India Pursues Free Trade Deals with Peru and Chile for Critical Minerals

India is actively pursuing Free Trade Agreements (FTAs) with Peru and Chile to ensure a steady supply of critical minerals, notably rare earth elements. This strategic move aims to enhance India's self-sufficiency and reduce its reliance on single foreign suppliers, a concern amplified by China's recent restrictions on rare earth exports. These restrictions have already affected India's automotive and electronics industries. Negotiations with Chile are progressing rapidly, with a comprehensive economic partnership agreement (CEPA) being discussed to cover trade in goods, services, critical minerals, and investment. The existing India-Chile Preferential Trade Agreement (PTA) from 2006, expanded in 2017, is set to be significantly broadened. Bilateral trade between India and Chile was $3.75 billion in FY25. Talks with Peru are also underway, although they are expected to proceed at a slower pace, having begun in 2017 but paused due to the COVID-19 pandemic. India is also seeking rights for mineral exploration in both nations, aligning with its broader strategy of trade diversification and securing essential resources. India aims to implement strong rules of origin to prevent goods from China from entering via FTA partners.

Impact: This development is highly significant for India's industrial and economic future. Securing assured supplies of critical minerals will bolster domestic manufacturing, particularly in the automotive and electronics sectors, by ensuring access to components like rare earth magnets. It also strengthens India's supply chain resilience against geopolitical risks and trade disruptions. The FTAs will foster deeper economic ties, potentially increasing bilateral trade volumes and opening new avenues for Indian exports and investments. India's focus on self-sufficiency in critical minerals is a long-term strategy that can reduce vulnerability and drive innovation. Rating: 7/10

Difficult Terms Explained: Free Trade Agreement (FTA): An agreement between two or more countries to reduce or eliminate barriers to trade and investment between them. Critical Minerals: Minerals and metals that are essential for the economy and national security and have supply chains that are vulnerable to disruption. Examples include rare earth elements, lithium, cobalt, and graphite. Rare Earth Elements (REEs): A group of 17 chemical elements with unique properties crucial for many modern technologies, including electronics, magnets, and defense systems. Preferential Trade Agreement (PTA): An agreement between countries that grants preferential treatment to certain goods from participating countries, typically by reducing tariffs. Comprehensive Economic Partnership Agreement (CEPA): A broader trade agreement than a PTA, typically covering trade in goods, services, investment, intellectual property, and other areas. MSMEs (Micro, Small, and Medium Enterprises): Small and medium-sized businesses, which are often a significant part of a country's economy. Rules of Origin: Criteria used to determine the national source of a product. They are crucial for implementing trade policies such as tariffs, quotas, and preferential trade agreements.