Economic Times, 23 December 2005
Racing with Tigers to catch up with Dragon
NEW DELHI: India’s ‘Look East’ policy took a giant leap recently as prime minister Manmohan Singh stepped in to push forward the much-awaited Comprehensive Economic Cooperation Agreement (CECA) with the Asean. The body language said it all as the economist-turned-political leader rubbed shoulders with his counterparts representing the Tiger Economies — India was ready for strong economic bonding with the most dynamic free trade bloc of the region. It will not only be a question of trade with the Asean, but also investment flows and technology infusion for India Inc.
The contentious issues related to rules of origin (ROO) in the free trade agreement (FTA) with the Asean, which is part of the CECA, have been resolved and both sides are gearing up on a positive note to step up relations to a new level. India’s trade with the Asean has been growing at a fast pace and is expected to touch nearly $30 billion by 2007, according to estimates by Assocham. This region could account for nearly 10% the country’s trade, industry representatives feel.
It is not only the Asean, but the excitement stems from the possibility of the big picture of an Asian Economic Community encompassing China, Japan and Korea, besides India. Formation of such a strong economic grouping would be a challenge to the European Union and the Nafta. Since the Asian economies are growing far faster than the European economies and the US. Since India and China are emerging as the world’s largest economies, eastern linkages would definitely benefit India if the integration is carefully calibrated to suit the Indian economy.
With agreements having been signed recently at Kuala Lumpur to iron out the remaining glitches in the India-Asean CECA, current expectations are that negative lists under the FTA would be cut down significantly and a liberal ROO adopted.
While India Inc is apprehensive of imports from China entering India through the Asean, there is a strong feeling that Indian industry’s competitiveness would improve as a result of the trade pact.
The prime minister has also initiated steps for an FTA with key West Asian economies through a pact with the Gulf Cooperation Council, with a view to integrating India economically with the entire Asia. In any case, the Safta is coming into effect from the beginning of 2006 to enable closer economic ties with neighbouring countries.
Trade pacts have also been concluded with Latin American countries and the big picture looks at close engagement with all emerging markets. With multilateral talks through the World Trade Organisation (WTO) moving rather slowly, the engagement with the Asian Tigers seems to be the Indian ‘Elephant’ economy’s chance to catch up with the Chinese Dragon.