India’s Trade Relationship with Major Trade Block in the World

Trade agreements in India are any contractual measures with other state or states regarding their trade relationships. Trade agreements can be bilateral or multilateral that is, the agreement is between two states or it can be between more than two states or countries. For the majority of countries global trade is synchronized by unilateral barriers of several types, including tariffs, non tariff barriers, and outright preventions.

Trade agreements are one of the approaches to diminish these barriers, thus opening all parties to the remuneration of increased trade. In most contemporary economies the possible alliances of interested groups are numerous, and the variety of possible unilateral barriers is enormous. Further, several trade barricades are created for other, non economic grounds, such as national security or the aspiration to preserve or protect local culture from foreign manipulations.


Therefore, it is not startling that successful trade agreements in India are very convoluted. Various general features of trade agreements are:

(1) Reciprocity.

(2) A most-favoured-nation (MFN) clause.

(3) National treatment of non tariff barriers.

India views Regional Trading Arrangements (RTA’s) as constructive blocks towards the overall purpose of trade liberalization. Consequently, it is participating in a number of RTA’s which include Free Trade Agreements (FTA’s); Preferential Trade Agreements (PTA’s); Comprehensive Economic Cooperation Agreements (CECA’s); etc. These agreements are pierced into either bilaterally or in a regional grouping. Some of the key trade agreements are as follows:

Agreement on South Asia Free Trade Area (SAFTA)

The Agreement on South Asian Free Trade Area (SAFTA) was signed by all the member States of the South Asian Association for Regional Cooperation (SAARC) during the twelfth ‘SAARC Summit’ held in Islamabad on 4-6th January, 2004. As a result, SAFTA came into force from 1st January, 2006.

SAARC was recognized in Dhaka on December 7-8, 1985 with the intentions of:- promoting the profit of people of South Asia; hastening economic growth and social progress; promoting active collaboration in the economic, social, cultural, technical and scientific fields; increasing cooperation in international forums on matters of common interest; and cooperating with international and regional organizations with similar goals and principles.

Its members include Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. The objectives of SAFTA are to endorse and augment mutual trade and economic cooperation among the ‘Contracting States’ by inter-alia:

  • Eradicating barriers to trade in, and assisting the cross-border progress of goods between the territories of the Contracting States; 
    • Encouraging conditions of fair competition in the free trade area, and ensuring equitable benefits to all Contracting States, taking into account their respective levels and pattern of economic development; 
    • Creating successful methods for the execution and application of this Agreement, for its joint administration and for the resolution of disputes; and 
    • Creating a framework for additional regional cooperation to develop and enhance the common benefits of this Agreement.

India-Mercosur Preferential Trade Agreement (PTA)

A Framework Agreement was signed between India and MERCOSUR on 17 th June 2003 . The aim of this Framework Agreement is to generate conditions and methods for negotiations in the first stage, by granting reciprocal tariff inclinations and in the second stage, to negotiate a free trade area between the two parties in conventionality with the rules of the World Trade Organization. As a follow up to the Framework Agreement, a Preferential Trade Agreement (PTA) was signed in New Delhi on January 25, 2004.

The aim of this Preferential Trade Agreement is to enlarge and reinforce the existing relations between MERCOSUR and India and endorse the extension of trade by granting reciprocal fixed tariff preferences with the ultimate objective of creating a free trade area between the parties. MERCOSUR is a trading bloc in Latin America formed in 1991 and comprising Brazil, Argentina, Uruguay and Paraguay. It was formed with the objective of making possible the free movement of goods, services, capital and people among the four member countries.

The India trade agreements as included in the above international or worldwide agreements allow more expansion of trading business in India as well as across the globe. There are many similar worldwide agreements including the trade agreements in India and following up the legal consortiums of trade.

Asia-Pacific Trade Agreement (APTA)

The Asia-Pacific Trade Agreement (APTA), formerly known as the Bangkok Agreement, the trade was signed on 31st of July 1975 as a proposal of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) is the provincial expansion arm of the United Nations for the Asia-Pacific region. It emphasize on issues that are most successfully addressed through regional cooperation.

BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation)

BIMSTEC (Bangladesh India Myanmar Sri Lanka and Thailand Technical and Economic Cooperation), a sub-regional economic collaboration consortium was formed in Bangkok in June 1997. Myanmar connected to the alliance later in December 1997. Bhutan and Nepal too united with the alliance in February 2004. Its membership involves 5 members of SAARC (India, Bangladesh, Bhutan, Nepal & Sri Lanka) and 2 members of ASEAN (Thailand, Myanmar). Thus, it is pictured as a ‘bridging link’ between the two major regional groupings i.e. ASEAN and SAARC. Its chairmanship of BIMSTEC revolves amongst the member countries in alphabetical array. The immediate priority of the grouping is combining of its activities and making it striking for economic cooperation.

At its first summit held in Bangkok on July 31, 2004, the acronym BIMSTEC was renamed as “Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation.”

In the beginning, cooperation was planned into 6 sectors. But, throughout the 11th Senior Official Meeting in New Delhi in August 2006, it was decided that the areas of cooperation should be prolonged to 13 sectors and each sector will be lead by members in a deliberate manner.

The India trade agreements as discussed above follow a very concretive approach making the trade rules and regulations on their place along with the fulfillments of the requirement of the trade.

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