Trade, Imports, Exports for MSMEs: One of the driving factors for India to reject joining Regional Comprehensive Economic Cooperation (RCEP) agreement was that micro, small and medium enterprise (MSME) sector would suffer the most had India agreed to the member countries ambition to remove duties on around 90 per cent of the products exported to India,” PHD Chamber new President D K Aggarwal told Financial Express Online in an interview. “India has conveyed its decision at the summit not to join the RCEP agreement,” Vijay Thakur Singh, Secretary (East), Ministry of External Affairs reportedly said in a press conference in Bangkok, adding that India had significant issues of core interest that remained unresolved.
“There were a lot of items for which India had proposed an auto-trigger mechanism to protect Indian companies, largely MSMEs, from a sudden increase in dairy and industrial imports by increasing the import duty. There were more than 1,000 items where auto-trigger to safeguard businesses were asked but only 90-100 items were agreed upon, by member countries, to be put under the mechanism. This means around 900 other items would have been subjected to no safeguard. So if import increases in those items then there was no protection to Indian industry,” Aggarwal said.
India-China trade deficit was around $53 billion in FY19 while India’s deficit with potential RCEP members (including China) was $105 billion in FY19, Financial Express had reported. India entering into RCEP would have likely broadened the deficit as the country expected to have massive cheap Chinese products to be routed here.
India doesn’t have a free trade agreement with China, New Zealand, and Australia. China which exports electronics, metals, chemicals on a large scale could have affected India substantially, he added. Also, in the dairy industry where India does well, if import duty on dairy items are removed then production to Indian industry would be hit by imports from New Zealand and Australia under RCEP and hence, affecting the Indian MSME sector.
“This (not signing RCEP) will certainly encourage the indigenous trade and commerce in the country to work more for achieving your vision of $5-trillion economy. Your decision will extend a breathing life and unqualified support to retail trade, farming sector, dairy industry, steel & chemical industry, pharmaceuticals, small manufacturing sector and a large number of domestic producers,” traders body CAIT wrote to Prime Minister Modi in a letter on Tuesday.
Indian MSME sector is not competitive currently because of lack of a level playing field. For instance, the logistics cost for small businesses is 6-8 per cent higher than in other countries. “At that percentage competing with 15 other countries would have been very different and had killed the MSME sector,” said Aggarwal.