Need time to consider Turkey’s call for FTA, says New Delhi

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The Hindu | 02 May 2017

Need time to consider Turkey’s call for FTA, says New Delhi

by AMITI SEN/NAYANIMA BASU

India is open to considering Turkey’s proposal to negotiate a bilateral free trade agreement in goods, services and investments despite the politically volatile situation in Ankara, but needs time to weigh the potential gains for its industry.

“New Delhi wants to consider factors such as the EU’s uncertain trade relationship with both the countries and the access Turkey can provide for Indian businesses in other markets such as Russia and the Middle-East before taking a final call on the matter,” a government official told BusinessLine.

Officials are re-examining a feasibility study on the proposed Turkey-India FTA carried out earlier for the Commerce Ministry. “We will factor in the changes that have taken place in the economic and political situation subsequently and take a decision on the matter,” the official said.

The government may, in fact, go for a fresh feasibility study, another official said.

The earlier study finalised by ICRIER professor Arpita Mukherjee and her team in 2011 had pointed out that it was in India’s interests to have a time lag between the implementation of the proposed FTA with the EU and the FTA with Turkey.

This will give it sufficient time to examine the trade flows and the impact of the FTA with the EU given the fact that Turkey and India were competitors in the EU market, the report said.

“Since India’s FTA negotiations with the EU have not progressed substantially, we have to take into consideration the changed situation,” the first official said.

The political situation in Turkey is, however, not a cause of major concern for India as in the past, too, business interests did not take a big hit when things were rough. “It makes sense to respond positively to the new establishment in Turkey and help it cement its position in order to help foster a climate of stability and prosperity,” the official said.

Turkish President Recep Tayyip Erdogan, addressing a India-Turkey Business Summit on Monday, had said that it would be good to start FTA talks with India as it would add further momentum to bilateral relations.

Erdogan, however, pointed out that the bilateral trade volume was skewed against Turkey and there was a need to balance it as fast as possible. Of the total $ 6.4 billion annual trade between the countries, Turkey’s export to India was worth only about $ 650 million, he said.

While Erdogan was concerned over the sluggish Indian investments in Turkey, India has said its investors are seeking stable environment there in the wake of rising political turmoil there and other geopolitical issues, sources said.

Nevertheless, both sides have set a bilateral trade target of $10 billion by 2020 from $6.4 billion at present.

“Turkey no doubt will gain from an FTA with India as their base is low and there exists a lot of scope to increase Turkish exports given the size of the Indian market. We have to be clear about how the FTA will help Indian exports as the size of the Turkish market is small and gains would come only if we are able to use it to cater to other markets,” the official said.

For instance, India is a manufacturer of yarn, while Turkey makes fabric.

“An FTA will make sense for India, if Turkey increases its sourcing of yarn from India by removing duties and then uses this yarn to make fabric and supply to third countries,” pointed out Ajay Sahai from the Federation of Indian Export Organisations.

India would examine if big markets such as Russia and the Middle-East could be accessed by getting into joint-ventures with Turkish companies, the official added.

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source: The Hindu