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India & EEU: Free Trade Talks



  May 22, 2024

India & EEU: Free Trade Talks



Overview:

India is set to begin negotiations for a Free Trade Agreement (FTA) with the Eurasian Economic Union (EEU), aiming to enhance trade relations and economic ties. The EEU consists of five post-Soviet states: Russia, Armenia, Belarus, Kazakhstan, and Kyrgyzstan. These talks are expected to significantly boost trade between India and the EEU.

Key Details:

- Negotiation Timeline: The negotiations are anticipated to commence in the coming months. Both sides have exchanged trade data and are preparing for initial discussions.

- Expected Benefits: The FTA is projected to improve trade volumes and economic cooperation between India and the EEU. It aims to address trade imbalances and open new markets for Indian exports.

- Current Trade Statistics: During FY24, India's exports to Russia amounted to $4.26 billion, while imports stood at $61.42 billion. This represents an increase from the previous fiscal year, highlighting the potential for trade growth under an FTA.

- Main Trade Items:

  - India's Imports from Russia: Crude oil, petroleum products, coal, fertilizers, vegetable oil, pearl, iron & steel, and newsprint.

  - India's Exports to Russia: Pharmaceuticals, iron & steel, processed minerals, marine products, telecom instruments, and electronic machinery.

Geopolitical Context:

- Sanctions on Russia: The ongoing sanctions against Russia by Western economies, following its invasion of Ukraine, have significantly impacted its trade and economic stability. These sanctions include restrictions on financial systems and bans on Russian banks from the SWIFT system.

- Local Currency Usage: Due to these sanctions, there has been an increase in the use of local currencies for trade settlements between Russia and its trading partners, including India.

Strategic Implications:

- Economic Diversification: The FTA will provide India with greater access to the EEU markets, diversifying its trade partners and reducing reliance on Western economies.

- Enhanced Exports: Indian exports to the EEU, particularly to Russia, are expected to increase, addressing the current trade imbalance favoring Russia.

- Strengthened Bilateral Relations: This agreement will further solidify India’s economic and strategic partnerships with EEU countries, enhancing its geopolitical influence in the region.

Conclusion:

The proposed FTA between India and the EEU represents a significant step towards strengthening economic ties and boosting trade. As the negotiations progress, both sides are expected to explore opportunities to address trade imbalances and foster mutual economic growth.



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