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Leveraging FTAs for FDI in India



  Feb 14, 2024

Leveraging FTAs for FDI in India



India’s recent engagement in Free Trade Agreements (FTAs) presents a strategic opportunity to boost Foreign Direct Investment (FDI) inflows and stimulate economic growth. Here’s how:

Significance of FTAs: India’s FTAs with Mauritius, UAE, and Australia, along with ongoing negotiations with the EU and UK, are pivotal for achieving its ambitious export target of US$2 trillion by 2030.

Increasing FDI: By leveraging FTAs, India can attract FDI by offering preferential market access to its partners, especially those with contrasting endowments and different stages of development.

Declining FDI Trend: Despite initial success, India witnessed a decline in FDI inflows post-2022, necessitating proactive measures to reverse the trend.

Strategic Partnerships: Targeting FTA partners like the EU and UK, as well as influential investors like the UAE and Australia, can bolster FDI inflows and support India’s vision of becoming a manufacturing hub.

China Plus One Strategy: India can position itself as an attractive alternative to China by capitalizing on the increasing popularity of the “China Plus One” strategy among investors seeking diversified manufacturing bases.

Diversifying Imports: Partnering with FTAs can help India reduce its import dependence on China and diversify its import sources, enhancing resilience in critical sectors.

Integration into Global Value Chains: Redesigning FTAs to deepen economic integration and broaden trade liberalization will facilitate India’s participation in global value chains, fostering economic growth and job creation.

Addressing Unemployment: Attracting investments in labour-intensive sectors through FTAs can mitigate India’s “jobless growth” challenge and boost employment opportunities.

Promoting Innovation: Leveraging FTA negotiations with technologically advanced partners like the EU can encourage investment in research, development, and innovation, addressing India’s low innovation index.

Conclusion:

India’s strategic utilization of FTAs holds immense potential to attract FDI, integrate into global value chains, tackle unemployment, and foster innovation-led growth, positioning the nation as a key player in the global trade landscape.


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