India, EAEU Sign ToR to Begin Free Trade Agreement Negotiations

Syllabus :GS2/IR

In News

• India and the Eurasian Economic Union (EAEU) signed the Terms of Reference (ToR) to launch negotiations on a Free Trade Agreement (FTA) in Moscow.

Eurasian Economic Union (EAEU)

• The Eurasian Economic Union (EAEU) is an international organization of regional economic integration with international legal personality. 
• Its goal is to enhance cooperation, boost competitiveness, and support the stable development of member economies.
• It ensures the free movement of goods, services, capital, and labor, and pursues coordinated policies among its members. 
• Members: It comprises Armenia, Belarus, Kazakhstan, Kyrgyz Republic and the Russia
  • The Union membership is open for any state, which shares the goals and principles of  the EAEU, on the terms agreed by Member States. 

Benefits

• The proposed FTA is expected to expand market access for Indian exporters, support diversification into new sectors and geographies, enhance competitiveness against non-market economies, and deliver significant benefits to Micro, Small and Medium Enterprises (MSMEs).

Challenges 

• India-Russia trade has grown significantly since Russia’s invasion of Ukraine in 2022, especially with Russia now accounting for 35–40% of India’s oil imports, up from under 2%.
• However, India’s exports to Russia have only modestly increased, creating a trade deficit exceeding $60 billion.
  • To address this, India is revisiting rupee-ruble trade mechanisms after earlier efforts failed, while Russia-China trade has successfully shifted to domestic currencies.
• Meanwhile, India faces steep tariffs from the US, prompting exporters to seek alternative markets like Russia for textiles and pharmaceuticals. Currently, India mainly exports engineering goods, electronics, and pharmaceuticals to Russia.
  • Reports warn that rising US tariffs—potentially reaching 50%—could severely impact Indian exports. 

Source :PIB