Interviews
Take Indian Inc into confidence before concluding FTAs
07 Apr '08
4 min read
The study points out that apprehensions are that since India's tariff levels are much higher than China, any reduction in tariff will open the floodgate of cheaper imports from China. On the other hand, China's tariffs are already fairly lower than India. Therefore Indian producers can expect no serious market benefits from China through FTA. Any reduction in China's tariff will not increase India's imports to China in a significant way.
In 2004, China's simple mean tariff was 9.8% and weighted tariff was 6.0% whereas the corresponding figures for India were 28.3% and 28% respectively. India has reduced it peak tariff to 12.5% which is nearer to the ASEAN level. Even then Indian exporters cannot expect significant market benefits after an FTA whereas Chinese exporters can expect good gain from their exports, further points the Study.
In view of the comparative disadvantage of India's manufacturing sector, a much lower tariff structure in China and its higher degree of openness, a India-China FTA trade cooperation should start with a PTA with reduced tariffs in a phased manner. The ultimate goal should be an FTA with free flow of products and capital.
It, however, says that India and China trade has been growing very rapidly. In 1994-95 India's export to China was $254.3 million which increased to $5344.88 million in 2004-05. India's imports from China went up to $6768.92 million in 2004-05 from $761.04 million. Total trade between India and China was $18 billion in 2005 and is expected to reach $50 billion by 2010.
The problem for India is that the trade deficit with China has been growing from $506.74 million in 1994-95 to $1424.04 million in 2004-05. India's export to China consists of Iron ore, primary and semi-finished iron and steel, plastic and linoleum products, processed minerals etc. India's imports from China have been generally electronic goods, coal, coke and lubricants as well as organic chemicals, silk yarn and fabrics, non-electrical machinery etc.
According to ASSOCHAM study, in June 2003, India and China formed a Joint Study Group to expand trade and economic cooperation between the two countries. In March 2005, the JSG prepared a report and recommended a China-India Regional Trading Arrangement.
In 2004, China's simple mean tariff was 9.8% and weighted tariff was 6.0% whereas the corresponding figures for India were 28.3% and 28% respectively. India has reduced it peak tariff to 12.5% which is nearer to the ASEAN level. Even then Indian exporters cannot expect significant market benefits after an FTA whereas Chinese exporters can expect good gain from their exports, further points the Study.
In view of the comparative disadvantage of India's manufacturing sector, a much lower tariff structure in China and its higher degree of openness, a India-China FTA trade cooperation should start with a PTA with reduced tariffs in a phased manner. The ultimate goal should be an FTA with free flow of products and capital.
It, however, says that India and China trade has been growing very rapidly. In 1994-95 India's export to China was $254.3 million which increased to $5344.88 million in 2004-05. India's imports from China went up to $6768.92 million in 2004-05 from $761.04 million. Total trade between India and China was $18 billion in 2005 and is expected to reach $50 billion by 2010.
The problem for India is that the trade deficit with China has been growing from $506.74 million in 1994-95 to $1424.04 million in 2004-05. India's export to China consists of Iron ore, primary and semi-finished iron and steel, plastic and linoleum products, processed minerals etc. India's imports from China have been generally electronic goods, coal, coke and lubricants as well as organic chemicals, silk yarn and fabrics, non-electrical machinery etc.
According to ASSOCHAM study, in June 2003, India and China formed a Joint Study Group to expand trade and economic cooperation between the two countries. In March 2005, the JSG prepared a report and recommended a China-India Regional Trading Arrangement.
Associated Chambers of Commerce and Industry of India
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