India warns developed world against protectionism

Indian commerce and industry minister Anand Sharma has warned the developed world that protectionism would only deepen the recession, even as he reiterated India's firm commitment to the process of liberalisation and economic reforms.

Addressing visiting delegates from the US Congress and the German Bundestag, Sharma noted that a crisis led to inward thinking. "But protectionism is counter-productive as it deepens recession," he pointed out. "Wherever protectionism has been resorted to, it has never helped."

The minister said there is a need to sensitise US policy makers about the actual nature of outsourcing as it is well-documented that for every job that is outsourced there are higher end jobs created in the outsourcing economies. The minister emphasised that Indian companies are a major source of employment generation in the US market. "We need to engage more not less," he added.

Sharma expressed confidence that the US Generalised System of Preferences (US GSP) scheme, which expired last December, will be revived soon by the US Congress with full and long term reauthorisation. The GSP is designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories.

Citing the adverse impact on employment in vulnerable sectors, Sharma pointed out that the US government had withdrawn the GSP benefit in respect of a number of products from India including jewellery. The benefits have not gone to any least developed countries (LDC), but to major trading partners like China and France.

Sharma said that fundamentals of Indian economy are strong and there are a slew of reforms measures in the pipeline including the national manufacturing policy and FDI in retail that will further prop up the growth trajectory. "FDI is looking good after a disappointing last year," said the minister. "We hope to make up for the lost ground this year."

Germany and the US are India's leading trading partners. Last year, the US accounted for 10.17 per cent of India's exports and 5.26 per cent of imports. Bilateral trade between India and Germany in 2009-10 was about $15.73 billion. Germany is the eighth largest investor in India with cumulative FDI totaling $3.05 billion.

"While India places great emphasis on its external sector, Indian economic growth is fundamentally domestic-demand driven rather than export-led," pointed out Sharma. "India has tended to import more than it exports. As such, its growth will contribute to the global recovery process."