The ascendency of India as an economic world power

Yesterday, I wrote that there is little possibility of India and ASEAN having FTA in near future. ASEAN leaders want more from Indian government and Indian decision makers are not too much eager to offer more on the discussion table. So, today, I got a bit shocked when I saw this news headline in Jakarta Post: India-ASEAN free trade agreement likely by May 2008, says India's finance minister. 

Jakarta Post wrote:

A long-delayed free trade agreement between India and Southeast Asian nations is expected to be concluded by May 2008 after the last few problems are ironed out, Indian Commerce Minister Kamal Nath said Tuesday.

He made the announcement after talks with economic ministers of the 10-member Association of Southeast Asian Nations. ASEAN leaders were in Singapore this week for their annual political summit.

"While the main elements of (a free trade pact) have been agreed upon, a few issues relating to preferential access for a few products remain," Nath said. He said both sides had agreed to conclude the pact in May 2008.

Indian Prime Minister is joining ASEAN leaders and he will talk to them about FTA. Before leaving India, Prime Minister Manmohan Singh called on ASEAN leaders to be more flexible so that India and ASEAN can reach in to an FTA very soon.

About the obstacles behind FTA, Forbes wrote:

Negotiations have been held up because of what ASEAN says is a list of 854 products that India wants to exclude from tariff cuts. India had submitted a list of 1,414 products, while ASEAN's target number is 400.

Officials from the 10-nation Association of Southeast Asian Nations said the grouping will not resume negotiations with India until New Delhi comes up with a better offer.

'For the time being, it's temporarily postponed because we still cannot agree on the product coverage,' Indonesian Trade Minister Mari Pangestu told reporters Monday.

Well, you might think that India should not try too much to get this FTA. I also thought this way initially too. However, Federation of Indian Chambers of Commerce and Industry (FICCI) leaders are worried that if India cannot make progress in FTA talks with ASEAN then China will fill up the vacuum. In fact, China is in a strong position when it come to doing business with ASEAN.

Economic Times wrote:

While India’s share in ASEAN trade has marginally moved up from 1% to 1.6% between 1997 and 2006, China has recorded a three-fold jump in its share to 11.4% from 3.7% during the period, it said.

FICCI has undertaken a product-wise comparison between exports of India and China to ASEAN for 2006.

For as many as 20 products out of India’s top 25 exports to ASEAN, China’s share is higher than India’s.

What should India do now? What do you think?