The government should adopt an 'extremely cautious approach' before signing a Free Trade Agreement with China, as the resultant tariff cuts will see the Chinese goods flood Indian markets, Industry body Assocham said on Monday.
In a study on 'India's FTA and the Indian Industry', Assocham said the government should not rush into an FTA but instead sign a Preferential Trade Agreement (PTA) initially and reduce tariffs in a phased manner.
Suggesting that the government should undertake a comprehensive consultation process with the Indian industry, the chamber has prescribed a minimum period of five years before the two countries finalise the FTA, thereby helping the domestic industry protect its business interests.
"India's tariff structures are much higher as compared to China and the FTA can flood India with China's products. The ultimate goal should be an FTA with free flow of products and capital but in view of comparative disadvantage of India's manufacturing sector, a much lower tariff structure in China and its higher degree of openness, India-China trade cooperation should start with a PTA with reduced tariff in a phased manner," Assocham President Venugopal Dhoot said.
He said the tariff regime in India is as high as 12.5 per cent compared to that of China, which is less than six per cent. "FTA between India and China might affect economic efficiency of these countries as they would exclude and discriminate other countries," he claimed.
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