Liberalizing FDI in Retail: Implications for India’s Trade Agreements

Abstract

India is a proponent of liberalizing services in the WTO and in its FTAs. However, the country has not taken commitments in sectors such as retail in its trade agreements. This is because there are restrictions on FDI in this sector. India’s trading partners have been requesting for liberal commitments in the retail sector. In the year 2012, India autonomously liberalized FDI in retail, allowing 100 per cent FDI in single-brand and 51 per cent in multi-brand retail subject to certain conditions. Given this background, this paper examines the impact of autonomous liberalization on India’s commitments in trade agreements. The paper found that if India agrees to bind the autonomous regime in the trade agreements, it will increase India’s bargaining power in the WTO and FTAs. The country can trade-off commitments in retail sector for greater market access in areas of its trade interest. Binding the autonomous regime in trade agreements will speed up the negotiations process and lead to conclusion of pending agreements such as the India-EU bilateral agreement. However, there are some concerns. Since the FDI liberalization is accompanied by certain restrictions, which are only applicable to foreign service providers, India cannot undertake national treatment commitments.