Our tariffs not high: Kamal Nath

INDIA ECONOMIC SUMMIT 2006

Annual increases in imports from the US and the EU of more than 30 to 35 per cent prove that India's import duties are reasonable, says the Commerce and Industry Minister

Accusing developed countries of using the issue of protectionism as a bogey', Commerce and Industry Minister Kamal Nath said on Monday that India's annual increase in imports of over 30 to 35 per cent from the United States and the European Union was proof that the Indian economy was not 'protectionist'.

"Barring some items like wines and spirits where India does have high tariffs, largely tariffs in India are not high. We are unilaterally bringing down our imports duties on manufactured goods from an average 12.5 per cent at present to Asean levels. We can do more, but I want to see what we can get in return [at the World Trade Organisation]. When we unilaterally reduce duties, it is pocketed very easily [by the developed countries]," Nath said at the India Economic Summit.

The minister said India's economic engagement with the rest of the world was slated to touch $ 400 billion this year and was targeted to increase to $500 billion next year.

"The world of tomorrow will not be of tariffs but of rules of global trade," he said, adding that rule-based multilateral based trade was as important to India as it was to the US and the EU.

Referring to the structural flaws in global trade, Nath pointed out that duties on many manufactured goods in the developed countries was high.

"The import tariff on yarns in the US is 5 per cent, on garments it is 10 per cent but on coats it is 30 per cent. Similarly, the EU has no problems importing leather at zero duty from India but a leather coat attracts 35 per cent duty," he said.

Nath said that in recent years there had been an increase in the use, misuse and abuse of anti-dumping laws.

"There has been a proliferation in the number of lawyers in Brussels on account of anti-dumping. While we in India also use anti-dumping, we use it transparently. The use of anti-dumping needs to be made more transparent," he said.

The minister said that while developed countries were quick to term Indian economy as closed, it was a fact that there were hardly any branches of Indian banks in the US or the EU.

"The foreign banks have branches in India but we are not allowed to do the same. Why is it that nobody raises this concern?" he asked.

B Ramalinga Raju, Chairman of Satyam Computers, said that in addition to flagging agriculture issues at the World Trade Organisation, the Commerce Ministry should also raise the concerns of the services sector, since the sector was bogged down by issues such as mixing of immigration issues with services by some developed countries.

Agreeing with this, Nath said that immigration should not be linked with services since a two- month visa for providing a specific service was not the same thing as immigration.

He however added that agriculture was paramount concern to India, since 650 million people depended on it. "The Indian farmer is pitted against heavily subsidised American farm goods. I have often said that I can discuss commerce but not subsistence agriculture."

Hans-Joachim Korber, Chairman and CEO, Metro AG, raised the point that very often companies keen to do business in India were hampered by the different border rules which impact movement between states.

Nath said that states were now competing with each other in attracting investments, which would help to address such concerns.

"The direction is right, the question is the speed," Körber said, calling for opening up of the food sector, both basic agriculture as well as processed foods. Describing India as one of the most important food factories of the world, he spoke about his company's investment in educating farmers to ensure quality on its shelves.

"The Indian economy is driven by domestic demand, the services sector and hi-tech products," he said. "India has to work towards raising the standard of living of its middle class."

Kevan V. Watts, Chairman, Merrill Lynch International, United Kingdom described the Indian financial and capital markets as well developed, but cautioned that financial services and software alone cannot carry the entire burden of growth.

"Capacity building is critical to ensure that significant numbers of people are equipped to participate in the market economy," said R. Seshasayee, President, CII.