India must be “very careful and clever” while negotiating trade agreements with the United States, especially in the agriculture sector, former Reserve Bank of India Governor Raghuram Rajan said.
In an interview with PTI Videos, Rajan highlighted the risks posed by subsidised foreign produce to India's small-scale farmers.
“I think where it is much more sort of difficult (trade negotiations) is in areas such as agriculture, where every country subsidises its producers, and our producers may be relatively smaller, may have somewhat lower subsidies... unconstrained flow of agricultural products into the country may create problems for them,” PTI quoted Rajan as saying.
His comments come as India and the US concluded the fifth round of negotiations for a proposed Bilateral Trade Agreement (BTA) in Washington earlier this week. Agriculture and dairy remain politically sensitive, and India has not granted tariff concessions in these segments under any free trade agreement so far.
Calls for FDI in dairy instead of import concessions
Rajan suggested that instead of allowing more agricultural imports, India should explore ways to increase value addition for domestic producers through investment.
“For example, can we encourage more foreign direct investments from those countries (developed countries) to enhance the value added in some of those sectors, the milk for example, sort of improving the value added in our milk products, milk powder, cheese, etc, could be beneficial to our milk producers,” he said.
“Are there things we can do, rather than necessarily saying we welcome sort of more milk into the country from other countries. So all this requires very careful, clever negotiation, and I hope that is what our government officials are engaged in,” he added.
US President Donald Trump earlier said the proposed trade pact with India would be similar to the one finalised with Indonesia. However, India has pushed back against US demands for lower tariffs on agriculture and dairy imports. India has so far resisted US demands for duty concessions on agri and dairy products. It has not offered any tariff relaxations in the dairy segment under any free trade agreement so far.
The US had announced higher tariffs on multiple countries, including India, on April 2. The move was later deferred by 90 days to July 9, and subsequently to August 1.
India is pressing for the removal of a 26% additional tariff, and also wants lower tariffs on steel, aluminium, and automobile exports, which currently attract 50% and 25% duties respectively.
Rajan also spoke about the broader implications of trade tensions. “But you must remember that there are opportunities also in what is happening to the extent that India is perceived as an alternative route to some of the other regions like the United States.”
While India's manufacturing exports to the US are currently limited, Rajan believes tariff advantages could help India attract supply chains. “India's economic growth has sort of settled at a 6-7 per cent range, a fraction of percentage point maybe affected by the global sort of tariff environment,” PTI quoted Rajan as saying. “But in the longer term, this would spell opportunity for India.”
Rajan also acknowledged that India has adopted protectionist measures in certain areas. “As far as tariffs go, I think there are certain areas where India has become more protectionist, and certainly we can reverse that protectionism.
“For example, in car manufacturing, we have some advantages. We produce certain kinds of cars very well, and bringing competition in the automobile sector can actually be quite beneficial.”
(With inputs from PTI)
In an interview with PTI Videos, Rajan highlighted the risks posed by subsidised foreign produce to India's small-scale farmers.
“I think where it is much more sort of difficult (trade negotiations) is in areas such as agriculture, where every country subsidises its producers, and our producers may be relatively smaller, may have somewhat lower subsidies... unconstrained flow of agricultural products into the country may create problems for them,” PTI quoted Rajan as saying.
His comments come as India and the US concluded the fifth round of negotiations for a proposed Bilateral Trade Agreement (BTA) in Washington earlier this week. Agriculture and dairy remain politically sensitive, and India has not granted tariff concessions in these segments under any free trade agreement so far.
Calls for FDI in dairy instead of import concessions
Rajan suggested that instead of allowing more agricultural imports, India should explore ways to increase value addition for domestic producers through investment.
“For example, can we encourage more foreign direct investments from those countries (developed countries) to enhance the value added in some of those sectors, the milk for example, sort of improving the value added in our milk products, milk powder, cheese, etc, could be beneficial to our milk producers,” he said.
“Are there things we can do, rather than necessarily saying we welcome sort of more milk into the country from other countries. So all this requires very careful, clever negotiation, and I hope that is what our government officials are engaged in,” he added.
US President Donald Trump earlier said the proposed trade pact with India would be similar to the one finalised with Indonesia. However, India has pushed back against US demands for lower tariffs on agriculture and dairy imports. India has so far resisted US demands for duty concessions on agri and dairy products. It has not offered any tariff relaxations in the dairy segment under any free trade agreement so far.
The US had announced higher tariffs on multiple countries, including India, on April 2. The move was later deferred by 90 days to July 9, and subsequently to August 1.
India is pressing for the removal of a 26% additional tariff, and also wants lower tariffs on steel, aluminium, and automobile exports, which currently attract 50% and 25% duties respectively.
Rajan also spoke about the broader implications of trade tensions. “But you must remember that there are opportunities also in what is happening to the extent that India is perceived as an alternative route to some of the other regions like the United States.”
While India's manufacturing exports to the US are currently limited, Rajan believes tariff advantages could help India attract supply chains. “India's economic growth has sort of settled at a 6-7 per cent range, a fraction of percentage point maybe affected by the global sort of tariff environment,” PTI quoted Rajan as saying. “But in the longer term, this would spell opportunity for India.”
Rajan also acknowledged that India has adopted protectionist measures in certain areas. “As far as tariffs go, I think there are certain areas where India has become more protectionist, and certainly we can reverse that protectionism.
“For example, in car manufacturing, we have some advantages. We produce certain kinds of cars very well, and bringing competition in the automobile sector can actually be quite beneficial.”
(With inputs from PTI)
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