India to Negotiate FTA with Eurasian Economic Union

Overview

India is preparing to initiate negotiations for a Free Trade Agreement (FTA) with the Eurasian Economic Union (EEU). This agreement aims to enhance trade relations and economic ties between India and EEU member states. The EEU includes five post-Soviet countries: Russia, Armenia, Belarus, Kazakhstan, and Kyrgyzstan.

Key Details

• Negotiation Timeline: Negotiations are expected to start in the upcoming months. Both India and the EEU have already exchanged trade data and are preparing for initial discussions.
• Expected Benefits: The FTA is anticipated to improve trade volumes and foster economic cooperation. It aims to address trade imbalances and create new markets for Indian exports.
• Current Trade Statistics: In FY24, India's exports to Russia totaled $4.26 billion, while imports were $61.42 billion. This increase from the previous year highlights the potential for trade growth under the FTA.
• Main Trade Items:
  • Imports from Russia: Crude oil, petroleum products, coal, fertilizers, vegetable oil, pearls, iron & steel, and newsprint.
  • Exports to Russia: Pharmaceuticals, iron & steel, processed minerals, marine products, telecom instruments, and electronic machinery.

Geopolitical Context

• Sanctions on Russia: Ongoing sanctions imposed by Western economies due to Russia's actions in Ukraine have significantly affected its trade and economic stability. These sanctions include financial system restrictions and bans on Russian banks from the SWIFT system.
• Local Currency Usage: In response to these sanctions, there has been a noticeable increase in the use of local currencies for trade settlements between Russia and its trading partners, including India.

Strategic Implications

• Economic Diversification: The FTA will grant India greater access to EEU markets, helping to diversify its trade partners and reduce reliance on Western economies.
• Enhanced Exports: Indian exports to the EEU, especially to Russia, are expected to rise, helping to balance the current trade deficit favoring Russia.
• Strengthened Bilateral Relations: This agreement will further cement India’s economic and strategic partnerships with EEU nations, thereby enhancing its geopolitical influence in the region.

Conclusion

The proposed FTA between India and the EEU marks a pivotal move towards strengthening economic ties and boosting trade. As negotiations advance, both parties are expected to explore avenues to rectify trade imbalances and promote mutual economic growth.

Frequently Asked Questions (FAQs)

Q1. What is the purpose of the FTA between India and EEU?
Answer: The FTA aims to enhance trade relations, improve economic cooperation, and address trade imbalances between India and the EEU member states.

Q2. Which countries are part of the EEU?
Answer: The EEU consists of five countries: Russia, Armenia, Belarus, Kazakhstan, and Kyrgyzstan, all of which are post-Soviet states.

Q3. How much did India export to Russia in FY24?
Answer: In FY24, India's exports to Russia amounted to $4.26 billion, indicating significant trade activity and potential for growth under the FTA.

Q4. What are the main imports from Russia to India?
Answer: India's main imports from Russia include crude oil, petroleum products, coal, and fertilizers, which are crucial for various sectors in India.

Q5. How have sanctions affected trade with Russia?
Answer: Sanctions against Russia have led to a shift towards local currency usage for trade settlements, impacting how India engages economically with Russia.

UPSC Practice MCQs

Question 1: What is the main goal of the FTA between India and the EEU?
A) To increase Western trade
B) To enhance trade relations and address imbalances
C) To limit imports from EEU countries
D) To eliminate tariffs on all goods
Correct Answer: B

Question 2: Which of the following countries is NOT part of the EEU?
A) Belarus
B) Kazakhstan
C) Ukraine
D) Armenia
Correct Answer: C

Question 3: In FY24, what was the total value of India's imports from Russia?
A) $4.26 billion
B) $61.42 billion
C) $10 billion
D) $30 billion
Correct Answer: B

Question 4: Which product is primarily imported by India from Russia?
A) Pharmaceuticals
B) Coal
C) Marine products
D) Telecom instruments
Correct Answer: B

Question 5: How have sanctions influenced trade settlements with Russia?
A) Increased use of Western currencies
B) Decreased trade volume
C) Shift to local currencies
D) Elimination of tariffs
Correct Answer: C