Imagine Imported
Cars, Chocolate, Wine, But Without Those Rapacious Prices
Indian high-rollers fit the description well because they acquire what they want or
aspire to without letting some of the highest indirect taxes on everything
dampen their “animal spirits”.
This is as our most
dispirited Prime Minister ever puts it. That is also why they put up boards
welcoming Indian tourists in the picturesque cantons of Switzerland. Contrary
to supposition, we are good spenders when we are on vacation, even though we
know value when we see it.
Imagine though, buying a sexy new S Class Mercedes Benz
sedan for say Rs. 40 lakhs, instead of nearly a crore. This could be reality
before we get into 2014, because India is almost there in terms of a historic
free trade agreement. Officially named the Bilateral Trade and Investment
Agreement (BTIA) with the EU, it has already been in the negotiating for 7
years now.
The BTIA covers practically all the trade between the EU and
India and the sticking points have been the one-sided nature of some of the
European demands without adequate concessions of their own to the Indian ones.
So what is likely to come about first are the easy bits under a broad agreement
while negotiations will continue over more complicated and contentious areas of
bilateral commerce and industry.
Most recently, Commerce and Industry Minister Anand Sharma
met with the EU Trade Commissioner Karl De Gucht on April 15, 2013 in Brussels,
and opined that the talks were going well and that the two sides would be
meeting again in June 2013.
The EU wants India to authorise significant duty cuts on
auto, wines, spirits and dairy products besides a hike in the FDI cap on
insurance sector and a strong intellectual property regime so that they can let
us at their software. India too wants, most crucially, “data secure status”,
which will give our IT industry access to all kinds of high-end specialised
software.
The Europeans however are stuck on perceived threats of
piracy and unauthorised replication of proprietary software. But the lure of
substantial potential sales are likely to overcome their misgivings.
It must be said here that over the years since 2007, India
has, unilaterally, reduced overlapping and exorbitant import duties quite a bit,
on its own. So they have certainly moderated from their stratospheric levels,
as India walks the path to becoming less protectionist and swadeshi and more globalised and market- friendly. But as usual
there is a long way to go.
The circumstances of the EU however have drastically altered
for the worse since 2007, thereby eroding its negotiating leverage. Therefore,
Chancellor Angela Merkel of Germany, the most powerful country in the EU, who
met on the subject with Prime Minister Manmohan Singh too, thinks an
agreement is in the offing soon.
India wants more visas for its professionals, particularly
its IT wonks, to visit and work in the EU and fewer, less stringent
restrictions on what it must do on the ground here in India.
There have already been 16 rounds of negotiations since 2007,
but the pace is picking up significantly now.
From the consumer’s point of view, the goodies expected to
come in at vastly lesser cost are in the nature of a bonanza. From the balance
of trade point of view it could be a win-win for both sides at a time when the
EU does not have very much to cheer about.
The EU wants access to multiple
sectors of the Indian economy while softening its stances on regulatory,
sustainability and environmental issues. However, a few items are definitely ahead
of the rest.
The local car makers including those who have sunk
substantial investments in putting in manufacturing and assembling facilities
in India, the IMFL wallahs, the Nasik wine growers, maybe also multi-nationals
and big local operators like Cadbury, Amul, Nestle India and their ilk, may not
be too thrilled, but will have to reconcile themselves to the inevitable.
But they will get over it soon enough, when their
obstructionist lobbies seem destined to be brushed aside. Because despite the
duty cuts stacked at well over 100% on
all imported cars, wines, spirits and even chocolates, apart from duties on
duties, central excise and state taxes, the domestic manufacturers get several
concessions and advantages that can keep them ahead of the imported brigade. Of
course, they will have to shift for themselves now and stop hiding behind the
rhetoric of poor farmers threatened, livelihood issues etc.
It will mean healthy competition, modernisation,
streamlining. The competition will sometimes be between their own imported
product lines versus the India made ones, and better quality and specifications
all around.
But despite Left-wing murmurs, no real unfairness or body
blows to domestic agriculture, commerce or industry are likely that will sink
it. People who make those type of noises are living in the past or are working
their vested interest. After all, misinformation is cheap to disseminate, but
gearing up for market share may not be.
Again, it is the
consumer, and quite often the suppliers and producers also, who will benefit.
Our sizeable population of 1.21 billlion is the attraction for both the foreign
and domestic players and the potential of their buying power will overcome all
obstacles. Right now there is a great deal of unexploited demand because of
artificially high prices preventing uptake.
The two-way trade with the EU is
logged in at over $91 billion per 2010-11 figures, but if even elements of the
broad spectrum BTIA is implemented this year, the figures could double. And
that is nothing to sniff at.
(923 words)
May 26th, 2013
Gautam Mukherjee
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