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India and Peru are trying to speed up talks on the proposed bilateral free trade agreement (FTA), after it got delayed due to the Covid-19 pandemic and have scheduled the seventh round of negotiations in New Delhi, from April 8, prior to which offer lists on goods and services are likely to be exchanged, sources have said.
- Also read: FTA with Peru to help India expand foot-print in LatAm
“The proposed FTA with Peru is significant for India as it seeks to increase its presence in Latin American countries in line with the policy decision to diversify beyond traditional markets. The Covid-19 pandemic led to a pause in the negotiations but since the India-Peru FTA talks restarted in February this year, both sides are trying to expedite it,” an official tracking the matter said.
Although the Model Code of Conduct (MCC) for the 2024 Lok Sabha Elections has come into force, it would not apply on on-going trade negotiations, senior government officials had recently clarified. However, Cabinet approval for a FTA during the MCC period may be difficult.
Gold negotiations
Peru is interested in higher market access for its gold, which accounts for around 80 per cent of its exports to India and also some agricultural items such as avocados, fresh grapes, blueberries.
“Negotiations on gold could be tricky as it is a very important export item for Peru but as it is a high-value item, reducing import duties on it as part of the FTA may not be easy for India,” the official said.
- Also read: India, Peru to restart negotiations on FTA
In FY23, the yellow metal accounted for $1.8 billion or 80 per cent of India’s imports from Peru, according to a paper by research body GTRI. Import duty on gold in India is 15 per cent, which includes a basic custom duty of 10 per cent and an agriculture infrastructure development cess of 5 per cent.
Interestingly, in its recently concluded free trade agreement with the EFTA bloc comprising Switzerland, Iceland, Norway and Liechtenstein, India did not offer any effective tariff concession on gold. This was despite the fact that in Switzerland’s case, too, gold exports to India, valued at over $16 billion in 2022-23, comprised about 80 per cent of its total exports to the country.
While India agreed to a 1 per cent concession on the bound rate of 40 per cent, the effective duty remains at 15 per cent.
Trade expansion
“Apart from gold, Peru would also be interested in exporting more agricultural products like avocados, grapes and blueberries to India. The negotiators would decide what is the scope in such items,” an industry source said.
India hopes to have greater market access for its traditional exports such as motor vehicles, cotton yarn and pharmaceuticals while exploring opportunities in new products. “While Peru offers a big market for Indian products, it will also be used by Indian businesses to expand their foot print in Latin America,” the source said.
As imports from India constitute less than 2 per cent of Latin American countries total imports, the Commerce Department is of the view that there is significant scope for expansion of India-LAC bilateral trade. Efforts are on to double the bilateral trade to $100 billion in the coming years, according to officials.
During FY 2022-23, the bilateral trade volume reached $3.12 billion. India exported goods worth $ 865.91 million to Peru and imported goods valued at $ 2.25 billion from the country, per government data.
The proposed India-Peru FTA includes chapters such as Rules of Origin, Trade in Goods, Customs Procedures and Trade Facilitation, Technical Barriers to Trade, Sanitary and Phytosanitary Measures, General and Security Exceptions, Cooperation and Legal and Institutional Issues, Dispute Settlement, Services, Movement of Natural Persons, Trade Remedies and Investment.
