Fear-psychosis around FTAs must be overcome: Goyal

Commerce and Industry Minister Piyush Goyal said the fear-psychosis created around free trade agreements (FTAs) in India needs to be overcome if the country is to avoid global isolation.

“Our government is not a weak one. It will decide on an agreement based on what is good for the people and industry. It will ensure sufficient and adequate safeguards for industry... But the fear psychosis around FTAs created by a microcosm of people has to go...An FTA has to be a win-win for both sides,” Goyal said while releasing the report of the High Level Advisory Group (HLAG) on Trade on Wednesday. The event was organised by CII.

Goyal said a government has to balance consumer interests with industry interests and individual perspectives must be avoided. Unlike the way FTAs were signed in the past, the present government will weigh all aspects carefully. The Minister’s views are important given the proposed Regional Comprehensive Economic Partnership (RCEP) pact being negotiated between India, the ASEAN, China and four others. While India is still raising concerns on some of the aspects of the pact, including opening its markets for China, most other countries want a conclusion announced at the RCEP Leaders’ Summit next week.

National objectives

The high-level panel, set up by the Commerce Ministry under the chairmanship of economist Surjit Bhalla to assess the global environment and make recommendations for boosting India’s share and importance in global merchandise and services trade, has advice on FTAs as well. The panel suggested that every FTA must be conceived with a view of achieving national objectives and not driven by narrow considerations, sometimes even driven by political expediency. “While negotiating market access for goods in FTAs, India should focus on both tariffs and non-tariff barriers in the partner countries. In services, India should go beyond Mode 4 (movement of persons), and also focus on Mode 3 (commercial presence), as Indian investors have an interest in investing in the FTA partner country,” the report said.

There is a need to establish an institutional mechanism for seeking inputs from stakeholders prior to finalising an FTA, as well as informing the industry well in time about any steps that they would like to take during the period of transition with the aim of minimising their adjustment costs, the report added.

Panel recommendations

The panel came up with a slew of other recommendations to boost exports and investments. These include increasing authorised capital of the Exim Bank by a minimum of ₹10,000 crore, strengthening exports of labour-intensive sectors and ICT products, putting in place a national trade facilitation action plan and simplifying regulatory and tax framework for foreign investment funds and individual investors.

“In order to achieve an estimated aggregate growth level of 20 per cent, the balance capital (authorised capital less paid-up capital) of ₹6,141 crore needs to be infused by the Centre over the subsequent two years ending March 31, 2022.The authorised capital is to be simultaneously increased by a minimum of ₹10,000 crore by March 31, 2022,” the report said. It also suggested enhancing the bank’s borrowing limit.

For improvement in off-shore fund management, the report proposed a revision in eligibility conditions such as aggregate participation/investment by Indian residents in an offshore fund shall not exceed 5 per cent of the fund corpus and that the fund manager is not an employee or connected person of the offshore fund.

To attract more foreign investments, the report proposed replacing the existing regulatory and tax framework with a number of forward looking measures.

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