Somanathan said that a dose of carefully calibrated tariff protection for select sectors showing potential may be desirable
India did not join the Regional Comprehensive Economic Partnership (RCEP) due to strategic considerations, said Finance Secretary TV Somanathan, pointing at the border stand-off with China, a key member of the trading bloc. Besides, some free trade pacts India has signed have had large trade diversions and little benefit as partner countries resorted to non-tariff barriers, he said
“I am not aware of too many countries which have signed FTAs with countries with whom they have live armed conflicts," the finance secretary said. India decided against joining RCEP in 2019, which includes China and the Association of Southeast Asian Nations (ASEAN). He was speaking at a panel discussion organized by economic think-tank National Council of Applied Economic Research (NCAER) in his personal capacity.
He said there have not been many benefits from some of India’s free-trade pacts. “Also, even if free trade may promise economic efficiency in importing certain items from another country, strategic considerations including armed conflicts with certain nations would eclipse such economic gains. There are instances where economics is overwhelmed by strategic considerations,” said Somanathan, who is also the expenditure secretary.
Addressing concerns related to protectionism, he said that a dose of carefully calibrated tariff protection for select sectors showing potential may be desirable and will not make the country protectionist. “I do not think it is the policy of the government to become protectionist. But if incremental protection from a relatively moderate rate of tariff is necessary in certain sectors of the economy as a transitional measure for an infant industry that must grow up, then perhaps there is a case in some areas,” he said at the ‘India Policy Forum 2021’ organized by the NCAER.
He added that the idea is to ensure that critical supply chains are available locally and that India is not dependent on others for drugs, etc.
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