As India gears up to forge a raft of balanced free trade agreements (FTAs), a Parliamentary panel has recommended that New Delhi include a review mechanism in such pacts to ensure “mid-way course correction for any asymmetries” in trade with the partners. A report by the Parliamentary Standing Committee on Commerce, submitted on Tuesday, also called for expeditious conclusion of FTAs to reap benefits.
An FE analysis suggests, in five out of six of India’s prominent FTAs, which came into force between 2006 and 2011, have exacerbated New Delhi’s trade balance. This significantly contributed to the country’s unease over getting into fresh pacts for about a decade before the government decided to sign a deal with the UAE last month. Another interim trade deal with Australia will be announced anytime now.
The panel said that India should leverage the ‘China Plus One Strategy’ to emerge as an alternative investment destination for multinational companies. The growing preference of firms located in Europe and the US to shift from China to other manufacturing bases offers a golden opportunity for India that needs to be taken advantage of, it said. India should pursue FTAs or preferential trade pacts with the countries that seek to invest here under the strategy, the report said.
Importantly, the House committee has said that the imposition of minimum alternate tax and the introduction of sunset clause for income tax relief would impact the competitive advantages of special economic zone units. “The committee recommends that the government should ensure the continuation of fiscal benefits and extension of a sunset clause to retain the competence of SEZ units,” the report said. It also added that SEZs can have the benefits of Remissions of Duties and Taxes on Exported Products (RoDTEP) scheme, which is now applicable to domestic exporters.
It has also expressed concerns over the reduction in export incentives and suggested some of the sectors that have been kept out of the purview of the government’s flagship tax remission schemes be included. The sectors include pharmaceuticals, organic and inorganic chemicals and iron and steel.
The panel also suggested that the foreign trade policy (FTP) be firmed up within the stipulated time-frame. The FTP for 2015-20 was extended by two years through March 2022 following the Covid outbreak to ensure policy continuity.
On exports, the panel said: “The committee recommends that the department (of commerce) should identify the infirmities and opt for a more focused approach in increasing market access of the sectors that exhibit a downtrend in exports.”
