A free trade agreement (FTA) that India was supposed to sign with the Asean countries at Bali, Indonesia, next Friday may have hit a hurdle with differences cropping on during a cabinet meeting on Thursday.
India was to sign a pact on trade in services and investment with the Association of Southeast Asian Nations (Asean), a block of 10 countries, at the sidelines of the World Trade Organisation (WTO) meeting. This agreement is part of a comprehensive economic partnership agreement, called CEPA, under which a treaty on trade in goods was signed between Asean and India in 2009.
Finance minister P Chidambaram raised the issue when India’s stand at the WTO meeting — piloted by commerce minister Anand Sharma — came up for discussion. Sources said that Chidambaram was keen on hammering out contentious issues after consulting the finance ministry before India presents the final text.
When commerce minister Anand Sharma reportedly pointed out that the finance ministry was consulted, Chidambaram took out minutes of 18 meetings held to finalise the draft agreement. He reportedly pointed out that his ministry was not part of these meeting despite raising concerns over the agreement’s impact on Indian economy.
Sources said Chidambaram also presented a 15-page note of the finance ministry’s objections at the cabinet meeting chaired by PM Manmohan Singh.
The finance ministry had reservations over the FTAs, saying it was impacting the manufacturing sector and trade balance. The ministry also said that imports from countries with whom India has signed FTA have increased at a much faster pace than exports.
Even though India enjoys a trade surplus with Asean, the finance ministry said the gap between imports and exports was narrowing after the pact on goods trade was signed. States like Kerala were against the new FTA agreement with Asean, apprehending that it would create competition in jobs to a large number of nurses from the state.
The commerce ministry had to tweak its earlier agreements with Asean after top Congress leaders like Sonia Gandhi, defence minister AK Antony and rural development minister Jairam Ramesh raised concerns on its impact on the domestic industry.
As a result of finance minister’s objection, government officials have almost ruled out India signing the pact with Asean. On the political side, they fear that the issue of signing an agreement when economy was down can be raked up by the Opposition in the winter session of Parliament, beginning December 5.
Chidambaram and Sharma could not be reached for their comments.