Sounding a note of caution on free trade pacts, ICICI Bank MD and CEO Chanda Kochhar today said there should be “greater thinking” while signing FTAs as they have yielded more benefits to India’s partner countries.
At the Board of Trade meeting here, she said India has made good progress around FTAs but “greater thinking” is required around those pacts.
“If we just look at the performance. We were analysing that between 2005-12, the FTAs that we have signed with various countries, while our exports have grown but our imports from those countries have grown more. So, actually our partner countries have benefited more from us. So when we sign the FTAs we should see what are our competitive sectors like services and we can give them more weightage,” she said.
India has so far implemented FTAs with countries like Japan, South Korea, Singapore and Asean. It is negotiating several such pacts with nations like the EU, Australia and New Zealand.
Kochhar, who is member of the Board of Trade, also said that India needs to make up its mind about the Trans Pacific Partnership (TPP), a mega trade deal among 12 countries, including the US.
“We need to protect our interests,” she said.
Industry has raised concerns about the possible impact of TPP on India’s trade.
Talking about overall exports, she said the entire world is slowing down both for exports and imports.
India needs to make its exports more competitive amid slowing global demand and depreciating currencies, she said, adding, “I think we have to pick up some sectors where we can make India the global hub in the entire value chain and the most important sector to pick up should be electronics”.
“Being the second largest imported good in India, if we can just take one of this sector as champion sector…we will actually produce in the country for consumption in India to start with later of course exports and create huge amount of employment,” she added.
Suggesting steps on financing for exports, Chanda Kochhar said the entire export credit line in India are still much smaller in terms of scale compared to many other exporting countries.
“Today even the pre-shipment credit has entire obligations of SLR and CRR which add to cost of that credit. So if we can even have pre-shipment credit qualify for non-application of CRR and SLR, I think that cost of funding for the exporters could be much lower,” she said.
She also called for making the entire export credit part of priority sector lending as it can incentivise banks to provide more export credit.
“Today all the export credit that foreign banks do, it qualifies for priority sector classification but the funding of export credit that Indian banks do does not qualify for it,” she said.
She also said that there is a need to make the entire exercise, right from invoice to duty drawback, done digitally.