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Looking East

Times of India


21 June 2006

Baby steps are not always giant leaps for India, let alone for mankind. The reopening of the Nathu La pass, a key junction for trade between India and China over centuries, could have been a momentous event.

Instead, trade between the two sides will be confined to about 40 commodities, identified as being of interest to people living in the border areas. Why only 40 commodities, and why not use this opportunity to open up land trade generally bet-ween the Asian giants?

The same timorousness manifests itself in India’s dealings with ASEAN. Prime minister Manmohan Singh had once called resoundingly for an Asian economic community, but New Delhi is developing cold feet over a free trade agreement (FTA) with ASEAN, an early and essential pit stop on such a long journey.

New Delhi proposed a whopping 1,414 items to be kept out of the FTA’s purview, which it is now prepared to whittle down to a still capacious 854 items. ASEAN, on the other hand, is not willing to settle for more than 60.

New Delhi is particularly sensitive about agricultural products, following Sonia Gandhi’s directive to protect the interests of Indian farmers. The problem is that such protection easily turns into protectionism, when India’s farm sector has a lot to gain from the opening up of new export markets.

To be sure, the government has to make sure the livelihoods of farmers are protected, when the ASEAN region happens to be ferociously competitive in such areas as rice, palm oil and plantation crops.

But free trade and economic integration will inevitably involve movement of workers from non-competitive to competitive sectors, and New Delhi should be prepared to manage this process.

It could parlay concessions in agriculture for a deal in services, where India happens to be very competitive. One can’t, of course, expect rice farmers to turn into IT workers, but one can do a good deal to make Indian agriculture more competitive.

Since the 1980s public investment in infrastructure as well as research and development for the agricultural sector has been declining; its place is taken by rising subsidies for food, fertilisers and other inputs like power and water.

While powerful political lobbies are thereby appeased India’s agricultural economy, and therefore the lot of the common farmer, hardly improves. We should reverse the everyday wisdom that FTAs will ruin the Indian farmer to argue, instead, that they will provide the necessary impetus to reform the farm sector.