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A study of the India-Thailand free trade agreement by the Federation of Indian Chambers of Commerce and Industry has indicated a pressing need to address the disabilities suffered by the Indian industry in terms of high cost of production, higher import duties, infrastructure service cost and huge interest rate differential compared with Thailand.
The survey, which took into consideration responses by 35 companies whose products had been included in the list of 82 early harvest items of import from Thailand, reveals that internal cost disabilities are eroding the competitiveness of the domestic companies vis-à-vis Thai imports.
Among a host of other issues, it points out that India stands at a disadvantage as the power cost in Thailand at Rs 2.50 per kwh is much lower to India's Rs 5.50 per kwh. Further, it mentions that the average interest rate in Thailand at 4-5 per cent is also lower than India's rate of 13 per cent.
Ficci has done a comparison of import duties on certain raw materials in both countries. This reveals that major inputs like glass parts and chemicals (used in CPT industry) can be imported duty-free into Thailand but attract a 15 per cent duty when imported by India.
Similarly, alloy steel and stainless steel (used in transmission assembly) attract a 5 per cent higher import duty in India compared with Thailand.
Also, the survey points out that the inverted duty structure, which certain industries like colour picture tube, electric fans and transmission assembly are facing, may lead to Indian companies sourcing products from Thailand (48 per cent) or setting up their manufacturing bases in Thailand (21 per cent) in the FTA regime.
The survey says the FTA is expected to help Indian companies in gaining a foothold in east Asia but unless the cost disadvantages that the Indian industry faces in terms of higher import duty on raw materials, lack of adequate infrastructure and labour laws are removed, the domestic industry will find it difficult to meet the strong competition offered by imports.
It also says that the Indian industry is not unaware of the problems and are looking to employ measures like improving productivity and cost-cutting, efficiency in the use of raw materials and outsourcing to make up for the drawbacks.
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