months and undertake study or training for up to four months.
Faster approval for Indian medicines
Australian regulators will use inspection reports and approvals from Canada and the EU to speed up their evaluation process for Indian pharmaceuticals and manufacturing entities.
Addressing double taxation – a key concern for India’s IT sector
Australia has agreed to amend local laws to stop taxation of offshore income of Indian firms that provide technical services to Australia. This will offer significant relief to firms like Infosys Ltd, Wipro Ltd, Tata Consultancy Services Ltd, HCL Technologies Ltd, etc. Addressing the tax issue will also encourage Indian IT firms to expand their Australia operations.
Negotiation plans for full CECA to soon commence
A negotiation sub-committee between India and Australia will start work within 75 days to convert this interim trade pact into a full CECA. Chapters in the full trade agreement would touch on government procurement, digital trade, product-specific rules, etc.
Officials quoted by the media have said India could get access to about US$10 billion worth of official procurement by the Australian government out of an annual US$60-65 billion. Negotiations are also soon expected on a chapter on digital trade.
India-Australia virtual summit
On March 20, 2022, Australian High Commissioner to India Barry O’Farrell told reporters, “We [Australia] are hopeful of signing the Phase one (early harvest) trade deal by end of this month [March].” Prime Minister Narendra Modi and Australian PM Scott Morrison held a virtual summit on March 21, 2022. At the virtual summit, Morrison unveiled a INR 15 billion (AUS$ 280 million) investment package to boost cooperation across a range of areas that include cleantech and critical minerals (INR 1.83 billion) and the space sector (INR 1.36 billion). This is the largest investment made by the Australian government into its bilateral relationship with India.
Australia’s Department of Foreign Affairs and Trade released its Update to the India Economic Strategy to 2035 – after the India-Australia virtual summit. The 2022 Update provides a five-year action plan for the Australian Government and responds to evolving opportunities for both countries, changed global circumstances, the improving bilateral relationship, and key economic reforms in India. Priority sectors identified by the IES include technology, space, science and innovation, resources and METS (Mining Equipment, Technology, and Services) sectors, energy, health, education, agribusiness, defense, infrastructure, financial services, among others.
Formal negotiations for the CECA took place during the 17th India-Australia Joint Ministerial Commission on September 30, 2021. Both sides agreed to conclude an interim agreement or early harvest trade deal by December 2021.
India and Australia had previously launched CECA negotiations in May 2011, which were stalled and then eventually suspended in September 2015 after nine rounds of talks. The current geopolitical context has drastically changed since then and will accelerate closer economic and commercial relations.
India’s export basket to Australia majorly comprises of goods like petroleum products, medicines, polished diamonds, gold jewelry, apparels etc., while key Australian exports to India include coal, LNG, aluminum, and non-monetary gold. In the services sector, major Indian exports to Australia are related to travel, telecom and computer, government, and financial services, while Australian services exported to India are primarily related to education and personal services. Sectors like food and agribusiness, healthcare, infrastructure, as well as mining and resources have been gaining importance in recent years.
Indian exports to Australia in 2020-21 were worth US$4 billion and imports from the country were US$8.5 billion. In 2020, India was the seventh largest trade partner for Australia and its sixth largest export market. Education remains Australia’s largest service export to India, valued at US$4.46 billion and accounting for around 88 percent of the total in 2020. At the end of 2020, Indian students in Australia numbered 115,137. The total value of two-way foreign direct investment between both countries was valued at US$1.04 billion in 2020. For more information, see our article “Trade and Investment Between India and Australia: Trends and Prospects”.
During the previous year, 2019, Indian exports to Australia were worth US$3.19 billion, and included refined petroleum (US$287 million), packaged medicaments (US$277 million), and railway passenger cars (US$166 million). In 2019, Australia’s exports to India amounted to US$15.3 billion, and included coal briquettes (US$12.1 billion), gold (US$604 million), and petroleum gas (US$419 million).
India, Canada agree to expedite trade talks
- On May 10, Mary Ng spoke with Piyush Goyal. During the call, Minister Ng and Minister Goyal noted progress in negotiations on a Canada-India Early Progress Trade Agreement (early harvest deal) while working toward a Comprehensive Economic Partnership Agreement (a full FTA). Minister Ng emphasized the importance of advancing discussions on an investment protection agreement between Canada and India, which would improve predictability and transparency for Canadian investors in India. See the Readout on the Global Affairs Canada website here.
- On March 11, the two countries agreed to formally re-launch negotiations for the India-Canada Comprehensive Economic Partnership Agreement (CEPA) at the fifth Ministerial Dialogue on Trade & Investment (MDTI). Minister of Commerce and Industry, Consumer Affairs and Food, and Public Distribution and Textiles, Piyush Goyal and Mary Ng, Minister of Small Business, Export Promotion and International Trade, Government of Canada presided over the MDTI. The Ministers highlighted the existing trade complementarities between India and Canada. As per their joint statement, an interim agreement or Early Progress Trade Agreement (EPTA) would include high level commitments in goods, services, rules of origin, sanitary and phytosanitary measures, technical barriers to trade, and dispute settlement, and may also cover any other areas mutually agreed upon. Meanwhile, India has recognized Canada’s systems approach to pest risk management in pulses and is seeking greater market access for Indian agriculture goods like sweet corn, baby corn and banana etc. Canada has agreed to expedite its examination of the request to accord Conformity Verification Body (CVB) status to India’s APEDA (Agricultural and Processed Food Products Export Development Authority) to facilitate exports of Indian organic products. Canada’s exports of potash and India’s exports of generic medicines were recognized as underlying the two countries’ reliable trade partnership.
India and Canada have committed to strengthen their trade and commercial ties through enhanced partnerships and cooperation in certain identified areas, such as agro-products, chemicals, footwear, textiles, automobiles, energy, electronics, minerals and metals, urban development, information technology, and tourism. The two sides also noted the importance of the movement of professionals and skilled workers, students, and business travelers in strengthening the bilateral economic partnership.
As per the government of Canada, two-way merchandise trade between itself and India was $10.1 billion in 2019, and decreased to $8.7 billion in 2020 on account of the COVID pandemic. However, 2021 observed a growth rate of 12 percent over the previous year with bilateral trade in goods reaching US$6.29 billion.
Canada had previously been working to advance negotiations on a Foreign Investment Promotion Protection Agreement (FIPA) and a CEPA. India-Canada CEPA negotiations began in 2010 and the last full negotiation round was held in August 2017, covering cross-border trade in goods and services, e-commerce, telecommunications, sanitary and phytosanitary measures, and technical barriers to trade. In June 2021, Indian and Canadian trade officials had another stocktaking meeting.
Indian sectors of interest for Canadian companies include education, transportation infrastructure, life science, clean energy technology (integration of renewable energy/smart grid; carbon capture, use, and storage; and energy efficiency) and renewable energy, infrastructure development, natural resources, defense and security, value-added food products, mining, and oil and gas, etc.
India-US Trade Policy Forum outcomes
US Trade Representative Katherine Tai on her two-day visit in November last year asked India for greater agriculture market access while Indian officials brought up the difficulty of securing intellectual property rights in the US – among other issues. Following the visit, the revived Trade Policy Forum (after being dormant since October 2017) has provided a direct channel for the two sides to make progress on bilateral trade concerns.
In January 2022, it was announced by both governments that the US had approved the import of mangoes and pomegranates from India. Meanwhile, India agreed to import cherries, alfalfa hay, and pork and pork products from the US.
The US market preference for Indian mangoes is well known. Indian mango exports to the US amounted to 800 metric tons (MTs) in 2017-18, worth US$2.75 million. The next year, 2018-19, saw India export 951 MT of mangoes, worth US$3.63 million. In 2019-20, Indian mango exports to the US were 1,095 MT, worth US$4.35 million. In 2020, exports came to a halt as USDA officials could not visit India to inspect irradiation facilities due to COVID-19 travel restrictions.
The US Department of Agriculture’s (USDA) approval now will boost exports from Indian mango production strongholds like Maharashtra, Uttar Pradesh, Andhra Pradesh, and Telangana. It will also open up opportunities for the export of other mango varieties from the north and east India, such as Langra, Chausa, Dasehri, and Fazli. Currently, the state of Maharashtra accounts for 80 percent of India’s mango exports; reportedly 205 varieties of mangoes can be found in the Western Ghats in the state.
Various pending bilateral trade issues between India and the US include penal tariffs on Indian steel, market access for medical equipment and US dairy, and non-tariff barriers in both countries.
Meanwhile, on November 24, 2021, India and the US agreed on India’s implementation of the equalization levy or digital services tax till the OECD Pillar One came into force or by March 31, 2024 – whichever is earlier.
Indian goods exports to the US in FY 2020-21 were US$51.6 billion while imports were US$28.8 billion. According to USTR, trade in services with India (exports and imports) totaled an estimated US$54.1 billion in 2019. Services exports were US$24.3 billion and services imports were US$29.7 billion.
India-Russia trade and investment relationship following Putin’s 2021 visit
India and Russia held their first 2+2 dialogue (defense and foreign ministers) and the meeting of the Inter-Governmental Commission on Military & Military-Technical Cooperation on December 6, 2021, during President Vladimir Putin’s official visit to India.
Several government-to-government agreements between India and Russia were reached during the visit as well as MoUs between commercial and other organizations of both countries. The MoUs covered nearly 30 sectors, including trade, energy, steel, fertilizers, science & technology, intellectual property, outer space, geological exploration, cultural exchange, and education.
Prominent outcomes include a deal signed between the two countries worth INR 51 billion (US$689.90 million) for the joint production of more than 500,000 AK-203 assault rifles at a facility in the Amethi district of Uttar Pradesh state. Russia also agreed to provide reliable long-term supplies of coal to India for steel production through an MoU. Discussions also took place on Russian participation in India’s Production-Linked Incentives (PLI) program for specialty steel.
Besides these, Putin and Modi discussed India’s linkages with the Eurasian region through the International North South Transport Corridor (INSTC) and the proposed Chennai – Vladivostok Eastern Maritime Corridor. The INSTC offers a cheaper and faster alternative multimodal transit corridor for India-Russian trade as the route connects India with Nordic Europe, Central Asia, and Russia; it is expected to eventually touch the Baltic and Arctic regions.
The two leaders also looked forward to greater inter-regional cooperation between various regions of Russia, in particular the Russian Far-East, with the States of India. Areas of trade and investment cooperation between India and the Russian Far-East include energy, maritime connectivity, healthcare, and tourism.
Putin has extended an invitation to Prime Minister Modi to visit Russia for the 22nd India-Russia Annual Summit in 2022.
As per Indian embassy figures, Indo-Russian bilateral trade during April 2020-March 2021 amounted to US$8.1 billion. Indian exports were valued at US$2.6 billion while imports from Russia were worth US$5.48 billion. As per Russian figures, bilateral trade in the same period amounted to US$9.31 billion, with Indian exports worth US$3.48 billion and Russian imports amounting to US$5.83 billion.
India and Russia want to reach a trade target of US$30 billion by 2025. Negotiations for a India-Eurasian Economic Union (EAEU) free trade zone have been ongoing.
Russian Prime Minister’s visit to India planned for January postponed due to Omicron
The Russian Prime Minister Mikhail Mishustin was reportedly planning his maiden trip to India in the second week of January, following Putin’s December 6 annual summit. The Russian PM was to lead a delegation of 15 Russian governors, including 11 from the Russian Far-East, to attend the Vibrant Gujarat Global Summit (VGGS). The 10th edition of the VGGS was scheduled to be held during January 10-12, 2022, themed ‘From Atmanirbhar Gujarat to Atmanirbhar Bharat’ (From a Self-Reliant Gujarat to a Self-Reliant India). However the summit was postponed in the wake of the Omicron outbreak. It remains to be seen how the invasion of Ukraine impacts future participation.
India-Israel trade talks ongoing, 2022 target for deal
The two countries are reportedly engaged in FTA talks and want to sign a deal by mid-2022 as the year marks 30 years of India-Israel formal diplomatic ties. India-Israel bilateral engagement has flourished under the Narendra Modi government, with closer military and technology partnerships. Cooperation is reported to be improved in water and agriculture sectors and both countries have established mutual recognition of vaccination certificates. Total merchandise trade between India and Israel amounted to US$4.67 billion in FY 2020-21.
India-South African Customs Union preferential trade agreement talks revived
In July 2020, India revived talks with the SACU bloc for a preferential trade agreement (PTA). In a virtual meeting between the two sides, India emphasized its close engagement with the Southern African region. In 2019-20, India’s trade with Africa stood at US$66.7 billion, out of which India-SACU trade amounted to US$10.9 billion. Currently, the trade balance favors SACU showing its beneficial access to India’s market. However, there remains significant scope for greater trade.
India is seeking closer manufacturing and industrial investment ties with Namibia, and its sectors of interest cover agriculture, irrigation, renewables, ICT, pharmaceuticals, and medical supplies. India-Namibia trade in 2018-19 amounted to US$135.92 million with Indian exports worth US$82.37 million and imports valued at US$53.55 million. Namibia holds rich deposits of uranium, diamonds, copper, phosphates, and other minerals while India’s advantage lies in its capabilities in IT, engineering, pharma, railways, as well as its large SME (small and medium enterprise) sector.
India-South Africa bilateral trade was worth US$10.584 billion in 2018-19. Indian exports to South Africa include auto and auto components, transport equipment, drugs and pharmaceuticals, engineering goods, footwear, dyes and intermediates, chemicals, textiles, rice, gems and jewelry, etc. South African exports to India include goal, steam coal, copper ores and concentrates, phosphoric acid, manganese ore, aluminum ingots, and other minerals.
India-Oman trade and investment seek further boost
On October 9, 2021, India stated that it was looking to sign an FTA with Oman. Bilateral trade between Oman and India stood at US$5.931 billion in FY 2019-20, while bilateral trade in 2020-21 (April 2020 to February 2021) amounted to US$4.63 billion. Omani-India trade benefits from the fact that Oman’s ports are five days shipping time from India’s western coast.
There are reportedly over 4,000 India-Oman joint ventures (JVs) in Oman with an estimated investment of over US$7.5 billion. There are close to half a million Indian expats based in Oman, whose total population is around 4.6 million.
Oman has four sea ports facing the Indian Ocean. Its industrial zones at Duqm offer “30 years corporate tax exemption, 0% customs duty, 100% foreign ownership, usufruct agreements, 50 years renewable, no restrictions on repatriation of profits, no income tax, currency exchange freedom, and a stable currency rate,” as per Oman’s Ambassador to India Sheikh Hamad bin Saif Al Rawahi.
Oman’s sea ports are supported by airports and warehousing facilities. The Port of Duqm SEZ has been earmarked for an Indo-Oman JV, Sebacic Oman, which will be an US$1.2 billion acid plant. A ‘Little India’ integrated tourism complex project worth US$748 million has also been agreed to between the two countries, also located in Duqm. Indian entities are also among the largest foreign investors in the Port of Sohar, with an estimated investment of about US$2 billion. Other India-Oman JVs include the US$969 million Oman India Fertilizer Company (IFFCO, KRIBHCO of India, and Oman Oil Company) at the port city of Sur, which produces urea for Indian farmers. Indian investments at the Port of Salalah are in manufacturing automotive parts, textiles, cables, guar gum, etc.
This article was originally published November 6, 2021. It was last updated May 11, 2022.
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