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FTA with Asean hurting domestic market, reveals Ficci survey

Financial Express

FTA with Asean hurting domestic market, reveals Ficci survey

Monday, Sep 26, 2011

New Delhi : The India-Asean Free Trade Agreement (FTA), which came into effect from January 2010, has been a mixed bag so far. While more opportunities have opened up for Indian industries, in terms of greater market access for their products in the Asean region, the duty reduction on imports from Asean countries, in turn, has hit India’s domestic market.

These are the findings of a Ficci survey on the ‘Impact of India-Asean FTA on Indian Industry’. The survey drew responses from 78 companies with a wide geographical and sectoral spread. Companies participating in the survey had a turnover ranging from R1 crore to R27,000 crore.

According to the survey, sectors where imports were found to be increasing at a substantial pace included engineering products, processed food, textiles, garments, plantation crops and auto parts. On whether sourcing of certain products from Asean countries post-FTA would eventually render manufacturing of these products uneconomical in India and affect future investment decisions, 72% respondents felt that such sourcing had not yet affected manufacturing of these products in India.

The companies that participated in the survey highlighted various steps that the government could initiate to maintain and enhance competitiveness. Some of these were reduction in tariff and other related taxes on imports of raw materials ; reduction in tariff on imports of electrical products, laminates, natural rubber etc ; and reduction in transaction cost in India (from place of origin to port). India has sought easier movement of professionals to Asean countries in a number of areas, including teaching, nursing, architecture, chartered accountancy and medicine. India is also keen on expanding its telecom, IT, tourism and banking network in Asean countries.

On tariff reduction on imports from Asean countries, a majority of the respondents —59%—foresaw no negative impact on the domestic market. A majority of the survey respondents—80%—felt that the import of products in their sector from Asean countries had not increased since the pact came into effect. The companies also sought greater support to the MSME and agriculture [plantation crops] sectors from the government. They wanted quality checks imposed on products imported from Asena countries.

Indian pharmaceutical products are exported to many countries, including highly regulated markets of US, Europe, Japan and Australia. Companies in the sector expressed unhappiness over the NTBs imposed by Indonesia, including a cumbersome registration process.