New Delhi: The impending conclusion of negotiations for the contentious Regional Comprehensive Economic Partnership (RCEP) trade deal may have forced the Indian government to announce a comprehensive package for exporters—akin to a mini foreign trade policy—to boost their competitiveness.
“Announcing a package for exporters had become inevitable given the disadvantage that the RCEP deal may put some exporters," said a government official speaking under condition of anonymity.
While steel, MSME, agriculture, and dairy industries have been vocal against the trade deal, pharmaceutical and cotton industries may benefit from the trade agreement.
In clearest sign so far that India is inclined to sign the free trade agreement with the 16 member grouping which also includes China, trade minister Piyush Goyal last week said the government will protect its national interest while signing the RCEP deal.
“Prime minister Narendra Modi has directed me to enter RCEP negotiations while taking all steps to protect the domestic industry. At the same time, we have to keep in mind the opportunity to increase business activities of new technology, new foreign investment and opening up of the services sector, new market access to Indian exporters. Otherwise, Indian exporters will be at a disadvantage," Goyal had told reporters after hearing concerns of exporters on trade remedial measures.
Finance minister Nirmala Sitharaman on Saturday announced a package to boost exports that included a new WTO compatible scheme named Remission of Duties or Taxes on Export Product (RodTEP) to reimburse all central and state taxes paid by exporters; fully electronic refund of input tax credit; cheaper dollar and rupee credit for exporters including priority sector lending norms.
Also watch: Mint Views | India's dilemma in joining the RCEP
The package also included export facilitation measures including leveraging technology to reduce turnaround time at ports and airports to international standard and online system for getting Certificates of Origin of goods. To address lower utilization of free trade agreements, a senior commerce ministry official will now head a “FTA Utilisation Mission" to spread awareness about preferential benefits available under FTAs that India has signed and put in place an effective FTA monitoring system. Exporters now will also have to adopt all necessary technical standards to make Indian exports more competitive. This will also help government put in place stringent norms to check low quality imports.
In the RCEP Ministerial concluded last week in Bangkok, member countries resolved to conclude negotiations by November. Commerce ministry officials also feel that if India has to sign the deal, there is no point further dragging it as it may lead to higher ambition from member countries.
On Saturday and Sunday, officials from other RCEP member countries met in Delhi to discuss India’s proposal to put in place an “auto trigger" mechanism which would mean a member country would have the option to raise duties if it sees sudden surge in imports on particular items from a partner country.
The RCEP is a proposed trade pact between the 10 countries of the Association of Southeast Asian Nations and their six FTA partners, including Australia, China, India, Japan, Korea, and New Zealand. It accounts for 25% of global gross domestic product, 30% of global trade, 26% of foreign direct investment flows, and 45% of the world’s population.
India has been seeking a more balanced outcome of the RCEP deal with a strong agreement on services trade, including a deal on easier movement of skilled manpower. However, most members are reluctant to accept India’s proposal. With India’s trade deficit with China and RCEP in 2018-19 standing at $53.6 billion and $105 billion, respectively, it is apprehensive that further liberalisation in tariffs to China could be detrimental to its domestic industries.