By Vipin Agnihotri
The Chinese Dragon is on a new invasion mission, but this time in disguise. After becoming India’s third biggest trade partner, China now wants to enter into a Free Trade Agreement (FTA) and get a Market Economy Status (MES) from India.
In my opinion, both FTA & MES are sensitive issues that need greater deliberations, primarily due to reasons both political as well as economic. Entering into a FTA could create mayhem in Indian industry’s profit margins, as ‘Made in China’ products are already economical than the cheapest Indian products, granting MES would further entangle the situation.
It is worth mentioning in this regard that till now, prices of Chinese products in the US or European market are used for calculating dumping, but the grant of MES would make the Chinese domestic market prices applicable for calculation of dumping and this would refrain India from accusing China of flooding Indian markets.
According to experts, till the time there is complete transparency, there is no need for a FTA or granting MES. As a matter of fact, trade can always be done without that. As per the recent FICCI report, the Chinese Renminbi is 25-40 per cent undervalued against the US dollar and there has been barely any appreciation over the past one-year.
In addition, lower rate of interest at 2.8 per cent, inflation at about 3 per cent and scores of subsidies extended by the Chinese government to the industry contribute towards lowering the cost of production drastically in comparison to India. Because of all this, the Indian business is already suffering both in the domestic as well as international markets. Therefore, going for either of the two, would be nothing less than a blasphemy, causes of which could be very severe, remains the bottomline.
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