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Title:The fear about China justified: Nirmala Sitharaman

News Paper

Commerce & industry minister Nirmala Sitharaman has her hands full, dealing with crucial portfolios related to foreign direct investment (FDI) and international trade. In an interview to TOI, she strikes a note of caution about China in the ongoing negotiations for Regional Comprehensive Economic Partnership (RCEP), which will create the world's largest free trade area. Sitharaman blames global demand slump for the decline in exports over the past 10 months. She also discusses prospects for next month's WTO ministerial meeting, while suggesting that there are signs of a pick-up in domestic investment. Excerpts:

When it comes to RCEP, There is a lot of fear in industry about China. Is the fear justified and how are we dealing with it?

The fear is justified because our trade deficit with China is so huge and increasing. That's why we have taken a calibrated position. We have taken a three-tiered position for offers. For Asean countries, we may have an offer because we have an FTA with them. Then, among the Asean Plus countries, with which you already have an FTA, such as Japan and Korea, you have to look at from the point of view of what has been agreed with them and can we be in that range. Then countries like China and Australia come, where we don't have FTAs. China is big and is present in the Indian market in a big way and with which we have a huge trade deficit, you really can't open up much. So, you are looking at bottom line offer.

When do you expect investments to pick up, especially when there are several new measures on FDI?

FDI is showing an upward movement. Prime Minister's visit to various countries is becoming a catalyst, resulting in FDI from those countries. Before Diwali, we simplified the rules even further but no new policy changes were made. Domestic investment is also catching up. There was some problem with raising credit. Banks have been going through a bad patch and they were wary even with credible investors. There is a change in the last few months and there is a pick-up.

Despite several steps being announced, industry still complains about things not happening in some areas like tax administration. Is there a communication gap or are more steps required?

Within a year, the number of steps taken by various ministries are there for everybody to see. Unfortunately, the expectation is about more to happen and within 24 hours. Now that they know there is a government that is responding, more is being asked for. But time does pass between one action and another because you have to work within the system. That (the demands) shows that so much was not done earlier, which could have been done. These were essentially non-controversial things that could have happened. Now the foundation is being laid and it can be frustrating because it takes a lot of time. It doesn't show up as this is happening on the ground and people want things to show on top.

While most economic parameters are looking healthy, exports are a worry given that they have been down for 10 months. What are we doing about it?

Exports are down and there is no hiding it. Internationally, demand has fallen as economies are contracting - look at Brazil and Russia. As a result, globally demand is low. Even China's exports are falling. We have announced a package under Merchandise Exports from India Scheme (MEIS) to help some sectors. Interest subvention is yet to be taken up by the cabinet but if it comes through, there will be some more relief. We need to find new markets. We have identified some markets in Africa. We are looking at project exports. China is not willing on many products but it is looking for generic drugs. They are also looking for services in far-flung districts. So, there are newer ways of approaching your export capabilities. That may take a bit of time to show results.

With several agreements such as Trans Pacific Partnership, people are writing WTO's obituary and there is an increased fear that the developed countries would want the Doha Round to be on the backburner...

India strongly believes in multilateral institutions like WTO. Quite a few elements of the Doha Development Round are yet to be fulfilled. What was agreed in Bali will have to be fulfilled. Nearer Nairobi we will have to ensure that our food security concerns are addressed. We have fought to get the peace clause, we will ask for a permanent solution. We have agreed on ratification of the trade facilitation agreement. From among the Doha issues, on LDCs, India has fulfilled 98% of its obligations. India is moving forward with a positive agenda and we are not being obstructive in any way and we want to engage with all WTO members.