Informist, Monday, Aug. 18, 2025

--Govt source: To sign Peru FTA in tranches to expedite mkt diversification

--Govt source: Peru eager to seal first tranche of FTA by Dec

--Govt source: Multiple-tranche FTA with Peru to help India get early access

By Krity Ambey

NEW DELHI – India plans to sign the proposed free trade agreement with Peru in tranches to help exporters with market diversification as shipments to the country's top export destination--the US--become expensive due to tariffs, a commerce ministry official said. Lima has shown an eagerness to seal the first tranche of the deal by December, the official added.

"The multiple-tranche approach will help Indian exporters get early access to some sectors (in Peru)," the official told Informist. India is interested in Peru's automobile and pharmaceutical sectors.

"An FTA with Peru is also key to cutting India's dependency on China for critical minerals," the official said. Peru has a significant geological potential for critical minerals and rare earth elements necessary for the transition to green energy. Some of the rare earth minerals found in Peru are neodymium, praseodymium, dysprosium, and terbium.

Currently, China accounts for nearly 70% of the global supply chain of rare earth minerals. Beijing's suspension of exports of critical minerals and rare earth magnets has caused a severe shortage and hindered production at automobile facilities in India and around the world.

The official, however, said critical minerals may not be part of the initial tranche of the trade pact with Peru. "We need more negotiation on the subject (rare earth minerals) to reach a conclusion."

India imported goods worth $4.98 billion from Peru in the financial year 2024-25 (Apr-Mar), not even 1% of India's total imports in the year. Top goods imported by India from Peru included precious metals, iron and steel, and aluminium.

"Market diversification is our top priority amid uncertainty in the US," the official said. "We want our exporters to explore other regions in South America and Africa." Signing a tranche of the FTA with Peru will incentivise exporters, the official added.

The government has framed a four-pillar strategy, which hinges primarily on market diversification, to mitigate the likely fall in exports to the US. The commerce ministry, which had been focusing on 20 countries with over 60% share of India's exports till last year, has now expanded its emphasis to 50 nations with more than 90% share in India's exports. The ministry has also asked its missions abroad to undertake export promotion activities.

India's exports to Peru, at $1.00 billion in FY25, were also less than 1% of total shipments in the year. Automobiles and automobile parts, pharmaceutical products, and electrical machinery were among the top goods exported to Peru.

Peru is the first Latin American country to discuss a free trade agreement with India. Currently, India has preferential trade pacts with Chile and the MERCOSUR bloc comprising Argentina, Brazil, Bolivia, Uruguay, and Paraguay. The commerce ministry is also in discussions with Chile to expand the preferential agreement into a free trade agreement. "But it is too early to say if we will sign that deal in tranches as we have held only one round of negotiations," the official said. The two sides have finalised the terms of reference for the FTA.

India's total trade with Chile was $3.76 billion in FY25, with exports amounting to $1.15 billion and imports to $2.60 billion. The major components in India's export basket to Chile are transport equipment, pharmaceuticals, and iron and steel. On the import side, the top commodities sourced from Chile are rare earth minerals like copper ore, copper electrodes, and molybdenum ore. End

US$1 = INR 87.35

Edited by Rajeev Pai

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