The proposed free trade agreement that China had been pushing for failed to take off at Thursday’s summit with Premier Wen Jiabao, as India was wary of pulling down customs barriers for Chinese goods. For, it may worsen an already yawning trade deficit.
Although China advocated an early launch of negotiations for the proposed trade agreement, India’s response was lukewarm.
“A feasibility study has been done. As of now, that is where the matter stands,” foreign secretary Nirupama Rao said when asked whether the two sides discussed the possibility of market-opening regional trade agreements (RTAs).
Merchandise trade between India and China is set to touch $60 billion this year — a 10-fold increase over the trade five years ago. But the trade balance is tilted in China’s favour, with India staring at a possible deficit of $24 billion this year.
Both nations had completed a joint study in March 2005, when India’s trade deficit with China was $1.5 billion, to examine the benefits of greater trade and economic cooperation.
The joint group had recommended the governments appoint a joint task force (JTF) to study the feasibility and benefits of a possible China-India regional trading arrangement, and also give recommendations on the contours of such a pact. The JTF finalised its draft report covering trade in goods, services, investments, trade, and economic cooperation.
“There is an imbalance in trade and the deficit for India has been growing. We have very legitimate concerns in this regard,” Rao said.
On Wednesday, Wen told industry leaders it was “necessary to ease restrictions concerning the reveal-and-approval procedure, capital flow and entry and exit of people, thus creating more favourable conditions for mutual investment”.
Rao said India wants more market access for its pharmaceuticals, agricultural products and IT services as “we are brand leaders internationally”.
India and China have also agreed to grant permission to each others’ banks to open branches and representative offices. The two have also agreed to “jointly oppose protectionism in all its forms.”
Merchandise trade between India, China set to touch $60 bn this year — a 10-fold rise over trade five years ago
But the trade balance is tilted in China’s favour, with India staring at a possible deficit of $24 billion this year
India wary of pulling down customs barrier because of the yawning trade deficit
India wants more market access for its pharmaceuticals, agricultural products and IT services.