India offers more duty cuts to ASEAN

welcome aboard amit's official Blog

Free Market economy has been the buzz word that has been driving indian trade policy over the last 15 years and the country yesterday showed the interest and the commitment it has got towards the concept. The announcement of tariff cuts by Indian trade and commerce minister Mr.Kamalanath, highlights the importance India gives to the ASEAN in terms of trade. The asean which is a regional trading block is a consortium of the far-east countries. The announcement by the honoured minister is laudable for many but is quite a catastrophe for some others. Tariff cuts on agro based products are a serious threat to the local industry, so are tariff cuts in other areas like textiles. Indian farming is largely indigenous and does not make much use of the modern technology. In light of the above stated reasons the decision to lower the tariffs is a dangerous game that India is playing and to favour one side of the argument is only being baised.

Looking at the positive side of things, the tariff cuts are a good sign of things to come in the future. India has shown it's commitment to keep the talks alive by rising the number of products out of the tariff cuts to 94p.c from 69 p.c last year. The decision by the commerce ministry is largely influenced by the fact that the trade between the two countries has risen to a high figure of $17bn but still is very less compared to the amount of trade between ASEAN and the United States which is of the order of $132Bn. It can be seen from the above facts that India is eyeing the huge gains that the trade between the two groups can offer and is ready to forefit a bit from it's side. The fastly growing Indian middle class and the plans by major companies like Reliance to enter the retail sector are also major catalysts in lowerng the tariff cuts. There is a large and yet untapped market in india which the trade can leverage upon.

On the negative side of things the decision posses a great challenge to the government to protect it's own industries and agriculture. A 40 p.c cut on tariff is not something that pleases the average farmer and it would not be easy for the government to implement it. Tea estates are largely labour intensive. In this context the move to reduce the tariff by half on black tea and other varities is something that needs to be discussed more. Tariff cuts on Textiles is also of concern as the Indian textile industry has just learned to make use of advanced technology and is still in a growing stage. However, The government has a timeperiod of 5 years a la WTO agreements and major steps have to be taken to make both the retail and textile sectors to be competent.

To Sum it up, It was a brave, visionary and commendable move from India to lower the tariff rates. This agreement if implemented would bolster the trade withe countries like Malysia which augument for 70p.c of India's oil needs. But having said all this the government should realize that the opening up of market comes at a price and sufficient and quick measures are required to prevent the price from becoming too high.

Prasad