India- South African Union FTA: Revival of talks

India- South African Union FTA: Revival of talks

Subject: Economy

Section: Monetary Policy

Key Points:

• India to revive talks for a free trade agreement with the South African Customs Union (SACU).
  • The initial round of technical discussions for the India-SACU PTA took place in 2007 which lasted till 2010, but talks were on back burner till 2020
• SACU consists of 5 countries: Botswana, Lesotho, Namibia, South Africa, and Eswatini (formerly Swaziland).
• India’s Exports:
  • Automobiles, refined petroleum products, unmounted diamonds, and pharmaceuticals
  • India exported goods worth about $9 billion to SACU countries, accounting for around 2 per cent of its total exports.
• India’s Imports:
  • India mainly imports raw primary or semi-processed commodities from the SACU.
  • India also imports coal, diamonds, gold, and iron ore from the region that were essential inputs for various sectors.
  • Half of the Indian imports from SACU consist of natural or cultured pearls, precious or semi-precious stones and metals, with unwrought gold, unworked non-industrial diamonds and platinum.
  • Imports from the region were valued at a higher $11 billion (approx) which accounted for 1.53 per cent of the country’s total imports.
• The FTA negotiations are likely to be less complicated than the ones with India’s Western partners because as SACU comprises developing countries, contentious non-trade topics like labour, gender, and environment would not be on the table.
• India’s automobile industry could be one of the primary sectors that could gain from an FTA with SACU countries, as it accounts for about 38 per cent of the country’s exports to the region.

Significance:

• So far, of all African countries, India has an FTA only with Mauritius, this could help mitigate exposure to global volatility.
• Substantial gains to be made in pharma, iron and steel sectors.
• Could provide a foothold in the African market and would help diversify trade.
• Tariffs at present are as high as 20-25%, FTA would help boost trade substantially.
• India and Africa have set a target of doubling bilateral trade to $200 billion by 2030