India-Peru Free Trade Agreement :Technical Talks 2023
In fiscal year (FY) 23, trade between India and Peru was $3 billion. India imported 2.2 billion dollars from Peru but only exported 865 million.
India and Peru’s technical teams have begun discussions on the parameters and scope of the proposed Free Trade Agreement (FTA), which would serve as the framework for talks.
An FTA between India and Peru has been under discussion since 2017. Up to August 2019, five rounds of negotiations had taken place before the COVID outbreak stopped them.
We would want a convenient method. At the very least, commerce in products and services will be included under the proposed agreement. Stella Mera Gomez said that the technical teams will decide if issues like investments are to be included.
In fiscal year (FY) 23, trade between India and Peru was $3 billion. India imported 2.2 billion dollars from Peru but only exported 865 million.
Among India’s top exports to Peru are automobiles, motorcycles, three-wheelers, polyester and cotton yarns, medicines, iron and steel items, plastic products, and tyres. Gold, copper, artificial fibres, calcium phosphates, fresh grapes, fish flour, and blueberries are the main imports from Peru.
According to the minister, exporting agricultural goods like fresh grapes, blueberries, avocados, and other fruits and vegetables and natural resources like gold, copper, and calcium phosphates are in Peru’s best interests. The majority of the blueberries sold in India come from Peru.
“We are also interested in space in India for manufactured goods.”
She claimed that Peru is a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and has trade agreements with all major economies, including the US, EU, China, and Japan.” We don’t fight over the same commodity. The minister remarked that our economies complement one another, which is quite advantageous during negotiations.
Peru is also looking for investments from India.
We are building a new port at Chancy, 80 kilometres north of Lima, in the middle of South America. It will be ready the following year, be able to accommodate larger ships and shorten the connection time to Asian nations. There may be a chance for Indian companies to locate production there, according to Gomez.
“We want Tata, Mahindra, and every other Indian company to conduct business in Peru. There, two- and three-wheeled vehicles made in India are highly recognised; Bajaj and TVS are also present. To compete with the other nations we import from, we must have your items (produced) there.
Peru levies an 18% import duty on vehicles.
She said that investment tax incentives are chosen on a case-by-case basis and that international firms do not experience prejudice in Peru. Additionally, Peru offers free trade zones where Indian businesses may do manufacturing.
A few Peruvian businesses are also present in India. AJE, An Indian subsidiary of Peru, produces soft drinks. Resemen S.A.C., a significant Peruvian corporation specialising in mining equipment, has established Reliant Drilling Ltd. as a subsidiary in India. Other Peruvian mining services firms, such as Opermin and AAC Mining Executors, have opened offices in India. India now has a factory operated by lubricants giant Vistony.
As the global economy continues integrating, nations seek opportunities to strengthen trade relations. The initiation of technical talks between India and Peru in 2023 for a Free Trade Agreement (FTA) is a testament to this trend.
This article aims to provide a detailed analytical overview of these discussions, highlighting the potential benefits, challenges, and broader implications for both countries and their economies.
India and Peru have shared a robust diplomatic relationship since the early 1960s. Over the years, their bilateral trade relations have consistently grown, with trade figures reaching approximately $3 billion in the years leading up to the talks. Notably, the primary commodities exchanged include pharmaceuticals, textiles, and minerals.
Potential Benefits
- Economic Diversification: For India, the FTA could lead to a diversified export destination in Latin America, reducing over-reliance on traditional markets. Conversely, for Peru, it offers an opportunity to tap into India’s vast market, particularly in sectors like IT and services.
- Enhanced Trade: Reducing tariffs and non-tariff barriers would boost bilateral trade figures, with some experts predicting a potential 2x growth within a few years post-agreement.
- Investment Opportunities: Beyond trade, the FTA could pave the way for enhanced foreign direct investments. India could invest in Peru’s mining and agriculture sectors, while Peru might explore India’s tech industry.
- Strategic Cooperation: The FTA can be a cornerstone for India’s aspirations to enhance its presence in the Latin American region, countering the influence of global superpowers like China.
India would need to ensure that the local industries, particularly the small-scale sectors, aren’t negatively impacted. Peru would have similar concerns, especially in areas where India has competitive advantages.
Both nations have diverse regulatory systems. Aligning these, especially in sectors like pharmaceuticals and agriculture, would be challenging.
The economic landscapes of India and Peru are vastly different. Any agreement would need to be equitable, ensuring benefits for both nations.
A successful India-Peru FTA could be a template for other Latin American countries looking to collaborate with India. It could usher in a new era of India-Latin America economic partnerships.
China has significantly increased its influence in Latin America over the years. Some analysts might view this FTA as India’s attempt to counterbalance this influence.
At a time when protectionist sentiments are on the rise, such FTAs send a positive signal about the importance of free trade in ensuring global economic growth.
The technical talks between India and Peru for a Free Trade Agreement are not just another set of trade negotiations. They indicate the evolving global trade dynamics and India’s aspirations to play a pivotal role.
If successful, this agreement can redefine bilateral relations, paving the way for a synergistic partnership between Asia and Latin America. However, for lasting success, both nations must approach these negotiations with a vision for mutual growth and understanding the shared challenges.
