The Hindu Business Line : SAFTA may not lead to immediate jump in imports

THE ushering in of the treaty on South Asia Free Trade Area (SAFTA) from Sunday is not expected to lead to any immediate quantum jump in imports into India since as many as 884 specific product groups have been kept on the Sensitive List where the trade liberalisation programme would not be applicable, industry and trade experts told Business Line.

There is, however, an acknowledgement that SAFTA has more chances of success than South Asia Preferential Trade Arrangement (SAPTA). The optimism stems from the fact that SAFTA may encourage "greater cooperation" between the participating member countries in areas such as investments and the formation of a common energy grid.

"There are number of positives outside the ambit of trade in goods like investment and common energy grid that SAFTA would facilitate. Bhutan and Nepal have surplus power and there could be import of energy into India. But, the possibility of having a quantum jump in trade in goods is not very encouraging," Mr Ajai Sahai, Director-General of the Federation of Indian Export Organisations (FIEO), said.

Mr Sahai pointed out that other countries in the SAARC region had a limited trade basket mainly comprising textiles and plantation sector items, whereas India's Sensitive List includes goods mainly from the agriculture sector, textiles, chemicals and leathers and those reserved for the small-scale sector. Therefore, he felt that while SAFTA would encourage more textile trade between India and the least developed countries of SAARC, the same could not be said about the plantation sector.

"India has kept most of the items under the plantation sector in Sensitive List. There is, therefore, limited scope for trade enlargement in this area," the FIEO official said.

According to textile sector players, the SAFTA deal is likely to work in favour of LDCs such as Bangladesh, which is already a low-cost manufacturer of textiles and would get preferential access to the huge Indian market. "The phased tariff liberalisation programme when SAFTA comes into force would benefit countries such as Bangladesh as during the first two years, non-LDCs have to bring down tariffs to 20 per cent while LDCs will bring them down to 30 per cent only. The tariff concession would work to the advantage of finished product manufacturers from Bangladesh," a Confederation of Indian Textile Industry (CITI) official said.

Bangladesh would benefit from the "limited market access" that India has accorded through a tariff rate quota of 6 million pieces of fabrics, with the condition that the sourcing of fabrics should be either from India or of Bangladesh origin.

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