Monsters and Critics.com
No FTA envisaged during Hu visit: Kamal Nath
Nov 20, 2006
New Delhi, Nov 20 (IANS) — India and China will sign at least half a dozen trade agreements during Chinese President Hu Jintao’s four-day visit to India, but no free trade agreement (FTA) is on the cards, Commerce and Industry Minister Kamal Nath said Monday.
’I will be meeting the Chinese trade and industry minister. They are coming with the Chinese president. We are likely to sign seven or eight trade agreements,’ Kamal Nath told reporters hours before Hu arrives here.
He categorically stated that the signing of the much talked about FTA with China was not on the agenda during Hu’s visit.
’We should, in fact, be looking at an economic cooperation agreement in the long run which will be much wider in scope.’
Addressing a roundtable on China-India organised by the Confederation of Indian Industry (CII), Minister of State for Commerce Jairam Ramesh said an FTA was only possible after domestic tax reforms were in place.
’An FTA with China is something we should envisage but it is not something that is going to happen till we have value added tax (VAT) in force across the country and a generalised system of tax, which is still four to five years away, and we are not at a disadvantage vis-a-vis China,’ said Ramesh.
He agreed with the concerns expressed by the industry that Indian companies were currently at some disadvantage due to the lack of level-playing field, mainly owing to the lack of transparency in Chinese policies.
The encouraging factor is that the Indian firms are now increasingly looking at China as a growth opportunity and less as competitors who would swamp their businesses.
On the allegations from some quarters including the Chinese that India’s security concerns over investment proposals and project exports from China are exaggerated, Ramesh disagreed. He stressed that ’no country in the world can adopt a free-for-all policy on investment’.
Urging a middle path with the relaxation of some rules, Ramesh said: ’There is no instant solution.’
At the same time he pointed to the Chinese investors’ reluctance to invest in India despite having received clearances for many of their projects.
Of the Chinese projects worth $265 million cleared, the foreign direct investment flow so far has been only $3 million, while in the case of Indian companies, as against approvals for projects worth $150 million, the outflow of investments has been around $50-60 million, said Ramesh, urging a closer look at the reasons behind the trends.
While the India-China trade has been growing very rapidly in the last four years and is expected to cross $24 billion in 2006-07, up from $17.5 billion last year, he pointed out that the balance of trade was currently in China’s favour.
This was due to the fact that Indian imports from China are mainly manufactured and value added goods, but the same is not true for China’s imports from India.
Iron ore alone constitutes 50 percent of India’s export basket to China.
Whether it is iron ore for making steel or textile fibre for making clothes or mint oil used for pharma products, China utilises raw materials imported from India for value addition and capturing a larger share of the global market.
’We have a competitive advantage and can use the raw material for value addition. Therein lies scope for increasing trade with China,’ said Ramesh.