Narendra Modi's foreign policy to strengthen SAARC ties.

NEW DELHI: The Narendra Modi-led government will work on increasing imports from Saarc member-states to narrow the large trade surplus in India's favour.

Modi's invitation to Saarc nation heads for his swearing-in ceremony today has given a fresh impetus to India's ties with the seven nation regional grouping. With Pakistan Prime Minister Nawaz Sharif accepting Modi's invite, the commerce department is hoping that the visit will lead to normalisation of trade ties between the two countries, including the acceptance of India's long-pending demand of a non-discriminatory market access (NDMA).

"Pakistan and India have a done deal on non-discriminatory market access as far as the commerce ministries of the two sides are concerned. We are hopeful that with easing of political tensions, the trade pact will get signed very soon," said a commerce department official.

The Bharatiya Janata Party's manifesto for the just-concluded Lok Sabha elections spoke of strengthening regional forums like Saarc and Asean. Granting India the most favoured nation status—or the non discriminatory market access if one were to use a less politically sensitive term—would clear the hurdle for full implementation of the South Asia Free Trade Area (Safta).

"The NDMA will augur well for the Safta agreement as then it will be implemented in letter and spirit and we will be in a position to get other countries on board. With political tensions easing, there is no reason why Pakistan will not consider granting NDMA," said Ram Upendra Das, professor at the Delhi-based think tank Research and Information System for Developing Countries.

The two sides had agreed to a roadmap in September 2012, according to which India was to bring down its sensitive list under Safta to 100 by April 2013, after Pakistan grants India MFN status by December 2012. Pakistan missed the December deadline.

A meeting of the Pakistan cabinet scheduled in April on giving India non-discriminatory market access was cancelled as Islamabad wanted to engage with the new Indian government. India had shared a non-paper, listing 100 sensitive items on which it will not offer concessional tariffs instead of 614 at present.

In return, Pakistan is likely to allow 1,209 items that are currently banned from India, besides opening up the land route for trade for all items against just 137 allowed at present.

The commerce department has internally flagged the large trade surplus with these countries and may hold industry consultations to boost imports from Saarc nations— Afghanistan, Bangladesh, Bhutan, Maldives, Sri Lanka, Pakistan and Nepal.

"We need to import more from our South Asian neighbours. We have very large trade surpluses with all these countries. If we don't balance it beyond a point, their purchases from India may also get affected. It is the same problem as what we have with China," said a commerce department official.

India's exports to Saarc registered a 14.71% growth in 2013-14 at $17.3 billion. While South Asia accounts for 5.5% of India's exports, imports from the region have a share of just 0.55%.

India's imports from the region declined 8.31% in the last fiscal at $2.4 billion, leaving a trade gap of $15 billion. The government will also work on increasing services trade from the region, essentially tourism and medical tourism by providing multiple entry visas.

"If trade has to be sustainable, we need to import more from our neighbours. Our business communities should go there and find out what you can buy. We will speak to the industry on this," the official quoted earlier said. Saarc nations are negotiating to reduce the sensitive list, address the non-tariff barriers and implement trade facilitation measures that include smoothening of customs procedures.

India provides duty-free quota free access to all items barring just 25 products to the least developed countries in the group under Safta. The Safta agreement came into force on January 1, 2006. It required the developing countries in South Asia (India, Pakistan and Sri Lanka) to bring their customs duties down to 20% in the first phase of the two-year period ending in 2007 and to zero by 2016 in phases.

In 2012, India had reduced its sensitive list from 868 to 614 products, on which tariff concessions will not apply. India has the shortest sensitive list among these nations after Maldives.

Source : economictimes.indiatimes.com