India needs to strengthen its regional ties to effectively counter the impact of tariffs, according to Erik Berglof from the Asian Infrastructure Investment Bank (AIIB). This strategy includes deepening trade relationships with other Asian nations and reconsidering its stance on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to reap significant economic benefits.
The AIIB suggests that India should prioritize attracting investments, particularly in infrastructure development. Strengthening regional alliances can provide India with alternative markets and reduce its dependence on countries imposing high tariffs. This approach aligns with India's broader strategy of diversifying its trade partnerships amid rising global economic volatility and shifting geopolitical alignments.
One significant step in this direction is India's active exploration of ways to strengthen trade ties with China, potentially bypassing certain tariff barriers through negotiated arrangements and regional trade mechanisms. New Delhi is reportedly considering a renewed engagement with Beijing, focusing on easing non-tariff barriers, harmonizing standards, and facilitating smoother market access for Indian exports.
While India is not pursuing a full-fledged free trade agreement with China at this juncture, it is exploring mechanisms to facilitate greater market access and reduce costs for Indian exporters, especially in sectors like pharmaceuticals, IT services, and agriculture. The Confederation of Indian Industry (CII) has welcomed this move, recognizing the opportunities for Indian businesses to tap into China's vast consumer market.
India is also actively advancing negotiations with other key global players. Negotiations with Peru are expected to finalize a trade agreement by 2025, and discussions for a Comprehensive Economic Partnership Agreement (CEPA) with Chile are underway, aimed at achieving deeper economic integration.
Furthermore, India has activated the India-EFTA Trade Deal, marking a major trade partnership with the European Free Trade Association (EFTA) nations, including Switzerland, Norway, Iceland, and Liechtenstein. This deal is projected to channel a $100 billion investment into India, generating millions of jobs and boosting global trade integration. The agreement offers extensive tariff concessions and market access, strengthening India's export potential while fostering collaboration in clean energy, digital technology, and high-value manufacturing. Key sectors such as agriculture, IT, gems, and pharmaceuticals are poised to benefit from easier entry into EFTA markets.
These efforts reflect India's strategic turn towards navigating global trade dynamics with a focus on national interest, despite ongoing trade tensions and geopolitical realities.
