The Hindu Business Line : Elusive FTA

While efforts are on to reach a compromise with Asean, New Delhi has been keen to protect the interests of the more fragile sectors of the domestic economy.

If the bilateral trade turnover between India and Asean is any indication, there is little doubt that both stand to gain from the exchange. Proof of this — as referred to by the Prime Minister, Dr Manmohan Singh during his recent visit to Singapore to attend the Asean summit — is that the 2007 trade target of $30 billion has already been achieved. The potential, of course, is much larger, which is perhaps why Dr Singh has announced that the trade target for 2 010 would be $50 billion.

From 2003-2004, when the turnover was just $13.25 billion, bilateral trade has increased by 2.3 times, which should make the 2010 target of a two-thirds increase easily attainable. Another positive is that there is a good market for leading Indian export items such as oil-meal, gems and jewellery, meat and meat products, cotton yarn, fabrics, engineering goods, marine products, and fruits and vegetables, as such exports form but a small part of the total Asean imports. Clearly, the Indian export scenario (exports to Asean having risen faster than to other destinations) will depend on how well exporters are able to meet the challenges of price, quality and delivery schedules, not counting the development of new markets in sectors such as information technology. As far as Indian imports from Asean are concerned — such as artificial resins, plastic materials, natural rubber, electronic goods, organic chemicals, and edible oils — these too have increased, but at a slower pace than imports from other destinations, which may explain why the Asean grouping is putting pressure on New Delhi to reduce import tariffs on highly sensitive items such as palm oil, tea, pepper and coffee if the projected Free Trade Agreement is to get off the ground. Indeed, as regards the FTA — the finalisation of which has now been pushed back to the middle of 2008, the earlier deadline being July this year — there is probably little scope for the agreement to get through given the unreasonably hard stance adopted by countries such as Malaysia, Vietnam and Indonesia in sectors where they have a sizable presence.

It is hoped that official talks will help thrash out a compromise. While there is hardly any other option at the moment, New Delhi has been keen to protect what are clearly some of the more fragile sectors of the domestic economy, and quite politically sensitive as well. That is why the gloomy outlook for the FTA may get no better in view of the Lok Sabha elections slated to be held in 2009, if not earlier. In view of all this, the best bet for New Delhi’s “Look East” policy is to continue to focus on the trade exchange through normal channels which, as recent performance has indicated, has shown promise.

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