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Story so far: Even as `free trade' is gradually evolving from discussions to reality, I notice how in a mall, a seller of Indian goods idles, losing business to a neighbouring shop that vends foreign goods. I wonder if free trade would be a win-win for everybody.

Episode 89

Is it yes-FTA, no-FTA or simply fifty-fifty? That was the question last week, on what the impact of free trade agreements would be on India. "Hi Swati, FTA would definitely be a nightmare to Indian vendors," writes Aravinth Kumar.

"It is a fact that Indian consumers have a weakness for foreign products. If price is only a little more than affordable, then they tend to switch their loyalty too. We have come across many foreign invasions into the Indian market. And it will be sad if an Indian industry like that of beverages gets shut down completely. Moreover, FTA can demoralise our growing entrepreneurs."

How bleak, but Aravinth looks at the other side too. "We always have a tendency to perform well when there is a good competition. When this FTA is implemented with proper constraints, it would enhance the performance of our vendors and make them alert. The final result would be a good product with proper cost to us. So I go on with 60-40 share to the self and imported ones." Thanks for the views.

"Most of us prefer things which are foreign in nature, whether it be music systems, mobile, cameras, or clothes. How many of us would like to wear only khadi clothes and live life in the simple way without any grandeur?" asks Anil Kumar Pillai of Kannur.

"However, for creating new benchmarks, foreign companies should come to India. But there should be a level-playing field for participants. Government regulations should also be in place; otherwise acts like predatory pricing — wherein the prices are set below cost to kill domestic players and thereafter hiked — would be a norm." True, we need checks.

"If I am a consumer I would be happy to have 100 per cent FTA, because there would be many options and my bargaining power increases; and I can demand a quality product. If I am a manufacturer I would not prefer FTA, you know why. If I am a politician I would rather have 50 per cent FTA because everybody would be confused."

Interesting analysis, but Pillai has something more to say. "Why should India be afraid of FTA? Indians as entrepreneurs have left a mark in practically every industry. See the reservoir of skilled manpower — whether professionals or businessmen. Already globalisation has left its imprint on practically every sphere of our life. We are ready to take the bull by its horns." Very positive thought.

"Dear Swati, any trade agreements involving two countries should be on a win-win basis," opines M. Radhakrishnan. "We hope the agreement entered by us with Thailand falls in this category. Unlike China, I don't think Thailand manufacturers have the capacity to unsettle ours. To safeguard Indian manufacturers there are clauses against dumping of goods. Further I am sure that the Indian consumers will not be so excited about products from Thailand when compared to those from countries where the whites are a majority, to put it simply. Consumers will prefer apples from New Zealand or Washington than from Thailand."

Oh, I didn't know that. "Main threat faced by the Indian FMCG sector today is not foreign competition, but fake manufacturers within India who make inferior quality stuff and put the label of reputed manufacturers. The two key components to become a world leader are quality and timely delivery. Like the world software industry that is flocking to India, there were many industries that could have come to us in the past. Our manufacturers disappointed them with bad quality and delayed delivery.

"It is not that Indian companies could not produce quality products, but due to some unscrupulous manufacturers who wanted to make quick money and cheat foreign vendors, we got bad publicity resulting in loss of business." I agree. "With a 100 per cent FTA regime, definitely it is advantage India, provided we do the business in the right way. Then, we will have more Tirupurs (garment) and Mordabads (fashion items) in the country to boast of." Good that you shift the discussion from fear to quality.

"Hi Swati, I'm Srikanth doing masters in business economics, after completing BE (Mech)," is another mail. What a formidable combination, engineering with economics! "I am against an FTA that includes auto parts in it. Because Thailand has FTAs with other countries such as China, Japan, Australia and so on, the market is very competitive in auto products. I feel Thailand will concentrate and aggressively market in India." I can understand the concern of a mechanical engineer. "Thailand is good in technology automation. So, this will be a one-sided battle."

Let me see what Kamal writes from Mumbai. "Practically everywhere you see `Made in China' goods at throwaway prices. Price is what attracts people, not quality. I wish Customs duties made foreign goods costlier than our goods." Tariff walls are too weak as supports in a globalised world. "We have to create an atmosphere for our Indian industries to compete on quality and price," writes Gnanagurusamy, a CA from Rajapalayam. "Where to begin is a big question? Many hi-tech companies are multiplying their profits year after year, even quarter after quarter. Are we achieving even 0.1 per cent of such improvement in agriculture? Politicians are blaming monsoons and so on, but can't we get good results with the known factor of monsoon failure? Take cotton crop or tea production; our agriculture production is far below our neighbouring countries. If we concentrate on agriculture improvement, the price of other commodities will automatically come down." Wonder if anybody has given thought to this. "Another problem is corruption. If my India is corruption free, and I can go to a government hospital for free treatment or health check-up, I can purchase Indian-made articles even at an extra cost because the extra cost I am paying now will take care of my family's health, my child's free education and so on. Even though I'm a bachelor aged 25 years, I am worried about the cost of children's education in future.

"I believe that I would have to spend ten times or even more money than what was spent by my father for my education. Yes, I do agree with you Swati; I'd purchase quality materials at cheaper price, irrespective of country of origin." I wish our politicians had any answer for your point, on this Independence Day.

"Given the economic choices that India has made, there is no going back," writes Mamata. "So it will have to be a `yes' to FTAs. Though, as you rightly say, as consumers we would be interested in quality at optimal prices (value for money as I call it) wherever it is from, it does not mean that local trade will be destroyed. FTAs in the short run may not mean `good' for our manufacturers but they would certainly make them think about quality, pricing, marketing, guarantees, warranties, replacement policy of their produce, and so on.

"As consumers then we would have more products with better quality at our service and we will be able to make more `informed' choices. This discussion reminds me of the classic fight between the traditional kirana stores and superstores or the big bazaars. Small shop owners selling local produce have penetrated the deepest pockets of the country; and given the vastness of our country, I think local goods will co-exist with foreign goods." Quite optimistic, Mamata. Thanks.

*********

Sports is in the air, and like many others I track the events in Athens, hoping that our contingent will come back home with at least ten medals as an accounting firm has predicted recently. While on the subject, let me tell you that I manage to squeeze in some time in the afternoon or evening to visit the new gym that my company has put up on the top floor of the office. Even a ten-minute workout makes one fresh, I feel, though I'm disappointed that many of my colleagues have not visited the gym even once.

Perhaps they're waiting for some medical advice before getting started. What's more disheartening is that many companies don't even think of providing such a facility for their staff. What's your take on this? Send in your thoughts by Friday.

Swati_CA@hotmail.com

For archived episodes of this column click on: http://www.thehindubusinessline.com/nic/swati/index.htm

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