Today’s FTA, with the 10 member ASEAN bloc, coming shortly after the Comprehensive Economic Partnership Agreement with South Korea is indicative of the Government’s aggressive policy to enter into preferential / free trade and economic cooperation agreements with different countries and economic / regional blocs.

Almost every prominent member of WTO is a member of some regional trading bloc or the other. India is perhaps the only big country that is not a part of any major regional free trade agreement, apart from SAARC, which has still a long way to go.

“The current agreements are in keeping with our Government’s policy of “Look East”. Certain sections of industry may be affected in the short run but in the long term perspective the FTA with ASEAN will make the Indian industry more competitive and global.” Said Mr. Krishan Kalra , Secretary General, PHD Chamber.

“Such agreements assume significance not only because of their potential for trade creation but also on account of their ability to encourage cross-country investments.  There is need to have a road map to ensure that such agreements also lead to stimulating economic and industrial activity in the country.” Added Mr Kalra.     

In this context it is important that the Government must at the same time address issues of concern such as infrastructure, high cost of inputs that are not in keeping with international prices, high transaction costs, labour reforms, etc. that keep costs high for domestic producers and affect their competitiveness.

Going into the question of inflow of imports or the outflow of exports following the  implementation of the FTA, the crucial factor would be the direction of flow of investments which are solely dependent on the enabling environment.   A conducive investment climate is conspicuous by its absence in India.  Production costs in India are higher as compared to industries abroad which have a cost advantage in manufacturing.  This is surely the situation vis-a-vis the ASEAN countries. India has to strive to become a sourcing ground and not a dumping ground.