Economy
India-Peru to meet in Sept for FTA negotiations; Aim to ink deal by early 2025
Summary
- The comprehensive FTA, once finalised, has the potential to reduce the tariffs on gold, one of the largest imports from Peru, which has the potential to further increase gold imports from the country.
New Delhi: Trade officials from India and Peru will meet again in September focus on building consensus on a proposed free trade agreement, two people aware of the matter said.
Both sides hope to wrap up the deal by early next year.
“These meetings will involve the participation of top delegates from both countries together, including their respective negotiating teams," said the first person mentioned above.
“The intention from both sides is to wrap up the deal soon. We expect to sign the deal by early next year," the person added.
Trade between India and Peru stood at $4 billion during FY24, with India imports from Peru amounting to $3.1 billion and exports at $920 million in the fiscal.
Managing trade
Imports from the South American nation consist of gold, iron steel, cocoa products, silver, aluminium and chemical products, while exports include motor vehicles, cotton, drugs and pharmaceutical products, two-wheelers, copper, etc.
Peru, surrounded by the 'lithium triangle' comprising Bolivia, Argentina and Chile, is also home to a sizeable lithium reserve, critical for India's growing electric vehicle industry.
However, gold is the most important commodity traded between the twocountries, with gold imports from Peru making up a considerable part of the bilateral trade, at about $2.7 billion in FY24.
Both countries have been in discussions to finalise the FTA since 2017. However, the coronavirus pandemic had delayed the negotiations.
India has resumed trade talks with Peru after a long gap, with the last round of negotiations was held in the South American country from 12 to 14 February.
Various working group meetings were held in that round, including on trade in goods, rules of origin, trade in services, customs procedures and trade facilitation, dispute settlement and legal and institutional issues.
A holistic deal
The ongoing negotiation with Peru is India's third trade engagement with a South American country, following its agreements with Chile and the Mercosur bloc (Argentina, Brazil, Uruguay, Paraguay).
India signed a preferential trade agreement with Chile in 2005 and the Mercosur bloc in 2009.
However, the potential deal with Peru stands out as India's first comprehensive FTA in the region, signalling a broader scope beyond the goods-focused agreements with Chile and Mercosur, which primarily included tariff concessions on selected items, said Ajay Srivastava, founder of Global Trade Research Initiative (GTRI).
“This move underlines India's strategic interest in expanding its trade footprint in Latin America, leveraging Peru as a pivotal partner in this endeavour," he said.
Srivastava added that tariff concessions on gold, which accounted for about $1.8 billion or 80% of imports from Peru in FY23, is the most challenging issues for India.
“Gold, a high-value product with low volume, attracts a 10% (basic) customs duty in India. Even minor tariff concessions could lead to a significant increase in imports," he explained.
Peru is currently one of the largest suppliers of gold to India after Switzerland, the United Arab Emirates and South Africa.
Spokespersons of the commerce ministry and Peru's embassy in New Delhi didn't respond to queries emailed by Mint.
