Promises far outweigh concerns
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Dr. R K Dhawan delivering a lecture on ‘India-China Business Opportunities’ |
FIEO’s Northern Region Chairman Dr. R K Dhawan firmly believes that a free trade agreement with China would ultimately unfold numerous opportunities for Indian manufacturers and their initial concerns over competition with cheap imports from China would disappear in the long run. His address on ‘India-China Business Opportunities’ at the Tecnia Institute of Advanced Studies in New Delhi on February 7, 2007 reveals how Chinese export basket skewed in favour of value added goods over a period of time. Excerpts:
It is difficult to love thy neighbour, especiallywhen wars have been fought and when disputes over boundaries and territories continue to exist. But India and China are pushing ahead their bilateral trade and are now also looking for free trade agreements. The Department of Commerce of India has projected that China could be India’s largest trading partner, even surpassing United States. Our bilateral trade figure of US$ 20 billion, originally targeted for 2008, is expected to be accomplished this year itself.
The two countries hold the world’s largest populations and can mutually become the world’s largest populous market with over 2.4 billion people. Mutual opportunities for trade are thus tremendous. There are compulsions for urgent economic growth as both the countries together hold the world’s largest chunks of poor people as well. However, economic performances of both the economies, now known as Asian powerhouses, have been appreciable and have succeeded in gradually imparting better quality of life to their citizens.
Changing global trading system from ‘exclusive competition’ approach to ‘competition through co-operation’ approach is also compelling the leaderships in both the countries to delink economics from politics. Competitive advantages in today’s context do not lie in reinventing the wheel but in drawing strengths through cooperation. Notwithstanding, our bilateral trading relations need to be developed with due caution, particularly with manufacturing giants like China to ensure that the domestic industry like the textiles, footwear, toy, bicycle, light engineering etc. do not become the victims of cheap imports. The concerns of small and medium domestic enterprises are more important as they not only contribute to our GDP but also create substantial employment.
Overall, our balance of trade with China has been positive for almost all the last ten years except during 1998-99 and 1999-2000 when it was marginally negative. Our export to China has also grown year-after-year during these years except 1998-99. During 2002-2003, it crossed US$ 1,000 million and registered a growth of 108%. In 2004-2005 again, our export to China crossed US$ 5,000 million at US$ 5,616 Million, up by 90% over the previous year. During the last fiscal, our export to China was around US$ 6,759 Million and almost 7% of our total export was directed towards China during 2004-05 and 2005-06.
No doubt, there has been a gradual increase in our imports from China too during these years except during 1998-99 and 2000-2001. Imports from China crossed the US $ 1,000 million during 2004-05 when we imported goods and services worth US$ 1,323 million from it. In the last fiscal, our import from China registered a growth of 53% valued at around US$ 2,022 million. In the last fiscal our balance of trade was US$ 4737 million in our favour.
The rapid growth in our import from China has seen our market being flooded with Chinese goods such as toys, electricals etc. pushing our own manufacturers of these items into the corner. But that’s only one side of the story. Huge opportunities lie ahead for Indian finished goods producers to import cheap raw materials and intermediates from China. We need not to go back to the old days when we had severe restriction on imports due to foreign exchange crisis. I remember the thickness of the "restricted list" pages which used to be part of the EXIM Policy then. Today we have a sound forex reserve and we have to encourage healthy competition with China which can in-turn also help us push some key economic reforms particularly in infrastructure and labour laws.
Our Hon’ble Commerce & Industry Minister Mr. Kamal Nath has clearly said that we require facilitating imports to bring in better inputs to improve the overall quality of our manufactured items. A study by the Indian Department of Commerce also suggests that the growth in international trade, be it exports or imports, is directly linked to growth in job opportunities in our country.
At present most of our exports to China, barring a few exceptions, are of primary products where value addition is not to any significant extent. On the other hand, our import from China consists of electro-mechanical products, consumer durables, organic chemicals, minerals, fuel and silk. But this is the beginning. When China adopted Open Door Policy during 1978, 51% of its total exports were of mineral and agricultural products. In the ensuing years, their share gradually decreased to 44% in 1985 and 27% in 1989 and further went down below 20% in the recent years. Today Chinese exports comprise of mainly high-end manufactures such as electronic goods, telecommunications etc.
On the contrary, China’s imports today comprise of mostly raw materials such as iron and steel, industrial machinery and semi-finished products required in the manufacturing process. During 2005, China imported electronic components worth approx. US$ 100 billion, petroleum crude and products worth US$ 48 billion, optical equipments and apparatus of around US$ 31 billion, iron ore worth over US$ 18 billion, electrical apparatus for switching or protecting electrical circuits worth over 18 billion US$, plastics worth over US$7 billion, auto parts worth US$ over 6 billion and so on.
So, a free trade agreement with China may bring us some initial hiccups, but in the long run, it will help us produce many value added products by importing raw material and intermediates from China. But we need to augment trading infrastructure with respect to increased frequency on direct shipping route, expansion of air cargo facility, cooperation in customs valuation & documentation, direct banking link etc.
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FIEO Chief seeks extension of DEPB Scheme FIEO
President Mr. Ganesh Kumar Gupta has urged for the continuation of FIEO Chief says as the government has neither formulated any new scheme to replace DEPB scheme nor has it taken a decision to extend the DEPB Scheme so far, the exporters are in a fix to do their export costing for future shipments. "Such unstable policy regime does not augur well for exports," says Mr. Gupta. He is also of the view that the DEPB scheme should continue at least for one year after the announcement of any new scheme providing some gestation period to the exporters to switch over to the new scheme. |
