New Delhi: As the largest member of SAARC, India should give duty free market access to smaller and less developed neighbours like Bangladesh, Maldives, Bhutan and Nepal while Pakistan should respect the SAFTA and start its implementation. This was a statement issued by industry chamber Assocham this morning.
Days before the New Delhi SAARC Summit, Assocham President, Venugopal N Dhoot said Indian industry would fully support the government to come out with a package for India’s smaller neighbours since the size of our industry and economy is large enough to accommodate requirements of these countries.
India is the second fastest growing economy in the world after China with immense potential in markets, investments, technology and entrepreneurial resources. By enabling neighbour countries to capitalize on these prospects, it will send out a strong message of commitment to having a developed region.
India has extended a commitment to review its non-tariff barriers and generate better access to Indian market as part of South Asia Free Trade Agreement (SAFTA).
SAARC region accounted for a mere 2.5% of India’s total foreign trade in Apr-Oct 2006. Opening up of India’s market under the trade agreement is therefore unlikely to have a major impact on the domestic market.
Imports from SAARC countries stood at $0.857 bn, contributing just 0.82% to total imports while imports during the period stood at about $104 bn. Exports to the region were worth $3.56 bn in the above said period (5%of India’s total exports).
India has been running a comfortable trade surplus with SAARC region with surplus of $4.4 bn in the first seven months of the current fiscal. SAFTA provides opportunity to strengthen a case of seeking market access in developed countries.
Removal of trade barriers will result in increased economic activity bringing prosperity across South Asia haivng direct bearing on purchasing power of less developed nations, thereby providing market to Indian goods. Implementation of SAFTA is therefore a win-win situation for all member countries.
“A strong regional block would be instrumental in fighting the economic war with the developed world”, said Dhoot. Intra regional exports among SAARC countries are a meager 5% of total exports of the region. Developed world on the other hand, has much stronger trade ties among them with intra regional trade under NAFTA and that in European Union being more than 50%.
Where India’s total foreign trade including exports and imports in Apr-Oct 2006 witnessed a growth rate of 26% over the same period in 2005, trade with SAARC countries grew only by 16%. Total foreign trade of India in Apr-Oct 2006 was about $175 bn against almost $139 bn in Apr-Oct 2005.
Pakistan’s resistance to grant Most Favoured Nation (MFN) status to India even under the recently ratified SAFTA is an issue that warrants immediate resolution.