FTAs not hurting domestic manufacturing: Commerce Ministry
21/10/2014
01:24
Brushing aside concerns of Indian industry over free trade agreements
(FTAs), senior commerce ministry officials said it has not led to any spurt in
imports or export of raw materials, reported PTI. A Commerce Ministry's study
and analysis on impact of FTAs have found that "the imports have not increased
to any level that would create concerns and we have not become suppliers of raw
materials. This is good part," the officials said. However, officials did not
provide any concrete data to substantiate their claims on the impact of FTAs on
domestic manufacturing. Imports of intermediate goods have increased which means
that India is becoming part of the regional value chain of South Asia, they said
adding Indian exporters and industry are not able to exploit these pacts fully.
"The use of these agreements by our exporters are perhaps a matter of concern.
But we are making lot of efforts to disseminate informations, " the officials
said. The ministry has drawn up a strategy for the coming six months to
accelerate and strengthen outreach programmes which would include workshops. "We
will also try to go down to industrial clusters where potential exporters can
understand what are the benefits they have of using the preferential tariff
under the FTAs. We want to them about rules of origin, sanitary and
phyto-sanitary moves, technical barriers to trade," they said. The ministry is
also in the process of developing a comprehensive portal about FTAs. "It will
tell about different product regime. It will serve the purpose of promoting FTAs
and helping exporters to know about tariff and non-tariff and preferential
tariff regime in the partner country. That portal is for about 30 countries who
are our major trade partners, including FTA partners," they added. India has so
far entered into FTAs with Japan, Singapore, South Korea, Malaysia, Asean and
South Asia. Indian industry and exporters have raised serious concerns about
these pacts saying that they are benefiting partner countries more and impacting
domestic manufacturing. Citing few figures, the officials said that out of
India's total overall inbound shipments, imports from ASEAN, Singapore, S Korea
and Japan at preferential duty rates stood at 14.5 percent, 10.8 percent, 21.8
percent and 22.4 percent respectively. "This clearly indicates that the
preferential imports under FTAs have not contributed to the increase in trade
deficits with some countries," they said adding it was difficult to collect data
on exports as it have to shared by the FTA partner country. The Commerce
Ministry officials also said that India is losing its price competitiveness in
the global market but not because of free trade agreements. "We did a study
about global competitiveness of Indian manufacturing. We found that we are
losing competitiveness due to factors such as infrastructural bottlenecks,
deficiencies in customs procedures and trade logistics, inadequate communication
infrastructure and lack of uniform system of indirect taxes," they said. India
is losing its price competitiveness in some of its traditional strengths like
textiles, clothing, leather, automotive components and engineering machinery.
Further allaying concerns of Indian industry, they said that imports of consumer
goods too have not increased at higher rates due to these FTAs. "It has remain
stagnant. We have certainly not moved down in the value chain in our exports
also. We have also not become a market where consumer goods have dumped under
preferential tariff so that could have been a worry but that has not happened,"
they added. "One moderating feature is that we have not been able to use these
FTAs as they could have been. They are not as widely used as they could be," the
officials said. On complains of the automobile industry on spurt in imports of
auto components such as gear boxes, they said that "they are nothing alarming.
Auto percentage of imports under different free trade agreements are very low".
About increase in imports of electronic goods, they said that it was because of
the Information Technology Agreement (ITA) of the WTO and not because of trade
pacts. India's rationale for entering into FTAs was the diversification and
expansion of exports to the partners and region as well ass access to raw
materials, intermediate products and capital goods for stimulating value added
domestic manufacturing, they said. "FTAs have adequate safeguard mechanisms to
tackle the adverse effect of imports on the domestic industry and take
corrective action against import surges," they said.
