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Government likely to review bilateral trade pacts, FTAs to reassess gains

NEW DELHI: The government may review India's bilateral trade pacts including free trade agreements (FTAs) amid increasing clamour from the industry against conceding foreign trading partners more access to the country's market without extracting significant gains in return. 

finance ministry wants a review of the FTAs to ensure an optimum deal for the country, a senior official told ET, adding that India cannot run a high current account deficit for long. 

Even as the ministry has started reviewing the bilateral investment treaties, it is likely to soon ask the 
department of commerce to examine whether the country has got what it expected from the FTAs, most importantly with Thailand and the ten-member ASEAN. 

"We are at the moment looking at bilateral investment promotion agreements. But FTAs need to be looked at," said the official, who did not wish to be named. 

The domestic industry has been mounting pressure on the government, saying it has not gained much from the FTAs. 

"India needs to have a fresh look at its FTA strategy in view of the continued slowdown in exports and not much gains being realised from services exports either," a spokesperson of the industry body CII told ET. 

Indian industry's biggest concern is the India-Thailand agreement, which has kicked off in a limited way with an early harvest scheme that has eliminated tariffs on 82 items. 

India's imports from Thailand rose to $5.6 billion in 2012-13 from $2.7 billion in 2008-09 while exports grew to $3.7 billion from $1.94 billion over the same period. The country's trade deficit with 
ASEAN, with which it signed a trade agreement in August 2009, has widened to $18 billion from $14.9 billion in 2009-10. 

India has had a bitter experience with imports of 
gold from Thailand at a concessional duty under the trade early harvest scheme. Imports of gold items from Thailand shot up after India increased duty on the yellow metal to discourage its import and consumption. 

bullion imports were one of the main reasons for the rise in the country's trade deficit to an all-time high of 4.8% of GDP in 2012-13. 

Gold jewellery imports from Thailand have been suspended since and the finance ministry has sought removal of gold jewellery from tradeable item under the trade agreement with Thailand.

Trade experts say it makes sense to review pacts signed before the 2008 global financial crisis. "We need to have periodic reviews to see if our private sector had taken advantage of the trade agreements. However, while it makes sense to review pacts signed prior to financial crisis of 2008 it may be premature to be judgemental about those signed after that," said Ram Upendra Das, senior fellow, Research and Information Systems for Developing Countries. 

Although trade is for trade's sake, it has to serve as an instrument of employment generation, Das added. Most FTAs have periodic review clauses in which concerns of both sides are taken on board. India can use these reviews to ensure a better deal for itself even as it does a better due diligence in the ongoing negotiations. The country has already adopted a cautious approach in its negotiations with the 
European Union in a bid to ensure that its interests are protected.