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India needs FTAs for growth

With trade tensions escalating between China and the US, India is likely to benefit by getting more access to Chinese markets and attract FDI, provided India puts its house in order and becomes domestically competitive. If India is not competitive, it is unlikely to benefit from the China-US trade spat.

Five years ago, when wages were increasing across China, the question was asked whether foreign direct investments would flow to India because China was losing its competitiveness. Unfortunately, that was not completely realised. A lot of the FDI from Japan, China, Taiwan, and even Sri Lanka did come in to India, but most of the investments were diverted to Cambodia, the Philippines and Vietnam. This was because India did not engage in domestic reforms.

India feels it got its fingers burnt with free trade agreements with Japan and South Korea, so now it's taking things slow with the RCEP trade deal with Asean and other countries because it fears China will swamp the market. India also has a trade deficit with China. China, South Korea and Japan benefited by opening their markets because domestic markets alone will not generate enough growth. Accessing growth markets is critical for the long term growth of a country.

 
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