Reduction in trade cost can increase trade between India and LAC by more than US$ 16 billion
Export-Import Bank of India (Exim Bank)’s joint study with the Inter-American Development Bank titled, “A Bridge between India and Latin America- Policy Options for Deeper Economic Cooperation” was released at the hands of Mr. G.V. Srinivas, Joint Secretary (LAC), Government of India, Ministry of External Affairs; Mr. James Scriven, CEO of IDB Invest; and Mr. Debasish Mallick, Deputy Managing Director, Export-Import Bank of India in the presence of senior officials of FICCI, during the Industry Interaction Seminar on “India-LAC Trade and Investment” organized by IDB in association with FICCI at New Delhi, India.
The study outlines immense opportunities that are present for both India and the LAC region in the areas of trade, investment and mutual cooperation. It highlights that the current bilateral trade between regions, which has grown twentyfold in last couple of decades and stands close to US$ 40 billion in 2018, is concentrated in handful of products and few countries only.
The study notes that the cost of trading goods between LAC and India is a hurdle that needs to be reduced in order to deepen economic ties and reap trade gains. Trade costs are driven by tariffs, non-tariff barriers (NTBs), and inefficiencies along with transport and logistics routes. It is estimated that in the medium term, with a reduction in trade costs, LAC exports to India may increase by 42%, while Indian exports may increase by 46%. In current value terms, it means an increase in exports by US$ 7.6 billion by LAC and US$ 8.6 billion by India.
The study notes that there exists significant untapped potential for Indian exporters in products such as, machinery and mechanical appliances; electrical machinery and equipment; plastics and its articles; transport vehicles; pharmaceutical products, among others. These product categories present opportunities for India due to their high import demand in the LAC region.
Increasing the coverage of trade and investment agreements, enhancing trade facilitation measures, undertaking proactive and targeted trade promotion activities, as well as boosting investment in infrastructure and promoting reforms in logistics sector, are identified as a few key policy suggestions for improving bilateral trade relations between India and countries in the LAC region.