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Context:

India and Chile signed the Terms of Reference (ToR) for a Comprehensive Economic Partnership Agreement (CEPA) to boost trade, investment, and cooperation between the two countries.

News in Detail

The CEPA will build on an existing trade agreement called the Preferential Trade Agreement (PTA) and cover new areas like digital services, small businesses (MSMEs), critical minerals, and investments.

This move reflects a shared goal to deepen economic ties and create jobs, increase exports, and promote mutual growth.

India-Chile Relations

• Chile was the first country in South America to sign a trade agreement with India in 1956.
• 2005: They signed a Framework Agreement on Economic Cooperation to promote trade and investment.
• 2006: They implemented a Preferential Trade Agreement (PTA), which gave special trade benefits, like lower tariffs, for certain goods.
• 2016–2017: They expanded the PTA to include more products, effective from May 2017.
• 2019–2021: They held three rounds of talks to further expand the PTA but decided a bigger agreement (CEPA) was needed.
• April 2024: A Joint Study Group (JSG), set up to explore deeper trade ties, finalized its report, recommending a CEPA.
• April 2025: Chilean President Gabriel Boric visited India at the invitation of Prime Minister Narendra Modi. They agreed to start CEPA negotiations, emphasizing trade as a pillar of their relationship.

About Comprehensive Economic Partnership Agreement (CEPA)

It is a trade deal that includes:

• Trade in Goods => Lower or remove taxes on imported products to make them cheaper.
• Trade in Services => Make it easier for companies to offer services like IT, banking, or tourism across borders.
• Investment => Encourage businesses to invest in each other’s countries by offering protections and incentives.
• Other Areas => Cooperation in sectors like digital services (e.g., e-commerce), small businesses (MSMEs), and critical minerals (like lithium, which Chile produces and India needs for batteries).

Unlike the PTA, which focuses mainly on goods, the CEPA is more ambitious and covers a wider range of economic activities. It aims to create a “balanced, ambitious, comprehensive, and mutually beneficial” partnership, as stated by both leaders.

Potential benefits for India

Economic Growth => By reducing trade barriers, Indian businesses can export more to Chile, boosting industries like textiles, pharmaceuticals, and IT services.

Job Creation => Increased trade and investment can create jobs in India, especially in small businesses (MSMEs).

Access to Minerals => Chile’s critical minerals will support India’s clean energy goals, like producing electric vehicle batteries.

Strategic Partnership => Stronger ties with Chile enhance India’s influence in Latin America, a region with growing economic potential.

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Source: 

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