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Reportedly amid criticism from India Inc., the heads of top business houses, the new government on Saturday said it has initiated a review of all the Free Trade Agreements (FTAs). ‘I have instructed the ministry to do a complete analysis of each of the FTAs, as not every FTA is seen completely beneficial to India,” commerce and industry minister Nirmala Sitharaman told reporters at a news conference at the BJP headquarters in Chennai. “The ministry will come out with a report on it soon. It has to happen in a fortnight,” she said.
A website sidilik.com reported the news item with the uncharitable title screaming ‘Is Nirmala Sitharaman Smoking Ganja?’ However, as reported in delWine earlier, her statement was inevitable. The good news is that the government has taken a quick decision, barely two weeks after taking over the reins, to address the issue.
The new Government of PM Narendra Modi and Ms. Sitharaman ought not to lose sight of the fact that EU is a very important trading partner of India. The value of EU-India trade grew from €28.6 billion in 2003 to €72.7 billion in 2013. Interestingly, the trade is presently quite well-balanced between the two trading partners. In 2013, EU imported €36.8 bn worth of goods from India while it exported €35.9 bn. In 2012, the trade was slightly higher at €76 bn with EU importing €37.5 bn worth of goods and exporting € 38.5 billion.
Trade in commercial services quadrupled in the past decade, going from €5.2bnin 2002 to €22.5 bn in 2012 with the EU importing €10.7 bn worth of services while exporting €11.8 bn worth to India.
EU’s investment in India has been also continuously growing. Its investment stock in India grew substantially, reaching €41.8 billion in 2012. With the Indian investment in EU valued at €8.8 billion there has been a net Foreign Direct Investment (FDI) of €33 bn.
Negotiations for a comprehensive FTA were started in June 2007 and were dragging on till mid-2014 with every round expected to be the final one when, as predicted and reported by delWine much earlier, they were put on the back burner till the elections were held. The government at that point was so sure of coming back to power that it hoped to start the negotiations from where it left off. Now that the Treaty has not been signed it is natural that the new government takes a close look to ensure the negotiations conform to the party manifesto.
Indian industry has been generally critical of the free trade agreements. It has even blamed zero or low duty imports from the Asean countries as well as South Korea and Japan for MNCs going slow on investments in India. ‘While India will go back on its existing commitments, FTAs in the pipeline are expected to see some tough negotiations’, according to the report in TOI.
While former Prime Minister Manmohan Singh, along with then Commerce Minister Anand Sharma and Deputy Chairman of Planning Commission Montek Singh Ahluwalia drove the FTA agenda (and yet no agreement could be reached in 6 years!), even the UPA government was divided on the issue with P Chidambaram, the then UPA's finance minister cautioning the government against rushing into bilateral trade agreements.
In April 2013, BJP had demanded that UPA should desist from negotiating a trade agreement with the European Union because of concerns from the auto industry on lower import duties. The domestic wine industry had also raised a hue and cry on the reduction on the low end wines, fearing dumping of cheap wines hurting the domestic industry but it seemed to have reconciled with lower taxes on more expensive wines with whom they are not in a position to compete yet anyway.
We shall have to wait and see if BJP chooses to stick to its pre-poll rhetoric or will be progressive enough to reach some agreement soon to prove its mettle and claims that it means business.
For a few related earlier articles, please visit:
Blog: Having Freedom of Choice for Wines
Blog: Treaty with EU likely to go on the Back Burner
Sun to Rise Soon from West for Wines in India
India FTA may soon be on Back Burner
Mixed Signals of Duty Reduction on EU Wines
Wine Tax Reduction Remains Pipe Dream
Wine and Spirits Delay EU FTA with India
Blog: European Union Beware
Subhash Arora
Tags: Free Trade Agreements, Nirmala Sitharaman, Narendra Modi, EU |