Prof. Rupa Chanda’s study calls for reform measures to boost manufacturing & services competitiveness and leverage FTAs well through trade in goods, services & investment
10 March, 2016: A report submitted to the Department of Economic Affairs, Ministry of Finance on Free Trade Agreements and their impact on India, by Professor Rupa Chanda, faculty from the Economics & Social Sciences area at IIM Bangalore, has been cited in this year’s Economic Survey. The report is titled, ‘Impact Analysis of India’s Free Trade Agreements’.
The chapter in the survey covers Preferential Trade Agreements, specifically India's Free Trade Agreements (FTAs), their trends, India’s experience with a few of its FTAs, their impact (based on updated data and methodologies), trends in PTAs around the world, etc. India has made use of FTAs as a key component of its trade and foreign policy. In the context of this trend and the increased scope and depth of these FTAs which today comprise goods, services and investments and also many other trade-related issues, the report says: “An earlier study on FTAs, commissioned by the Ministry of Finance and authored by Rupa Chanda of the Indian Institute of Management Bangalore, notes that there are differences in the coverage of products and degree of integration across recent FTAs”.
Highlighting the Impact Analysis of India’s Free Trade, the report mentions Dr Rupa Chanda’s work again, stating that: “The author, using a before and after comparison for selected commodities under selected FTAs, concludes that the country has not effectively made use of the trade agreements to increase its exports. The author finds a significant increase in imports through the Most Favoured Nation (MFN) route, and recommends relaxation of structural and regulatory factors to promote exports”.
Dr Rupa Chanda’s paper discusses the various kinds of regional and bilateral agreements India has entered into in the past two decades, including free trade agreements (FTAs), preferential trade agreements (PTAs), comprehensive economic cooperation and economic partnership agreements (CECAs and CEPAs), the concerns regarding the benefits of these agreements and the competitiveness challenges they pose. It focuses on five bilateral integration agreements signed by India, namely those with ASEAN, Japan, Korea, Singapore and Thailand. Specific sectors under focus include iron and steel, automotives, chemicals, electronics, capital goods, textiles, pharmaceuticals, and gems & jewellery. It analyzes India’s merchandise and services trade as well as investment flows for the 2000-01 to 2013-14 period with the selected partner countries.
Her analysis reveals that in the context of goods trade, there has been limited leveraging of the FTAs by India due to issues of coverage, rules of origin, declining preference margins under FTAs, third country competition effects and generalized issues of manufacturing competitiveness. Domestic factors that determine manufacturing competitiveness are the main contributors to India’s deteriorating merchandise trade balance with the partner countries rather than FTAs per se.
The analysis also indicates that certain issues need to be looked into by the government, such as whether these FTAs have contributed to an inverted duty structure in certain sectors, to what extent NTBs may be undermining preferential access gained through tariff reductions under the FTAs, how to better secure India’s trade interests by revisiting the concession schedules and coverage of products under these agreements and instances of rules of origin violation and the differential implications of these rules for different industries.
The report also points out that, in the context of services, there has been little or no gain so far (except with Singapore), mainly because the post-FTA period has not been sufficiently long in most cases. With regard to investments, the study finds that there is scope to use the FTAs to increase inward investment from these countries and that this has been constrained by the non-conducive business environment and back and forth on important policy issues such as taxation in India. There is also potential to increase outward investment to the FTA partners with benefits for both goods and services trade.
Overall, the broad conclusion drawn in Dr Rupa Chanda’s study is that ultimately, domestic policies and reform measures are essential for boosting manufacturing and services competitiveness and for better leveraging of these FTAs through trade in goods, services and investment. In fact, FTAs can be used to push for such reforms.
To view Dr Rupa Chanda’s full profile, please go to: http://www.iimb.ac.in/user/48/rupa-chanda
Prof. Rupa Chanda’s study calls for reform measures to boost manufacturing & services competitiveness and leverage FTAs well through trade in goods, services & investment
10 March, 2016: A report submitted to the Department of Economic Affairs, Ministry of Finance on Free Trade Agreements and their impact on India, by Professor Rupa Chanda, faculty from the Economics & Social Sciences area at IIM Bangalore, has been cited in this year’s Economic Survey. The report is titled, ‘Impact Analysis of India’s Free Trade Agreements’.
The chapter in the survey covers Preferential Trade Agreements, specifically India's Free Trade Agreements (FTAs), their trends, India’s experience with a few of its FTAs, their impact (based on updated data and methodologies), trends in PTAs around the world, etc. India has made use of FTAs as a key component of its trade and foreign policy. In the context of this trend and the increased scope and depth of these FTAs which today comprise goods, services and investments and also many other trade-related issues, the report says: “An earlier study on FTAs, commissioned by the Ministry of Finance and authored by Rupa Chanda of the Indian Institute of Management Bangalore, notes that there are differences in the coverage of products and degree of integration across recent FTAs”.
Highlighting the Impact Analysis of India’s Free Trade, the report mentions Dr Rupa Chanda’s work again, stating that: “The author, using a before and after comparison for selected commodities under selected FTAs, concludes that the country has not effectively made use of the trade agreements to increase its exports. The author finds a significant increase in imports through the Most Favoured Nation (MFN) route, and recommends relaxation of structural and regulatory factors to promote exports”.
Dr Rupa Chanda’s paper discusses the various kinds of regional and bilateral agreements India has entered into in the past two decades, including free trade agreements (FTAs), preferential trade agreements (PTAs), comprehensive economic cooperation and economic partnership agreements (CECAs and CEPAs), the concerns regarding the benefits of these agreements and the competitiveness challenges they pose. It focuses on five bilateral integration agreements signed by India, namely those with ASEAN, Japan, Korea, Singapore and Thailand. Specific sectors under focus include iron and steel, automotives, chemicals, electronics, capital goods, textiles, pharmaceuticals, and gems & jewellery. It analyzes India’s merchandise and services trade as well as investment flows for the 2000-01 to 2013-14 period with the selected partner countries.
Her analysis reveals that in the context of goods trade, there has been limited leveraging of the FTAs by India due to issues of coverage, rules of origin, declining preference margins under FTAs, third country competition effects and generalized issues of manufacturing competitiveness. Domestic factors that determine manufacturing competitiveness are the main contributors to India’s deteriorating merchandise trade balance with the partner countries rather than FTAs per se.
The analysis also indicates that certain issues need to be looked into by the government, such as whether these FTAs have contributed to an inverted duty structure in certain sectors, to what extent NTBs may be undermining preferential access gained through tariff reductions under the FTAs, how to better secure India’s trade interests by revisiting the concession schedules and coverage of products under these agreements and instances of rules of origin violation and the differential implications of these rules for different industries.
The report also points out that, in the context of services, there has been little or no gain so far (except with Singapore), mainly because the post-FTA period has not been sufficiently long in most cases. With regard to investments, the study finds that there is scope to use the FTAs to increase inward investment from these countries and that this has been constrained by the non-conducive business environment and back and forth on important policy issues such as taxation in India. There is also potential to increase outward investment to the FTA partners with benefits for both goods and services trade.
Overall, the broad conclusion drawn in Dr Rupa Chanda’s study is that ultimately, domestic policies and reform measures are essential for boosting manufacturing and services competitiveness and for better leveraging of these FTAs through trade in goods, services and investment. In fact, FTAs can be used to push for such reforms.
To view Dr Rupa Chanda’s full profile, please go to: http://www.iimb.ac.in/user/48/rupa-chanda