Study on Impact of FTAs on the Manufacturing Sector

Impact evaluation of FTAs is a continuous process which starts even before FTA negotiations are entered into. As per preferential import data available, the extent of utilization of FTAs by the exporters of the trading partner countries is low. Before entering into negotiations with its trading partners, studies are undertaken internally, as well as through the Joint Study Group (JSG) to study the feasibility of the proposed FTAs, including their impact on the domestic stakeholders including the Apex Chambers of Commerce and Industry, Industry Associations as well as the Administrative Ministries and Departments. In order to protect the interest of the domestic industry and agriculture sector, these agreements provide for maintaining sensitive/negative lists of items on which limited or no tariff concessions are granted under the FTA. In addition, in case of a surge in imports and injury to the domestic industry, a country is allowed to take recourse to the measures such as anti-dumping and safeguards. Every FTA has a joint review mechanism which monitors the implementation of the FTA. India’s trade and economic relations with all its FTA partners have increased substantially.

As per the National Accounts Statistics, the annual growth rate (at 2004-05 prices) of the manufacturing sector in 1991-92 was negative at (-) 2.4 percent, after which the annual growth rate remained positive in successive years before becoming marginally negative at (-) 0.7 percent in 2013-14.

To address the inverted duty structure, the Union General Budget 2014-15 presented on 10th July, 2014 in the Parliament has reduced basic customs duty (BCD) on certain items.

The information was given by the Minister of State (Independent Charge) in the Ministry of Commerce & Industry Smt. Nirmala Sitharaman in a written reply in Rajya Sabha today.