Free trade agreements and impact on Indian Turmeric Trade: A partial equilibrium analysis

The study examines the impact of India's participation in the ASEAN-India Free Trade Agreement (AIFTA) and the South Asian Free Trade Area (SAFTA) on its turmeric trade. Using the Software for Market Analysis and Restrictive Trade (SMART) simulation model, various factors like trade creation, welfare implications, revenue changes, and consumer surplus alterations resulting from tariff reductions are considered. The estimated results found that under AIFTA, India has experienced increased exports to ASEAN countries like Indonesia, Malaysia, and Vietnam but faces concerns regarding over-reliance on specific nations for exports and potential risks from increased imports. The agreement has led to positive welfare impacts but adverse revenue effects due to reduced tariff revenues. With SAFTA, India has seen significant export growth to countries like Bangladesh and Nepal. Still, it faces challenges in maintaining stable trade relations with nations like Afghanistan and Pakistan due to geopolitical factors. The tariff increment from 0 to 1 percent under SAFTA has resulted in minor negative trade effects but substantially increased revenue and reduced imports for India. The study concludes that while AIFTA shows overall positive impacts, SAFTA seems to be advantageous primarily to Bangladesh, prompting the need for policy reassessment of India's trade relationship with SAFTA members. Policymakers may consider negative revenue effects against welfare implications for better decision-making.