The Hindu Business Line : FTAs make sense with right partners: FICCI

(From left) Mr Amit Mitra, Secretary-General, Mr Yogendra K. Modi, President, and Mr Omkar S. Kanwar, Vice-President, FICCI, at the executive meet of the chamber in Hyderabad on Thursday. — A. Roy Chowdhury

Hyderabad , Aug 5

THE Federation of Indian Chambers of Commerce and Industry (FICCI) viewed that the country could be better positioned to maximise the potential gains either from the FTAs (free trade agreements) or from multilateral trade negotiations only if they were accompanied by sustained process of internal reforms.

The FICCI President, Mr Yogendra K. Modi, has called upon the Government to remain actively engaged in WTO negotiations, pursue FTAs with right partners and simultaneously accelerate internal reforms.

Complimenting the Government for its successful trade negotiations at Geneva and Bangkok, he said the momentum should be sustained to leverage both multilateralism and FTAs that enable greater market access for Indian goods and services.

Addressing newspersons here on Thursday, the FICCI President said the Government needs to focus on key issues pertaining to internal reforms such as flexibility in labour laws, improved quality and availability of infrastructure, lower transaction costs, reduced cost of finance, VAT applicable to all goods and services, and seamless movement of goods across the country that leads to creation of `One India Market.'

"This alone can create an enabling environment for the domestic industry to compete with imports at zero or low duty from our FTA partners, which in turn would facilitate faster regional as well as global integration of the Indian economy," Mr Modi said.

Apart from FTAs with neighbouring countries that were natural candidates due to geographical proximity, FICCI also believes that selection of FTA partners has to be extended to other complementary economies, Mr Modi said. "India has to strive to negotiate and conclude FTAs with countries and blocks such as US, European Union and Japan."

According to Mr Modi, besides playing a critical role in stepping up India's competitiveness through sourcing of inputs and raw materials at competitive rates, FTAs also lead to expansion of markets.

Citing the example of India and Sri Lanka, he said India's exports to Sri Lanka increased from Rs 2,163 crore to Rs 6,067 crore between 1999-2000 and 2003-04.

Similarly, Sri Lanka's exports to India moved up from Rs 192 crore to Rs 893 crore in the same period.

Stating that FTAs also have a positive impact on members' ability to attract higher volume of foreign direct investment (FDI), he said the India-Sri Lanka FTA has stimulated new FDI in Sri Lanka for rubber-based products, ceramics, electrical & electronic items, wood-based products, agri-commodities and consumer durables.

According to UNCTAD, owing to the FTA, 37 projects were now in operation with a total investment of $145 million and India has emerged as the third largest investor in Sri Lanka.

"This is a successful illustration of trade-investment nexus in the context of South Asian economic integration. Similarly, it is expected that more foreign investment would be directed to India once economic cooperation agreements between India and Asean, and India and Singapore come into effect," Mr Yogendra K. Modi said.

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