SAPTA NEWS

Amidst the global economic slowdown, South Asian countries are making efforts to promote intra-regional trade. India has announced that it will cut its sensitive list by a fifth to allow greater market access to its neighbours under the South Asia free trade agreement (SAFTA). SAFTA allows a duty free access to trade among the member countries. However, each member country maintains a 'sensitive list' of items that are not offered any preferential tariff cuts. The sensitive list provides protection to domestic industries which otherwise cannot withstand competition from imported goods. We fear that India's latest step will increase competition for domestic companies involved in the items removed from the sensitive list. It may also lead to shift of investments in those sectors from India to other countries. This is similar to the agony of vanaspati industry in India in the last decade. Unhindered import of vanaspati from Sri Lanka caused significant damages to the domestic players. Various small and medium-sized vanaspati companies in India operated at just 30% of their capacity, forcing many to shutdown. On the other hand as per experts, India will gain most if there is no sensitive list and total tariff liberalisation is there among SAFTA member countries. In the long run which of the two issues win and whether India emerges as a beneficiary on a whole or not is something that remains to be seen.