The free trade agreement with the Eurasian Economic Union will not only boost India’s relation with the member countries but will also give it an opportunity to explore strategic and economic ties. We should just sign the deal
The signing of the free trade agreement with the Eurasian Economic Union, which is an economic union comprising Belarus, Kyrgyzstan, Kazakhstan, Russian Federation and Armenia, has immense potential for India to build its strength and further boost its relationship with the members of the regions.
The operation of the EEU came into force on January 1, with the aim to integrate 176 million populations and gross domestic product of over four trillion dollar into a single market. The Union has vast reserves of natural resources comprising oil, gas, electric power, mineral fertilisers, coal, iron and steel etc and offers a ready market to be harnessed and explored. Undoubtedly, the free trade deal with the EEU will bring a number of benefits and will improve the Indian economy.
One of the advantages that this deal advances for India is giving boost to the relationship with the member countries of EEU. India enjoys amiable relationship with all the countries of the Eurasian Economic Union. Once the FTA is in place, India will get an opportunity to explore strategic and economic ties with these countries. India is seen as a trustworthy partner to all the members of the EEU and recent years have seen a significant move in the bilateral linkages with these countries.
For instance, India’s ONGC Videsh limited, recently received an invitation by Kazakhstan to explore its Abai bloc for energy resource and signed a deal with Belarus to supply 500 tonnes of potash fertilisers. Despite this, bilateral trade between India and the members of the Union is considerably low. Between India and Russia, the volume of trade in 2013 was $10 billion, $63million with Armenia, $400 million with Belarus, $505 million with Kazakhstan and $35 million with Kyrgyzstan. The spurt in trade is possible only if the FTA is signed between India and EEU countries.
To promote economic convergence and cooperation, the EEU has promoted the concept of customs Union and single market. The whole idea of establishing customs Union is to eliminate intra-bloc tariffs and not tariff barriers and to create a common external tariff policy to ensure the effective operation of a single market for goods and services and comprehensive policies.
The EEU has fostered a common pharmaceutical zone and a single market is expected to be created by January next year within the Union. Over the years, India has achieved an eminent global position in the pharma sector. By being part of the comprehensive economic partnership agreement with the EEU, India will have immense influence on the region and will get an added advantage, given the fact that Indian pharmaceutical industry is estimated to grow at 20 per cent compound annual growth rate. Presently, Indian pharma products faces non-tariff barriers in Russia and the lack of time periods for the implementation, registration and confirmation by Russia delays the supplies of the products which can be overcome once the FTA is signed.
Moreover, the growing credibility and increasing costs of healthcare has led the commonwealth independent states, including Armenia, Belarus, Kazakhstan and Kyrgyzstan to eye on India’s pharma products. Considering that the demand for pharma products in Russia and CIS nations will report a double digit growth, the FTA will provide a huge opportunity for India’s pharmaceutical industry whose share of exports of pharma products to the EEU members is very low.
Further, the textile industry of India will be benefitted as the free trade pact will provide inherent incentives on the duty front. In particular, Knitwear exporters will be able to reap the advantages of the FTA as the agreement will make the Indian products cost- competitive. Additionally, the exports of bovine, cow and buffalo meat and egg products which faced the stricter norms from Russia will see be relaxed, once the Comprehensive Economic Partnership Agreement is signed. In the recent development, Indian entities have been permitted to exports egg powder to the Russian Federation, Kazakhstan and Belarus. Also, a ban on the export of non-basmati rice and oilseeds from Russia is been lifted since the EEU has been into force.
Furthermore, the FTA will give market accessibility to both India and the EEU countries. India is seen as a promising market for the EEU members as there is a huge demand for vehicles, equipment, chemical products and fertilisers, mining equipment etc from Russia. Also there is an immense need for Eurasia’s reserves of oil and natural gas for India’s security, energy and infrastructure needs.
As pointed out by President Vladimir Putin, the Union will be a hydrocarbon treasury, possessing a fifth of all global natural gas resources and 15 per cent of the oil reserves . The FTA between India and EEU is also vital for investments in India’s infrastructure, defence and technology intense sectors. For the Make in India initiative to be successful, India needs to improve its infrastructure and meet its energy demand. In December 2014, Mr Putin offered to build one of the Russia’s most advanced helicopters in India.
The signing of the FTA agreement will ensure the speeding up of the supply of regional and medium haul airplanes and also civil helicopters that are vital for Make in India. The FTA will also improve connectivity. With the realisation of North-South transport Corridor, which will connect India, Central Asia, Russia and Iran, will give a further momentum to the trading relationship between India and the EEU countries by ensuring easy movement of goods through the corridor and reducing time and freight cost. India really needs to take forward the negotiations quickly as it will gain immensely out of this deal. India should not delay any further.