Free Trade Agreements
Government of India has entered into free trade agreements with many
countries but most of the FTAs are not in favor country and those needs to be
reviewed. From the trend line of the below graph for the period of 2008 to
2013, it is clear that country’s balance of trade situation has worsen in these
years. This indicates that we have imported more from the other countries and
exported less and this gap is widening although free trade agreements have been
entered into with aims of plugging this gap. And this increasing gap is not
good for the exchange rate for Indian rupee at all.
There are a number of economists who favor and advocate free trade
agreements claiming that it is beneficial for both the economies. With the
opening up economy a lot of foreign money comes to economy and this has been
the case with India too. And it helps economy to huge extent. But it seems to
be not true in case of India.
If we look as longer period from 1991 when liberalization of Indian
economy started, it is clear that situation has worsened more during this
period. From the below trend line graph, it can be concluded that it has
negative impact on net export from India. Till 2003-2004 there was no huge gap
in exports and imports but once India followed the path of bilateral economic
ties and free trade agreements in 1998 with Sri Lanka, the gap between export
and import rose sharply. In most of the trade agreements (bilateral or
multilateral) are tilted in favour of the other countries resulting extra
burden on Indian rupee. So on the basis of balance of trade one may say that
free trade agreements had not been beneficial for Indian economy as a whole. Although it is not possible to scrap these
agreements but time has come when these agreements must be reviewed (mainly FTA
with China).
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