New Delhi: The free trade agreements that were signed in the last 25 years have had a “tough experience” for India as they adversely impacted the domestic supply chains while even getting hollowed-out in some cases, External Affairs Minister S. Jaishankar told India Inc. Friday.
The minister also said he does not believe in the “old mantras” of globalisation in which it was a norm to sign FTAs.
“The experience in the last 25 years has been very tough. To a large extent we were dealing with non-market factors at work and as a result we have seen in many cases our domestic supply chains very badly affected. In some sectors actually they got completely hollowed out,” Jaishankar said at a session on ‘Future of India’s Economic Diplomacy’ at the annual general meeting of Federation of Indian Chambers of Commerce & Industry (FICCI).
He said those economies or countries with which India signed FTAs in the past have been “very very protective” of their own supply chains and MSMEs even as they raised several non-tariff barriers to trade.
“They all have business cultures which are an overlay over the economics…. We got to get real about this. That’s why I have some discomfort with the old mantras of globalisation that said the more FTAs you do, the more competitive you become, the more you open up, the better for you…. We had some of those debates in 2019,” Jaishankar said.
He added, “This is a government which listens…. The fact that we are pushing for reviews of FTAs today with many partners actually underlines that. When it comes to new FTAs, we are very prudent. And this is where the Ministry of External Affairs comes in.”
Jaishankar said in order to sign a trade pact today partners need to have “strategic convergences” and “business comforts”.
“In a few years from now we will end up with a better set of FTAs,” he added.
India is presently looking to conclude FTAs with Australia, United Arab Emirates (UAE) and European Union, among others.
In the last two decades India signed trade agreements with Singapore, Japan, Korea, Malaysia and Association of Southeast Asian Nations (ASEAN), among others.
“Today we have to look at deeper domestic supply chains because we can no longer count on the world,” Jaishankar said, adding that “We were over-exposed.”
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Beyond China-Plus-One
According to Jaishankar, Indian businesses should not reduce itself to a ‘China-Plus-One’ strategy and come out with their own business plan to address the challenges of the Covid-19 pandemic.
“We should be asking ourselves why we should have seven, eight, nine per cent growth for a considerable period. Why don’t we have the deep strengths that you see in East Asia or Southeast Asia? Why is it that our MSMEs haven’t developed? Why is it that our own domestic supply chains haven’t developed…. There are basic issues we need to look at,” he said.
He said the country has to send out a message to the world that India is a “manufacturing friendly economy” by carrying out some economic reforms.
Exhorting Indian businesses to be more upfront about the issues that they face in the outside world, Jaishankar said this will enable the government to represent them better.
Afghanistan a concern, Pakistan different category
Addressing Indian businesses, Jaishankar Friday also said that “Afghanistan is not the only trouble in the neighbourhood”.
“At some point the Americans were going to leave Afghanistan. Obama pushed for it and he almost had his way.… At one level, it’s not a surprise. It’s actually a collapse of confidence. That’s really what you saw in Kabul on August 15,” he said, adding that as a neighbour, India is “concerned”.
The external affairs minister said the world is willing to help in terms of humanitarian issues but otherwise everyone is observing a “wait and watch” approach on the Taliban dispensation.
On the border standoff issue with China, he said “they are not following agreements which they had…. So it’s like a party which has violated a contract”.
He said India’s ties within the neighbourhood, be it Bangladesh, Sri Lanka or Maldives, are going well, adding that “Pakistan is a different category”.
On the issue of India supporting projects abroad by way of Line of Credit, Jaishankar said the country has at present 300 active lines of credit of about $30 billion involving about 600 projects in about 70 countries across the world. Apart from this, India gives grants to about 12-13 countries to assist in infrastructure project development.
“These give a platform to Indian companies to go out and execute complex projects,” he said.
(Edited by Saikat Niyogi)
Also read: Free Trade Agreements haven’t served India’s economy well, says S. Jaishankar