NEW DELHI: The commerce department’s internal studies suggest that India has not benefited much from the many free-trade agreements and investments pacts that the country has signed, findings that will add to the dispute between two arms of the government over such accords.
While the reduction in tariffs has increased imports of manufactured goods, the offsetting gains India expected in services exports and higher investments have not materialized, according to the studies.
This will give ammunition to the department of industrial policy and promotion (DIPP) that has suggested India should not sign any more such agreements and the ones it has should be reviewed as they were hurting domestic manufacturing. Commerce secretary Rajeev Kher had strongly defended the comprehensive trade pacts signed by India in his letter to DIPP counterpart Amitabh Kant.
Various desks in the commerce department are conducting an impact analysis after the new government sought a review. “We could not have gained much in merchandize exports as all our partner countries anyway had much lower tariffs compared to us. We had to undergo a sharp tariff reduction, offering them a large market access,” said a government official aware of the study.
India’s share in Japan’s global investments has shrunk after signing the 2011 comprehensive economic partnership agreement (CEPA), to 1.6% in 2008 from 4.5% in 2013, halving in absolute terms from $5.5 billion to $2.1 billion. In fact, India’s share in Japanese investment in Asia saw a sharp decline to 5.3% in 2013 from 23.7 per cent in 2008.
While India’s share in Japan’s exports rose to 1.2per cent from 1per cent, the share in imports grew to 0.9per cent from 0.7per cent. “Even in services, we are not able to deliver,” said the official. India needs to sign mutual recognition agreements (MRAs) of professional degrees for its professionals to get access, but not a single one has been signed. “We need to negotiate a way out so we can make available our services to the partner country even without an MRA,” he said.
The Indian community in South Korea is estimated at just 7,500, much less than that in countries such as the US, UK, Australia and Canada, said Nisha Taneja of the Indian Council for Research and International Economic Relations (Icrier) in her study.
As for exporters, another official said they would “rather wait for the full tariff reduction expected by the end of the FTA tenure”. The Japanese embassy has written to the PMO on policy hurdles related to changes in tax rules, labour issues and the imposition of minimum alternate tax in SEZs.
The commerce department also says utilization of the pacts by partner countries has been low. Trade ascribed to such accords was 25per cent for South Korea, 22per cent for Japan and 17per cent for the Association of Southwast Asian Nations (Malaysia, 3.47per cent).