The Hindu Editorial Analysis- 13th May 2024 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

India-EFTA trade deal

Why in News?

India’s free trade agreement (FTA) negotiations with countries such as the United Kingdom and the European Union (EU) seem to be on ice due to the ongoing parliamentary elections in India. However, before election fever gripped the country, India managed to clinch a historic trade deal, in March, with the European Free Trade Association (EFTA), comprising Iceland, Liechtenstein, Norway and Switzerland.

About

• The Trade and Economic Partnership Agreement (TEPA) marks the second such full-fledged FTA signed after India’s agreement with the United Arab Emirates.
• These FTAs are expected to see considerable tariff reduction, increase in market access, and simplification of customs procedures. 

India-EFTA Pact: Trade and Economic Partnership Agreement (TEPA) 

• Signing Date: March 10, 2024
• Participants: India and EFTA member states: Iceland, Liechtenstein, Norway, and Switzerland
• Objective: Encourage investments and exports, particularly in India’s IT and audio-visual sectors, and facilitate skilled professional movement
• Investment Target: EFTA states aim to boost FDI into India by $50 billion over 10 years, with an additional $50 billion in the following five years
• Key Provisions:
  • Human Rights and Sustainable Development: For the first time, the FTA includes a chapter on commitments to human rights and sustainable development
• Implementation: The agreement will take effect after ratification by the EFTA states, anticipated possibly by year-end.

Potential benefits for India

• Tariff Reduction: Following the treaty's enactment, EFTA nations will experience decreased tariffs on most industrial exports to India, including pharmaceuticals, machinery, watches, fertilizers, medicines, and chemicals.
• Increased Trade and Investment: EFTA's investment in India reached $10.7 billion in 2022, with Switzerland leading as India’s primary trading partner in this group, followed by Norway.
• Job Creation: The agreement aims to boost FDI into India by $100 billion over 15 years, potentially generating one million direct jobs.
• Access to EFTA Markets: Indian products will gain access to the markets of the four EFTA countries, expanding export opportunities.
• Services Sector: The agreement will boost services exports, particularly in IT, and facilitate skilled personnel movement.

Challenges for India

• Trade with Switzerland: In CY2023, Switzerland contributed $1.38 billion to the total $1.87 billion of Indian exports to EFTA. However, 98% of Indian exports to Switzerland are industrial goods already entering at zero tariffs and won’t be affected by the FTA.
• Exclusion of Agricultural Products: Most agricultural items are excluded from the deal. India offers access to "82.7 percent of its tariff lines which cover 95.3 percent" of EFTA exports.
• Limited Market Access: India faces challenges in increasing market access for goods in EFTA. In CY23, India had a trade deficit of $18.58 billion with the bloc, with imports totaling $20.45 billion.
• Key Imports: Gold and other precious metals, stones, and coins, mainly from Switzerland, accounted for $16.7 billion. Gold, constituting 80% of India’s imports from Switzerland, is crucial.
• Limited Competition: Joint Venture areas identified for investments typically do not face competition from India.

Way Ahead

• The Indian government had set an ambitious target of $2 trillion in exports of goods and services by 2030. Achieving this will require policy action on a range of issues — from lowering tariffs to entering into deeper, more expansive free trade agreements while safeguarding the country’s interests. 
• It also calls for ensuring that measures are taken so that the benefits from these trade agreements are fully reaped.

A well-intentioned study and a demographic myth 

Why in News?

All is well with the religious minorities in India is the short conclusion of the report of the Prime Minister’s Economic Advisory Council (PM-EAC), that has also revived the debate about Muslim population growth. Though the report is well intentioned and has been prepared to demonstrate how India’s minorities in general and Muslims in particular are absolutely safe and face no discrimination or persecution at all, it has caused a stir.

Concept 

• Reconstitution of Economic Advisory Council to the Prime Minister (EAC-PM): The government has reconstituted the EAC-PM for a two-year period following the end of its previous term.
• Continued Leadership: Bibek Debroy remains the Chairman of the EAC-PM.
• Nature of EAC-PM: The EAC-PM is a non-constitutional, non-permanent, and independent body established to provide economic advice to the Government of India, particularly to the Prime Minister.
• Functions:
  • Provides economic advice to the government, offering a neutral perspective.
  • Advises the Prime Minister on various economic issues such as inflation, microfinance, and industrial output.
  • Publishes reports on the annual Economic Outlook and Review of the Economy of India.
• Membership and Structure: There is no fixed definition of the number of members and staff of the EAC-PM.
• Administrative Handling: For administrative, logistic, planning, and budgeting purposes, the NITI Aayog serves as the Nodal Agency for the EAC-PM.

About:

• Nature of EAC-PM: The Economic Advisory Council to the Prime Minister (EAC-PM) is a non-constitutional, non-statutory, and independent body established to provide advice on economic and related matters to the Government of India, specifically to the Prime Minister.
• Functions:
  • Provides neutral viewpoints on key economic issues to the government.
  • Advises the Prime Minister on economic matters such as inflation, microfinance, and industrial output.
• Administrative Handling: The NITI Aayog serves as the Nodal Agency for the EAC-PM for administrative, logistic, planning, and budgeting purposes.
• Terms of Reference:
  • Analyzing any economic or other issue referred by the Prime Minister and providing advice.
  • Addressing macroeconomic issues and presenting opinions to the Prime Minister, either suo-motu or on reference.
  • Attending to any other tasks requested by the Prime Minister.
• Periodic Reports:
  • Annual Economic Outlook
  • Review of the Economy