Financial Express, India
FTA with Singapore to benefit India: NCAER
OUR ECONOMY BUREAU
26 July 2005
NEW DELHI, JULY 25: Changing its views on India-Singapore Comprehensive Economic Cooperation Agreement (ISCECA), the Delhi-based think-tank National Council of Applied Economic Research (NCAER) has said that India will be benefitted from ‘plus’ component of the free trade agreement (FTA). Earlier, the NCAER was of the opinion that Indo-Singapore FTA was a losing proposition for India.
NCAER pointed out that India and Singapore could now provide preferential access to mutual trade in services under the Economic Integration Agreement in Services (EIAS). The EIAS with Singapore is also India’s first bilateral venture in the area of trade in services.
NCAER said EIAS would provide India with opportunities to experiment with swift actions in a limited way before a more widespread opening up under the aegis of GATS. India would also be benefitted from FDI inflow expected to originate from Singapore. The movement of natural persons is another area for India’s perceived gains.
• India to get benefits from FTA-plus component
• EIAS to provide India with opportunities to experiment with swift
• India will be benefitted from FDI inflow expected to originate from Singapore
However, the flip side of EIAS is that there might be some trade diversion in favour of service providers of the two countries in areas where liberalisation has already taken place under GATS, the NCAER report said.
For instance, it pointed out that India was committed under GATS to permit 12 foreign bank branches to be opened annually. A preferential permission to Singaporean banks would tantamount to barring entry by competing banks from other countries. Since EIAS would precede multilateral liberalisation, the service providing firms from two countries would acquire incumbency advantage in each other’s country.
The NCAER study further suggested that ISCECA is an interesting and ambitious experiment which must be monitored carefully. It hoped that India would earn benefits from the FTA-plus component and more than offset costs that it might incur on the FTA component alone.
The ISCECA, which was finally singed on June 29, was conceived three years ago when the then Indian Prime Minister Atal Bihari Vajpayee visited Singapore in April 2002.