Contrary to popular perception, India’s Free Trade Agreements (FTAs) with Asean, Japan, Korea are not leading to significant surges in imports of consumer goods. Detailed studies commissioned by Commerce Ministry also put to rest fears that India might be slipping down the exports value chain owing to FTAs.
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The analysis also confirmed that exports of raw materials were not rising. The findings however, corroborate that the loss of price competitiveness of Indian industry in traditionally strong areas such as automotive components, industrial and engineering products and textiles is due to high cost of doing business, infrastructural bottlenecks, logistics and high taxation. Also, that Indian exporters and industry are not able to exploit the pacts fully.
A senior Commerce Ministry official told reporters that there was evidence of rising imports and exports of capital goods and intermediary goods which showed India’s capability to source inputs, add value and then re-export them.
“It shows India is becoming part of the regional value chain of South Asia,” he said.
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“Data on preferential trade does not confirm fears that India is becoming a dumping market for consumer goods,” the official said.
The rapidly growing imports of electronic goods, he clarified, was on account of the Information Technology Agreement of the WTO rather than FTAs.
The official said that the shares of imports at preferential duty rates in overall inbound shipments do not exceed more than 22 per cent in the case of any of the FTAs India has signed which indicated that the preferential imports under FTAs did not contributed to the increase in trade deficits with those countries.
The share of imports at preferential rates in the case of the ASEAN FTA is 14.5 per cent and that for Singapore, South Korea, Japan is 10.8 per cent, 21.8 per cent and is 22.4 per cent respectively. However, India at present does not have any system of collecting data on exports.
India has so far entered into FTAs with Japan, Singapore, South Korea, Malaysia, Asean and South Asia. FTAs are economic instruments for leveraging competencies in trade and investments. India’s rationale for entering into FTAs was the diversification and expansion of exports (both goods and services) to the partners and regions as well as access to raw materials and capital goods for stimulating value added domestic manufacturing.
FTAs also have adequate safeguard mechanisms to tackle the adverse effect of imports on the domestic industry and take corrective action against import surges, the official said.