APEC membership for India, important in PM's talks with Obama: Arvind Panagariya

India's membership in the Asia-Pacific Economic Cooperation (APEC) forum will likely be an important topic in Prime Minister Narendra Modi's talks with US Preisdent Barack Obama next week, according to Arvind Panagariya, the vice chairman of the Niti Aayog.

"One concrete thing I would hope would be on the agenda is India's entry into APEC, during the Modi-Obama summit," he told a roundtable at the Asia Society Policy Institute here Wednesday.

Panagariya, who advocated an outward orientation as a development strategy for India, emphasised the need to join trade agreements. "APEC is a stepping stone on the way to other trade agreements. APEC by itself is not going to get the country very far and it had to get into other arrangements," he added.

 

"If India is going to sustain a growth rate of 8-10% over a period of 20-25 years, it cannot be done without actually capturing some of the world markets through trade arrangements," he said. He further adds, "The strategy of free trade agreements becomes quite important part of the whole strategy that if you have free market within a large region, India would have the right to sell duty free into that market."

Founded in 1989 at Australia's initiative, the 21-member APEC stretches from Australia to Peru and includes the US, Russia, China and Japan representing 2.8 billion people, almost 57% of the world's gross domestic product and about 47% of global trade. It had a moratorium on new members for a decade which has now been lifted and India is actively lobbying to join it.

Modi was committed to joining the APEC and had sought Japanese Prime Minister Shnizo Abe's help when he visited India, Panagariya said.

Asked about India joining the Trans-Pacific Partnership, the trade pact pushed by the Obama administration, Panagariya said candidly, "India is below the standards that are required in the TPP."

he informed, "A lot of the things that India would need to do to be a member of the TPP, remains to be done on issues of intellectual property, labour, standards, government procurement. These are integral parts of the TPP."

The TPP agreement was signed by 12 Pacific-rim countries in February and does not include China.

While seeking to join trade agreements, India also needs to act internally on issues like trade facilitation so that goods can move in and out of the country without bureaucratic delays, he said.

One of the problems for India in international trade is the lack of large companies and that 73% of the workforce is employed by firms with 20 or fewer persons, he said. The smaller units are less productive and limited in competing on the global markets, he said.

As bigger companies proliferate, they will define the ecosystem and ensure that small and medium enterprises in their region would also become highly productive, he said.

"The big players have to compete with the best of the world markets. They will have to be constantly on their toes. They will see, the small and medium firms that are around them will do the same," he stated.