Govt reviews impact of trade pacts on economy, employment

Commerce and Industry Minister Nirmala Sitharaman said review of FTAs is a continuous process and this one was also on those lines

The government on Tuesday reviewed India's existing free trade agreements (FTAs) and their impact on domestic economy and employment generation.

The move comes after growing concerns from exporters pointed that these pacts may be helping trading partners more than India.

The ministries of Commerce and Industry, Finance and Textiles participated in the meeting where the findings of a parliamentary report on these pacts were discussed.

Chaired by Finance Minister Arun Jaitley, Chief Economic Advisor (CEA) Arvind Subramanian gave a presentation on FTAs.

Commerce and Industry Minister Nirmala Sitharaman said the review of FTAs is a continuous process and this one was also on those lines.

Merchandise exports fell for the second consecutive month in August, going down by a marginal 0.30 per cent. Exports had contracted for 19 consecutive months till May this year, before rising marginally by 1.27 per cent in June. Compared to this, during the 2008-09 global financial meltdown, the decline was for nine months in a row.

Last week, the debate over the 'correct' value of the rupee and how it affects India's exports had raged after the media reports suggested the Commerce Ministry was going to approach the Finance Ministry over devaluing the currency.

However Sitharaman had denied such claims.

Earlier, the Commerce Ministry had pushed a Cabinet note in this regard. The note has proposed that an 'official mechanism' be set up under the finance ministry's Department of Economic Affairs with representatives from the commerce ministry as well as the Reserve Bank of India (RBI). The idea is to determine the correct value of the Indian currency with an aim to boost exports, which would require the rupee to weaken against currencies of the trading nations.

While exporters prefer a weaker rupee to boost exports, economists advise caution pointing out that India is a net importer.

According to sources, in his presentation Subramanian highlighted the impact of FTAs on employment generation. It was also decided in the meeting to hold stakeholder consultations to assess the impact of these pacts on employment generation.

India has implemented these agreements with several countries including Japan, Korea and Singapore as well as the Asean group.

It is also negotiating similar pacts with several regions, including the European Union, Australia, New Zealand and Canada.

When asked whether there was any discussion related to devaluation of rupee to promote exports, Sitharaman said: "I have not said and I am not saying anything on devaluation".

"There was nothing discussed on it," she said.

Worried over continuous slowdown in exports, the Commerce Ministry is pressing for better exchange rate policy, alignment of freight rates with global standards and a liberalised visa regime to boost shipments.

As part of the strategy to boost both exports of goods and services in the long run, the ministry is working on the three important pillars -- exchange rate, visa regime and freight rates.