Barclays not too bullish on India FTAs' power

India’s recent spate of signed and proposed free-trade agreements may not be sufficient to offset the impact of US tariffs on the South Asian country’s exports, economists at Barclays Plc said.“While the FTA spree certainly bodes well for making international trade more seamless, it may not necessarily result in higher exports large enough to offset the US tariff-inflicted pain,” Barclays economists Aastha Gudwani and Amruta Ghare wrote in a report on Friday. India remains one of the few major economies without a trade deal with Washington, despite facing a 50% tariff rate — among the highest in the world. The levies have dealt a heavy blow to India’s labour-intensive sectors, especially textiles, handicrafts, apparels, gems and leather. The US is India’s largest overseas market, accounting for 19.3% of total exports before the tariffs were imposed.The lack of certainty on the trade deal has pressured the rupee and forced New Delhi to dole out $5 billion to protect Indian exporters. It has also sharpened India’s focus on trade negotiations with partners including the European Union, as it seeks to shed a protectionist image by lowering trade and non-tariff barriers long bemoaned by investors. Still, many of the newer agreements — including those signed with Oman and New Zealand last year — are unlikely to deliver a major boost to India’s exports, given relatively small trade volumes. “The sheer scale of things doesn’t add up,” Barclays economists said. “For example, in case of electrical machinery, after the US, the three large trading partners are UAE, Netherlands and the UK. But these three cumulatively do not make up for the market size that the US offers.”They added that of India’s top 20 export markets, it has free trade agreements or is actively negotiating such deals with 16 countries — including the US — and those markets together account for 51% of total trade. “The real test lies in translating these agreements into tangible export growth,” including whether they strengthen India’s industrial base, Barclays said. 126564850 About 70% of India’s exports to the US face “serious threat” if the 50% tariffs persist, according to the report. Sectors such as leather and apparel, gems and jewelery, home furnishings and marine exports would bear the brunt.The expected India–EU FTA would be a “big step towards export diversification and greater trade openness with a large bloc,” the economists said. European Commission President Ursula von der Leyen and European Council President António Luís Santos da Costa are set to visit India later this month, raising expectations that the two sides could move closer to signing an agreement after years of negotiations.