The Telegraph
Since 1st March, 1999
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If a week is a long time in politics, ten years is an era in economics. Thus the proposal made by Mr Atal Bihari Vajpayee to the ASEAN for a free trade area between India and the region, to be achieved over 10 years, is unobjectionable only in principle. Ten years may be too long a time for the Indian economy to wait. India cannot afford to wait that long if it is to march on the frontiers of economic development. The Indo-ASEAN relationship is a story of missed opportunities on the Indian side. There is always the apprehension that a decade-long wait will only result in more missed goals. The contrast between India and the ASEAN countries could not be more marked. The latter have very open trade rules including low tariffs. India has the opposite. The promise of Indian finance ministers to bring tariffs down to ASEAN levels in three years has yielded very little. One projection has it that at current levels of progress, it will take two or more three-year periods. There exists the persistent fear among policymakers and manufacturers that competition will result in the death of Indian manufacturing. Such a fear, real or otherwise, is grounded on the poor quality of physical infrastructure and high operating costs in India. Economic reforms have barely scratched the surface of these aspects of the Indian economy, and there is an apparent reluctance to address these problems. One positive fallout of the formation of a free trade area between ASEAN countries and India will be a push to reform these aspects of the Indian economy.

India’s keenness to integrate with ASEAN is easily explained. Saarc, thanks to continuing Indo-Pak hostilities, is a non-starter, and this leaves India a trifle high and dry in a world revolving around regional trade blocs. India is thus eager to jump on to the bandwagon of a meaningful and powerful forum. ASEAN, on the other hand, would not mind a big country with a massive investment and market potential as a force with which to counteract the growing influence of China in the region. This is helped by the perception that India is now on the right side of Uncle Sam. But these favourable factors are offset by the slow pace of economic reforms in India and a reluctance to abandon protectionism. While looking eastwards, the prime minister needs to pay greater attention to proposals originating at home. The task force headed by Mr Vijay Kelkar has suggested duty reductions. Mr Vajpayee should put a time schedule on this. Such a schedule will introduce a touch of reality to the idea of a free trade area with ASEAN. Otherwise, at the end of ten years, India may find that it has been left behind by an era.

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