Balanced trade: Piyush Goyal wants FTA to be tweaked to lower trade deficit with Japan

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India on Thursday pitched for greater Japanese investments but at the same time called upon Tokyo to reduce its huge trade surplus of about $8 billion with New Delhi and move towards “balanced trade”, hinting possibly at the need to review an existing free trade agreement (FTA) between the two sides. This is in tune with New Delhi’s new policy thrust on reducing the sticky and yawning trade deficits with some of its trading partners, most notably China. Commerce and industry minister Piyush Goyal addressed a virtual seminar for Japanese companies looking to invest in India.

He said: “You will appreciate that the world today is looking at balanced trade. And just as we have pressure from some countries to reduce our surplus with them, we would also like to work with Japan to balance the Indo-Japanese trade. So let’s work together in this spirit of partnership.”

Japan’s minister for economy, trade & industry (METI), Hiroshi Kajiyama, said, Japanese companies have over 200 investment plans for India but many of these have been delayed in the wake of the Covid-19 outbreak. Shigehiro Tanaka, Japan’s vice-minister for economy, trade and investment, cited a survey to say Japanese companies think India has great potential to be a global export hub but it has to remove obstacles such as price competition, quality issues of certain products, and weakness in its logistics systems. Elaborating on price competition, he said increasing labour costs in India and stringent rules of origin sometimes prevent companies to take advantage of the benefits of an FTA.

To ensure that issues flagged by the Japanese companies are sorted out at the earliest, Goyal said an inter-ministerial group of Indian officials, preferably of the joint secretary level, will resolve the investors’ concerns on logistics, export procedures, customs clearance and quality parametres. This group will meet 50 Japanese companies 25 of whom are already opearting here and 25 potential investors and submit their assessments with Goyal. The group will have officials from the ministries of commerce, industry, finance, railways and road transport.

While Indian imports from Japan stood at $12.43 billion in FY20, its exports were to the tune of only $4.52 billion. Japan is the fourth-largest FDI source for India, with cumulative inflows of over $33.5 billion, or 7% of the total, between April 2000 and March 2020. Massive merchandise trade imbalance has forced India to rethink its FTAs with Asean, Japan, South Korea and Malaysia, more so after its pull-out in November 2019 from the 16-nation RCEP trade deal talks. In recent years, India has been pressured by the Trump administration to bring down its trade surplus with the US. India’s main imports from Japan are capital goods, electronics, iron & steel, plastics and copper products.

Speaking at the same event, organised by Invest India, department for the promotion of industry and internal trade (DPIIT) secretary Guruprasad Mohapatra said that a proposed single-window system, with a one-stop solution for all industrial licences and clearances, will be fully functional by April 2021.

Mahapatra also said India is planning to set up the 13th Japanese industrial township in Assam, which will further promote domestic manufacturing and bilateral ties. Typically, these townships are integrated industrial parks, with ready-to-move-in infrastructure facilities, with world-class infrastructure, plug and play factories, pre-approved licences and investment incentives exclusively for Japanese companies, he added.

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