Services gain may not cover goods export loss : 13-11-2018

Several ministries have given a long wishlist of products that should be kept out. Besides, there are fears that by giving duty concessions to China, the government will open floodgates for the entry of cheap electronic goods, which are already entering India from Japan, South Korea and Vietnam.

For long, the government has argued that Indian IT professionals and nurses will benefit from its decision to allow zero-duty import of bulk of the goods under RCEP. But trade experts and industry players are questioning the argument, saying that services trade with the members currently negotiating the agreement, is a tiny fraction of goods trade estimated at $225 billion in 2017-18.

In case of China for instance, nearly 80% of the $76 billion import could come without paying customs duty. And, with import volumes expected to rise, this loss could only mount as the trade deficit widens, a revenue official said. “Will Indian services sector be able to generate new business and remittances of $5-6 billion in China?” another source added.

The RCEP members have trashed India’s demand for visa-free movement of its professionals, an arrangement similar to the one in European Union. The rejection comes despite Asean and China having a mechanism like this.

Industry chambers such as Ficci and CII have pointed out that gains from earlier trade deals have been limited, especially on the services front. For instance, Singapore has blocked fresh visas for IT professionals, although during PM Narendra Modi’s last trip, India went ahead and offered to allow more duty-free import from the island nation.

One of the key constraints to services sector benefiting is the dependence on mutual recognition agreements, where the professional qualification of chartered accountants or architects is recognised in India as well as its trading partner. Trade experts said trade-offs at this stage are not possible, as a result the services agreement largely exists on paper.

There are domestic sensitivities on the goods side too. For instance, the pharma department wants basic drugs to be excluded as import from China has wiped out domestic companies. Similarly, Gujarat Co-operative Milk Marketing Federation, that owns the iconic Amul brand, fears that imported milk and milk products from Australia and New Zealand will swamp the market, hitting the dairy sector. Similarly, Siam wants the automobiles and lithium ion batteries excluded.

Source : Economic Times


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