India's foreign trade is set to see a big jump with its free trade agreement (FTA) with ASEAN, the world's largest and covering a market of almost 1.8 billion consumers, coming into effect from January 1, 2010. Under the FTA, tariffs on over 80 per cent (4,000 product lines) of the goods traded between the two regions are proposed to be completely withdrawn by 2016. Also, the agreement opens up the $1.1-trillion ASEAN market to Indian exporters, paring their dependence on the western countries.
Curently, India's trade with the ASEAN economies stands at $44 billion with Singapore, Thailand and Malaysia accounting for the bulk ($40 billion) of total trade. According to the Federation of Indian Chambers of Commerce and Industry (FICCI), the pact is a win-win for both as the increased market access would result in doubling of the bilateral trade from about $50 billion in 2010 to $100 billion by 2015. Indian exporters would be able to source products at competitive prices in sectors such as machinery and machine parts, steel, agricultural products, auto components, chemicals and synthetic textiles. On the other hand, ASEAN would gain access to the Indian market for its non-agricultural products.
Says Anjan Roy, Chief Economist, FICCI: "Lowering of custom duties would surely add to the depth of the trade. The FTA should also bring under its ambit services along with goods." However, there are concerns that a range of cheaper products coming from the ASEAN region could adversely impact the domestic farmers and industry. The FTA proposes to safeguard their interests by identifying certain products as highly sensitive, and putting them in the negative list.
About 500 items will be excluded from the list of tariff concessions and 600 items from the list of tariff eliminations—mostly agricultural products, processed food, textile, auto and petrochemical products.
