China-Asean FTA may hit trade balance: Scindia

NEW DELHI: China’s free trade agreement (FTA) with the Asean bloc could adversely affect India’s trade balance with the country, minister of state for commerce and industry Jyotiraditya Scindia has said.

Rising trade deficit with China is already a matter of concern for India. The FTA will reduce tariffs on goods exported by Asean countries to China, making it more difficult for India to export its goods. The consequent decline in India’s exports to China would increase the trade deficit India runs with the country. India has been trying to widen its trade basket to include manufactured goods, basmati, rice, fruits and vegetables in a bid to bring down its deficit with China.

“The effort may have a setback due to the India-Asean FTA as goods from Asean will now cost much less to the Chinese consumers,” Mr Scindia said replying to a Rajya Sabha question on Thursday.

India is running a trade deficit close to $22 billion with China due to a sharp increase in flow of goods from the neighbouring country over the past few years. Since India’s export basket is mostly restricted to primary commodities, it has not managed a commensurate increase in its exports to the country.

China has been interested in a FTA with India, too, but the Indian industry has been opposing it for the fear of being swamped with cheap Chinese goods after tariff barriers are lowered.

Interestingly, some Asean members have already started complaining about the trade bloc’s FTA with China. The Malaysian industry has complained to the government about a sudden surge in Chinese goods following the implementation of the FTA.

While the Malaysian government has said that it cannot place a cap on imports, it is looking at other options.