If India enters into Free Trade Agreements (FTAs) with other nations, then the growth of exports of India would depend upon which of the following? 1. Extent of tariff reduction vis-à-vis MFN tariffs 2. Extent of relaxation in terms of rules of origin 3. Extent of relaxation in sanitary and phytosanitary measures 4. Level of infrastructure in India 5. Income in nations with which India enters into FTAs Select the correct answer using the code given below.
1, 2, 3, 4 and 5
The correct answer is: Option 1 – 1, 2, 3, 4 and 5.
📦 Free Trade Agreements (FTAs) and India’s Export Growth
When India enters into Free Trade Agreements (FTAs) with other countries, it typically aims to enhance market access, reduce trade barriers, and increase the competitiveness of its exports. However, the success of such agreements in stimulating export growth depends on multiple interconnected factors.
Let's analyze each of the five listed components and how they influence India's export potential under FTAs:
✅ 1. Extent of tariff reduction vis-à-vis MFN tariffs
- MFN (Most Favored Nation) tariffs refer to the standard import tariffs applied by WTO member countries.
- Under an FTA, partner countries may offer preferential tariffs, often lower than MFN rates.
- The greater the tariff reduction under the FTA, the more attractive Indian goods become to foreign buyers.
- Therefore, the deeper the cuts compared to MFN rates, the stronger the export boost.
✔️ Highly relevant for export growth
✅ 2. Extent of relaxation in terms of rules of origin
- Rules of origin determine the national source of a product to qualify for FTA benefits.
- If these rules are too stringent, exporters may find it hard to prove compliance, negating the benefits of tariff reduction.
- Simplified or relaxed rules reduce compliance burdens and enhance utilization of FTAs.
✔️ Crucial for practical utilization of FTA benefits
✅ 3. Extent of relaxation in sanitary and phytosanitary (SPS) measures
- SPS measures are health and safety standards for agricultural and food products.
- Even with zero tariffs, stringent SPS regulations can act as non-tariff barriers.
- Relaxing or harmonizing SPS norms under FTAs can open agri-export opportunities.
✔️ Important for expanding exports in food and agriculture sectors
✅ 4. Level of infrastructure in India
- Trade-enabling infrastructure—ports, roads, customs, logistics—affects the cost and speed of export delivery.
- Better infrastructure enhances supply chain efficiency and global competitiveness.
- Poor infrastructure can undermine the benefits of FTAs, regardless of tariff concessions.
✔️ Directly affects export readiness and competitiveness
✅ 5. Income in nations with which India enters into FTAs
- Export potential depends on demand-side factors too.
- Higher per capita income in partner countries leads to greater consumption of imported goods.
- FTAs with wealthier nations offer more opportunities for value-added and high-end exports.
✔️ Demand in partner nations drives export volume and value
📊 Summary Table
| Factor | Impact on Exports |
|---|---|
| 1. Tariff reduction vs. MFN | Enhances price competitiveness |
| 2. Relaxation of rules of origin | Increases FTA utilization |
| 3. Relaxation of SPS measures | Reduces non-tariff barriers |
| 4. Infrastructure in India | Improves delivery and reduces transaction cost |
| 5. Income in FTA partner nations | Drives demand for Indian goods |
✅ Conclusion
All five factors—tariff reduction, rules of origin, SPS relaxation, domestic infrastructure, and partner country income levels—play critical roles in determining whether India’s exports will actually grow under an FTA.
Therefore, the correct answer is: Option 1 – 1, 2, 3, 4 and 5.
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