The signing of the Free Trade Agreement (FTA) with the Association of South-East Asian Nations, or Asean, would increase the overall trade turnover between India and the 10-country block by over a fourth to as much as $50 billion.
Under the pact, which forms a part of the Comprehensive Economic Cooperation Agreement, tariffs on most of the trade between India and Asean will be cancelled by 2016, while duties on 489 “very sensitive” products will be retained. The agreement would come into force from January 2010.
“India and Asean have set an ambitious target of achieving bilateral trade of $50 billion by 2010. The current agreement would help achieve this target,” said a statement issued by the government.
Trade between India and Asean has grown at a compounded annual growth rate of 27 per cent since 2000. The pact will give a further impetus to the bilateral trade and investment linkages, the government said.
The agreement, which was inked after six years of negotiations, calls for gradual elimination of duties on items which account for 75 per cent of the trade between India and Asean. These include electronics, textile, machine and chemical goods.
The agreement would provide additional market access to exporters, fuelling the growth in bilateral trade and investment. Indian exporters which stand to benefit from the pact include those dealing in machinery, steel, agriculture products, auto components, chemicals and synthetic textiles.
In addition, Indian manufacturers now would also be able to source products from overseas at competitive prices from the Asean members.
The pact also provides for safeguard mechanisms to protect bilateral trade in case of a sudden surge in imports after the treaty. “In such an eventuality, if it hurts a domestic industry, measures like imposition of safeguard duties may be put in place for up to 4 years,” the statement mentioned.
Commerce Minister Anand said that India’s trade with Thailand alone — one of the Asean members and ranking fourth in Indian imports — may jump to around $10 billion by the end of 2010 from $6 billion currently.
The overall trade turnover between India and Asean was over $40 billion in 2007-08, making the bloc the fourth-largest trading partner for the country.
The domestic industry bodies have expressed hope that the pact would open up market for the exporters. “The agreement is not an agreement in goods alone. It would eventually cover services and investment too. Indian professionals and service providers would be able to have greater market access in the Asean region once the FTA in services is in force,” said Amit Mitra, secretary general, Federation of Indian Chambers of Commerce and Industry.
“The FTA would give us access to a trillion-dollar Asean economy,” added Chandrajit Banerjee, director general, Confederation of Indian Industry.
