StatsGuru: 21-April-2014

Examining impact of free-trade pacts on India's export & import

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India has signed a number of free-trade agreements (FTAs), many of which have become controversial. The impact on India's trade in goods has been mixed. Overall, India's exports and imports (including services) is shown in Table 1. Both rose sharply overall - but exports not enough to cancel out imports. Recently, the trend has been for imports to decline sharply, and exports to be flat - in dollar terms. How have various FTAs contributed to this situation? As Table 2 shows, imports from various Southeast Asian nations, especially Malaysia and Indonesia, increased sharply after the India-Asean FTA came into effect on January 1, 2010. But the recent decrease is also marked. Imports from Japan and South Korea have also seen the effects of demand destruction, as Table 3 shows. But there, too, a notable bump was seen as the effect of the implementation of FTAs with Japan on August 1, 2011, and S Korea on January 1, 2010. With Sri Lanka and Nepal, FTAs have been in effect since the early 2000s; but imports have been flat, even as exports have risen till recently, according to Table 4. Trade with Europe, shown in Table 5, has not yet benefitted from an FTA. The bottom row of tables shows how imports have crashed in value terms in almost all sectors. Worryingly, a similar effect is also visible for exports, perhaps a result of a rupee that is not being allowed to depreciate sufficiently.