Economic Highlights
New Delhi, 22 March 2007
Exploit Opportunities Galore
Open Market
to Neighbouring Countries
By Dr. Vinod Mehta
The Fourteenth SAARC Summit will be
held in India
next month. But it is a pity that South Asia Free Trade Area (SAFTA) is yet to
take off. ASEAN and EU are reaping the
benefits of a common market but South Asian countries are lagging behind. Since the beginning of liberal economic
policies we have been opening up our market to foreign goods. We have opened up
to China, South East Asia
and have signed FTA with Thailand
but SAFTA is yet to take off. With Pakistan
unwilling to extend MFN status to India
as yet should India go on
waiting for Pakistan
to act? Or considering the fact that India is a large country, should it
unilaterally become more liberal towards imports from small neighboring
countries?
The relatively strained relations
between India and Pakistan, which now appear to be thawing, should
not come in the way of trade and economic relations between India and other
SAARC countries. The potential of trade and economic links with Nepal, Bhutan,
Bangladesh, Sri Lanka and Maldives are very high. The current
political situation in Nepal
is only a temporary phase and things are likely to improve in the near future.
As for Pakistan, its
attitude towards India
also appears to be changing but very slowly. However, we can afford to be a
little bit more generous towards smaller neighbours.
Let us not become hyper-sensitive on being labelled as ‘big
brother’ by some quarters in these countries. Both territory-wise as well as
population-wise India
is relatively much bigger than all the SAARC countries taken together. In
economic terms also India
is very large; it is one huge market perhaps of the size of EEC. Its GDP is
much higher than those of its neighbours and at the moment India is
enjoying a very large and comfortable volume of foreign exchange reserves that
it had not seen in the last fifty years. The Indian economy is by and large growing
at an average rate of 9 to 10% per annum which is a reasonable rate of growth.
Therefore, at this stage India
can afford to be more liberal towards its neighbors than what it had been in
the past.
Apart from economic gains India is
looking for, it should also aim to earn the goodwill of the people of these
nations by being more accommodative to them. Two years ago, the then Indian
Foreign Minister on his visit to Bangladesh
announced that India will
allow duty free import of forty Bangladeshi products to India. More
recently India is
considering duty free import of jamdani sarees and hilsa fish from Bangladesh. At
the moment Bangladesh is
having adverse trade balance with India. Whether these measure will
help reduce the adverse trade balance of Bangladesh
vis-à-vis India,
but it will have good impact on the relations between two countries.
One would like to say that India should show similar gesture to other
neighbouring countries especially Nepal,
Bhutan, Sri Lanka and Maldives and allow their products
to have an access to Indian markets
in a big way. Let’s not get paranoid by the fact that the goods from these
countries would flood the Indian market. 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 after the liberalization many of the
Indian companies have shifted their
production bases to some of these countries.
At the moment, India’s
external trade is mainly oriented towards OECD countries and some West Asian
countries. ASEAN countries would come second. The trade turnover between India and the
individual SAARC countries is so small that it does not attract attention even
in our annual Economic Surveys.
A few years ago it was being said
that the cheap Chinese goods would swamp the Indian market when India would
open up its economy. The Chinese goods entered the Indian market in a big way
but had to beat a retreat as the quality of Chinese goods was low that the
Indian consumer did not accept it 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 the
SAARC region has been neglected for a very long time. Tourism sector has low
capital investment but relatively high earning potential. At one point of time
there was an idea to start daily air services to link the capitals of all the
SAARC countries. This idea can be again revived. We can learn from the ASEAN
experience. All the ASEAN capitals are linked by air and they have special low
airfares for travel within ASEAN countries.
Apart from this 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 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 should be admitted as
dialogue partners. It is India
which can again take initiative in this direction by lobbying with SAARC
countries. Even if it calls for amending the original SAARC charter Indian
should be able to carry the other members along with nit on this issue.
Afghanistan at the moment is engaged in
reconstructing its economy. It not only needs humanitarian aid but also trade
to put its economy on a strong footing in the long run. 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. It would then be difficult for Pakistan to block transit facilities to Afghanistan.
As for the land locked Central Asian nations like Uzbekistan, Tajikististan, Kyrghistan and Kazakhstan, they are also looking for trade
opportunities through land routes with India. If they become dialogue
partners or associate members of the
SAARC then 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 high time India
becomes active in the SAARC by winning over its small neighbouring countries by
allowing duty free to India
some of their goods which they feel are important for them. Let these countries
also share India’s
higher growth rate. In the long run Indian will benefit by large trade turnover
within the region.---INFA
(Copyright,
India News and Feature Alliance)
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