India must review its existing trade agreement, work towards new ones: CII
Premium- The industry body suggested that new trade agreements with key large markets would help reduce tariff gaps with other supplier nations
Amid ongoing trade negotiations with over 20 countries, the Confederation of Indian Industry (CII) has said that India must review its existing trade agreements since Free Trade Agreements (FTAs) signed by India with ASEAN, Japan, and Korea have not helped Indian industry access these markets.
In its report ‘Achieving $1 tn Merchandise Exports by 2030: A Roadmap’, CII stressed identifying non-tariff measures and undertaking discussions with partner countries to resolve them for market access. The industry body suggested that new trade agreements with key large markets would help reduce tariff gaps with other supplier nations.
“FTAs should not only cover tariff liberalisation but also address the Non-Tariff Measures in partner countries. A comprehensive exercise of consultations with industry country by country should be undertaken to identify specific NTMs that hinder Indian exports under the FTA. These should be systematically taken up with the FTA partners," CII said.
The CII report lamented that the US decision to withdraw the Generalized System of Preferences (GSP) under the Trump administration in 2019 has impacted India’s exports from labour-intensive sectors. Since the US is India’s largest export market, CII suggested that India should press for the restoration of GSP by the US.
Based on the potential to gain global share, CII identified 14 products that can contribute the most to the increase in exports. “These include vehicles, textiles, electrical machinery and equipment, machinery, apparel, chemical products, plastics, pharmaceuticals, etc," CII said.
On manufacturing, the report highlighted that India has been imposing excessively high import duties on components and intermediate, as a result, imports of finished products have thrived, “discouraging new investments and underdevelopment of a vibrant input ecosystem in the economy".
The government should aim at encouraging the import of intermediate products that add value to exports, CII suggested.
“Overall manufacturing competitiveness in India is impacted by higher costs at every stage of the export process, ranging from starting a business to processes to transport of the products.
Labour productivity in India is low, leading to higher labour costs despite the demographic advantage. All delays and hurdles manifest in higher working capital requirements, lost orders, longer inventory holdings, and added storage costs," CII added.
CII also raised the issue of delays in implementing the four labour codes, saying that the laws have been notified but are yet to be notified by the state governments. The rules on the Codes should be framed in consultation with the industry. The threshold limit for certain labour laws should be increased. Each state should create a single labour authority, the report suggested.
For sustaining India’s export competitiveness, the report stressed that it is important to extend benefits under the Remission of Duties and Taxes on Export Products (RoDTEP) to more sectors. The government should also revisit the guidelines of the RoDTEP scheme and include the exports of SEZs/EOUs, CII suggested.
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