* India-US Trade Deal Concerns Weigh on Markets
Indian Stock Markets Underestimate India-EU Trade Deal, Other FTAs
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Indian stock markets are overly focused on a potential trade deal with the United States, neglecting the positive impact of the recently finalized India-European Union (EU) trade agreement and other free trade agreements (FTAs), according to financial analysts.
India-EU Trade and Technology Agreement
The India-EU Trade and Technology Agreement (TTA),finalized in July 2023,represents a significant opportunity for Indian businesses. The agreement aims to boost bilateral trade and investment by reducing tariffs and non-tariff barriers. It also focuses on cooperation in areas like green technology and digital trade.
The agreement includes a commitment from the EU to invest over €20 billion in India over the next five years, supporting projects in areas like renewable energy, transportation, and digital infrastructure. European Commission – India
US Trade Deal Focus Distracts Investors
Investors are disproportionately concerned about approximately $40 billion in Indian exports perhaps affected by US tariffs, according to a report by Incred Research. This fixation overshadows the potential for increased demand from Europe and other FTA partners within the next two to three quarters.
Analysts at Incred Research suggest the Indian equity markets have remained relatively stagnant for the past 12-15 months,partially due to this singular focus on the US trade negotiations. This overlooks the diversification benefits offered by other trade partnerships.
Benefits of Diversified FTAs
India has actively pursued FTAs with several countries beyond the US and EU, including the United Arab Emirates (UAE), Australia, and Mauritius. These agreements are designed to reduce trade barriers and promote economic cooperation.
The India-UAE Comprehensive Economic Partnership Agreement (CEPA), which came into effect in May 2022, is projected to increase bilateral trade to $100 billion by 2030. Invest India – Free Trade Agreements. The India-Australia Economic Cooperation and Trade agreement (ECTA), signed in April 2022, aims to boost bilateral trade to $50 billion by 2030. Australian Department of Foreign Affairs and Trade - India-Australia ECTA
Market Implications and future Outlook
the current market undervaluation of these diversified trade relationships presents a potential opportunity for investors. A shift in focus towards the benefits of the India-EU TTA and other FTAs could lead to a re-evaluation of Indian equities.
According to a report by the Confederation of Indian Industry (CII),ftas are expected to contribute to a 10-15% increase in India’s exports over the next five years. Confederation of Indian Industry - Trade Policy