Keeping its promise to Iranian President Hassan Rouhani during his visit in February, the Indian government has started examining the feasibility of a preferential trade agreement with the Islamic Republic.
“India’s focus is on market access for products such as pharmaceuticals, manmade fiber, rice and automotive parts,” an Indian government official told BusinessLine.
Iran has been keen on a PTA with India, but New Delhi had not been pursuing it with vigor as it was already engaged in a number of bilateral agreements with other countries.
“Things have changed now and India is keen on a PTA, as it realizes that the Iranian market could be promising. A number of new opportunities opened for the Indian businesses in Iran when the country was hit by economic sanctions from western economies, including the US and the EU,” the official said.
The Federation of Indian Export Organizations had sent a list of items to the Commerce Ministry, where it feels there is scope for increased exports.
“We are positive that a PTA with Iran will benefit Indian exporters a lot. The foothold that we gained in the Iranian market while the economic sanctions against Iran were in place and there was less competition will help us expand our exports if a PTA is signed,” FIEO Director General Ajay Sahai said.
Iran-Pakistan Ties
There are other geopolitical factors, too, which might be guiding India’s interest in Iran, including the ongoing negotiations for deepening the PTA between Iran and Pakistan.
Pakistan could be a competitor for India in the Iranian market for several items and if it gets preferential access for its exports, it could hurt India’s interest.
The Indian Cabinet recently cleared a double taxation avoidance agreement between India and Iran, which will promote investment flow and curb tax evasion.
The Cabinet also gave an ex-post-facto approval for the MoU between India and Iran for cooperation in the field of agriculture and allied sectors. The MoU was signed in February during Rouhani’s visit to India.
Another MoU on cooperation in the fields of health and medicine was also approved.
The MoU covers exchange in training of medical doctors and other health professionals, assistance in development of human resources and setting up healthcare facilities, regulation of pharmaceuticals, medical devices and cosmetics, and exchange of information, among others.
“There are political signals in both India and Iran to get close on the economy front. It is a good time for a PTA that serves both countries,” the official said.
Iran’s exports to India in 2017-18 were worth $11.11 billion, a growth of 5.76% over the previous year. India’s exports to Iran grew 11% to $2.65 billion during the fiscal.
Trade imbalance is mainly because of India’s import of oil from Iran.
