India-EU Trade Pact: A Strategic Shift in Global Economics

Nobel laureate economist Abhijit Banerjee describes the India-EU free trade agreement as a strategic move, distancing from US economic reliance. However, Banerjee cautions that India must dramatically improve its efficiency and logistics to reap benefits from the trade pact amid global trade tensions and high tariffs.

Nobel Prize-winning economist Abhijit Banerjee has labeled the India-EU free trade agreement as a crucial display of strategic alignment, which diverts reliance on the US in response to America's high tariffs under President Donald Trump's administration. Banerjee emphasizes that without significant improvements in efficiency and logistics, India's gains from the agreement could be limited.

The landmark trade agreement, involving markets totaling two billion people, aims to reduce tariffs on 99% of Indian exports to the EU and 97% of EU exports to India. Despite these provisions, challenges remain, as Banerjee highlights competition from nations like Vietnam and Bangladesh and the slower efficiency and speed of Indian supply chains.

He further explains that while the agreement marks a crucial step in international relations, its benefits depend heavily on whether India can enhance its supply chain efficiency to match that of China's. Banerjee remains skeptical about how much geopolitical leverage the FTA provides against the US and underscores that true advantages will arise only if India improves its competitiveness.

(With inputs from agencies.)