Trade experts point out that the FTA will pave the way for a combined market of over 1.7 billion people in India and Asean, with a total gross domestic product of $ 2.4 trillion.
The free trade agreement (FTA) will involve duty free trade of merchandise goods and was cleared by the Cabinet headed by Prime Minister Manmohan Singh on July 23. Singhs cabinet peers, including Defence Minister A K Antony, had expressed concern about the impact of the trade pact on plantation farmers in Kerala.
Government officials in the know confirmed that the deal has been cleared for signing at the annual meeting of Asean trade ministers at Bangkok. Commerce Minister Anand Sharma will sign the deal on Indias behalf. Senior officials of the Commerce Ministry, led by Commerce Secretary Rahul Khullar is scheduled to accompany the minister. Once the deal is inked, parliaments of Asean nations will need to ratify the pact to operationalsie it from January,1, 2010. Negotiations on the FTA were concluded on August, 2008.
The FTA is at the advanced level of completion and most of the procedural requirements associated with it has been completed, said Commerce Ministry spokesperson Rajeev Jain.
The deal is a flag bearer of Indias Look-East policy which was mooted by Singh. The 10 member Asean, accounts for nearly 11% of Indias exports and 9% of imports.
The FTA is expected to be upgraded to a Comprehensive Economic Partnership Agreement covering services and investment.
We have to remember that the proposed agreement is not an agreement in goods alone. It would cover services and investment too. FICCI, therefore, expects that Indian professionals and service providers would be able to have greater market access in the Asean region, said Ficci secretary general Amit Mitra.
A 12 member business delegation of Federation of Indian Chambers of Commerce and Industry (Ficci) will also be in Thailand to coincide with Sharmas visit. The delegation, will meet their Thai counterparts from sectors like petrochemicals, automobiles, entertainment as well as gems & jewellery.
The Asean countries imported services worth over $ 180 billion in 2007, and is seen as a lucrative as well as emerging market.
The FTA will pave the way for total elimination or reduction of duties in 90% of 5,000 items trade by India. While 489 items will not see any duty cut, highly sensitive farm products like tea, coffee, pepper as well as refined and crude palm oil will see duty being bought down in the range of 37.5 - 50%, in a period of 10 years.
From the Asean side, duties on 80% of the products traded will be completely slashed in four years from the date the deal is operational. The south-east Asian trade bloc had imported goods worth $ 936 billion in 2008 from across the globe.
The trade pact has been vehemently opposed by farmers in Kerala, which has 70% of its economy dependent on plantation sector. Three days after the FTA was cleared by the Union Cabinet, Kerala Chief Minister VS Achuthanandan wrote a letter to Prime Minister Manmohan Singh, warning of at least one million job losses in the state, if the Asean FTA is implemented. Achutanandan also met Singh in Delhi to discuss the implications of the trade pact on his state.