|
Economic Highlights
Elusive SAFTA
OPEN MARKET TO SAARC NATIONS
By Dr. Vinod Mehta
(Former Research Director, ICSSR)
New Delhi, May 08, 2008
Fourteen SAARC Summits have been held till
date, but the South Asia Free Trade Area (SAFTA) is yet to
take off! While ASEAN and EU are reaping the benefits of a
common market, South Asian countries continue to lag behind.
Since the start of our liberal economic policies we have been
opening up our market to foreign goods and investments, such
as China and South East Asia. While we have signed FTA with
Thailand, SAFTA is still elusive.
This raises the question: what should India do? With Pakistan
unwilling to extend the MFN (Most Favoured Nation) status,
should we keep waiting for it to act, or considering that
India is a large country, should it unilaterally become more
liberal towards imports and investments from small neighboring
countries?
The relatively strained relations with Pakistan, which are
showing signs of thawing, should not come in the way of trade
and economic relations between India and other SAARC
countries. Note that there is a huge potential for trade and
economic links with Nepal, Bhutan, Bangladesh, Sri Lanka and
Maldives. With its elections over, Nepal is likely to
concentrate a lot more on its economy to fight the widespread
poverty and unemployment. As for Pakistan, with the new
civilian coalition government in saddle, its attitude towards
India may too change.
What about us? Well, at this stage we can afford to be a bit
more generous with our smaller neighbours. We need not become
hyper-sensitive to being labeled as ‘big brother’ by some
quarters in these countries. Both territory and
population-wise, India is relatively much bigger than all
SAARC countries put together. In economic terms too, India is
large -- one huge market perhaps the size of EEC.
Besides, its GDP is much higher than its neighbours and at the
moment India is enjoying a large and comfortable volume of
foreign exchange reserves that it hadn’t seen in the past five
decades. The Indian economy is growing at an average rate of 9
to 10 per cent per annum, which is a reasonable rate of
growth. Reasons enough for us to be more liberal than what we
had been in the past.
Apart from economic gains, India should also aim to earn the
goodwill of the people of these countries by being more
accommodative towards them. At the moment, Bangladesh is
having adverse trade balance with India. There should be no
problem for India to allow duty free import of certain
Bangladeshi products like jamdani sarees and hilsa fish.
Already some retail outlets in Delhi are selling biscuits from
Bangladesh which are as good as any Indian manufactured ones
and have not posed any threat to our producers.
In fact, India could make similar gestures to other
neighbouring countries especially Nepal, Bhutan, Sri Lanka and
Maldives and allow their products to have an access to the
Indian market in a big way. We have no reason to get paranoid
that the neighbours’ goods would flood our markets. Their
production bases are so small that it will call for huge
investment before they can produce goods on a scale, which can
flood the Indian market. In fact, following liberalization
many Indian companies have shifted their production base to
some of these countries.
India’s external trade is today mainly oriented towards the
US. The EEC and a few West Asian countries, and ASEAN would
come second. As for SAARC, the trade turnover between India
and its member countries is so small that it does not even
attract attention in our annual Economic Surveys.
A few years ago when we opened up our economy, it was feared
that cheap Chinese goods would flood the Indian market. While
this did happen in a big way, the Chinese had to beat a hasty
retreat as their quality was sub-standard. The Indian consumer
refused to accept these even though they were relatively
cheaper. Compared to China, our South Asian neighbours are
small in every respect and unlike China would not be able to
dump their goods on the Indian market.
There are also many additional opportunities to expand
cooperation with the SAARC nations. For instance, the tourist
sector within this region has been neglected for long. While
tourism has a low capital investment, it is relatively a
high-earning potential. At one point of time, daily air
services to link the capitals of all the SAARC countries was
under consideration. This idea could be revived. We should
learn from the ASEAN experience, wherein its capitals are
linked by air and they have special low airfares for travel
within the countries.
This apart, wherever possible rail, road and sea links must be
strengthened among the SAARC countries. With Pakistan, Nepal
and Bangladesh we can develop world-class road and rail links
for speedy movement of both goods and people. With Sri Lanka,
Maldives and Bangladesh we can develop sea links.
India must also take a lead in admitting more members. It may
be a good idea to allow other countries like Afghanistan and
Burma to become full members, while Central Asian countries
could be admitted as dialogue partners. It is India, which can
take the initiative by lobbying with SAARC nations. And, if it
calls for amending the original SAARC charter, India should be
able to carry other members along with it.
Let’s take the example of Afghanistan. It is engaged in
reconstructing its economy and not only needs humanitarian aid
but also trade. If Afghanistan is admitted as a member of
SAARC it would be easier for countries like Nepal, Bhutan,
Bangladesh and India to send goods by road through Pakistan as
the latter would find it difficult to block transit facilities
to Kabul.
Yet again, land-locked Central Asian nations like Uzbekistan,
Tajikististan, Kyrghistan and Kazakhstan, too are looking for
trade opportunities through land routes with India. If they
become dialogue partners or associate members of the SAARC, it
would again be difficult for Pakistan to stop the movement of
Central Asian goods to India, Nepal and Bangladesh through its
territory and vice-versa.
It is time India becomes active in SAARC by winning over its
small neighbours. Allow them some duty free goods to India
which are of importance to them. Let these nations also share
India’s higher growth rate. For, India will benefit by large
trade turnover within the region in the long run. ---INFA
(Copyright India News & Feature Alliance)
E-Mail :
newseditor@sarkaritel.com |
