India-US trade deal ‘more or less’ finalised, framework for preferential access being worked out: Commerce Secretary Rajesh Agarwal
The India-US trade deal is nearly finalized, with both nations discussing preferential market access. India's free trade agreement with Chile is also in its final stages of negotiation. New Zealand FTA is expected to become active soon, potentially in October. Government efforts aim to reduce freight costs and support exporters effectively. India sees significant opportunities to expand its fintech services globally, especially in the Global South.
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Context
The Indian Commerce Secretary has indicated that an India-US trade deal focusing on preferential market access is nearly finalized and will be signed soon. Concurrently, Free Trade Agreements (FTAs) with Chile and New Zealand are advancing. The government is also prioritizing fintech exports, aiming for a significant share of the global market by leveraging India's digital public infrastructure.
UPSC Perspectives
Economic
The impending India-US trade deal hinges on resolving the asymmetry between India's Most-Favored-Nation (MFN) tariff regime (a principle ensuring non-discriminatory trade among members) and the US system, which often utilizes executive tariffs. To facilitate this, the agreement aims to establish preferential market access, meaning goods from one country will face lower tariffs in the other compared to standard rates. This requires a specific architectural framework to manage the differentials. A finalized deal would significantly boost bilateral trade by reducing non-tariff barriers and providing clarity for businesses. UPSC candidates must understand the distinction between FTAs, Preferential Trade Agreements (PTAs), and the implications of MFN status. The upcoming FTAs with and further demonstrate India's strategic push to expand its export markets and integrate more deeply into global supply chains, moving away from past protectionist tendencies.
Technology & Innovation
The article highlights India's ambition to become a global leader in fintech exports, leveraging its successful Digital Public Infrastructure (DPI) (like and Aadhaar). The goal is to capture a larger slice of the global financial services market, targeting $60-$80 billion, up from current levels. This strategy involves building fintech solutions 'for the world,' particularly focusing on the Global South (developing nations in Asia, Africa, and Latin America). By sharing its DPI model, India can offer scalable, low-cost digital payment and financial inclusion solutions to these countries. A crucial aspect of this is reducing the cost of cross-border remittances (money sent home by migrant workers). Lowering the average remittance cost from 5-6% to the SDG target of 3% would have a massive developmental impact, freeing up billions of dollars for families. This demonstrates how domestic technological success can be translated into a powerful tool for economic diplomacy and export growth.
International Relations
India's recent flurry of trade negotiations, including 9 trade agreements signed over the past five years covering economies with a combined GDP of $60 trillion, signifies a proactive shift in its economic diplomacy. The focus on the Global South for fintech exports aligns with India's broader foreign policy goal of positioning itself as a leader and voice for developing nations. The signing of Memorandums of Understanding (MoUs) with 23 countries for cooperation on is a key component of this strategy, creating technological dependencies and fostering goodwill. The successful negotiation of complex trade deals with major powers like the while simultaneously pursuing agreements with varied economies like and showcases a multi-aligned approach to trade policy. The ongoing disruption in global supply chains, highlighted by rising freight costs, underscores the necessity of these diversified trade partnerships to build economic resilience.