FTA with Asean may hit FDI inflows: Assocham

An industry study has said with the operationalisation of the free-trade agreement (FTA) with the Asean, FDI inflow into the country may be hit as these Southeast Asian nations are not only more investment-friendly but also have better infrastructure.

Saying that the country has got far less than what it has given to this trading bloc under the FTA, a study carried out by industry body Assocham pointed out that bulk of our exports to the Association of Southeast Asian Nations (Asean) were, in any case, going duty-free, as the 10-nation bloc followed a free-market policy.

"The effective additional market access that India has secured out of the FTA with Asean is merely 14 per cent for its exports to the region," the study said, adding while the Asean would be getting much more than this.

Pointing out that since India is not as open as the Asean bloc, New Delhi will have to open more in terms of duty reduction or even elimination, the study said these trade-centric economies will get extra market for 75 per cent of their exports, which in turn will hit FDI flows into India.

"If market is thrown open to industries situated in the Asean region, new investors may well prefer to set up facilities there and supply the products to India," it said.

Once tariffs are reduced or eliminated, goods from the Asean nations would provide severe competition to domestic firms. "These developments could impact capital inflows to our country as the Asean countries are more investment-friendly with their infrastructure," Assocham said.