Rushing into FTAs in the past without due diligence didn’t serve India well, says Piyush Goyal

The Narendra Modi government does not believe in rushing into trade negotiations because hurrying into FTAs in the past, and underselling India’s potential have ended up harming our interests, Union minister for commerce and industry Piyush Goyal said in New Delhi on Friday.

Speaking to Ashok Malik, former policy advisor, ministry of external affairs, who asked the minister why trade negotiations with the UK and the EU are proving more complicated, Goyal said, “we should never rush trade negotiations. These are going to impact the country for years and years to come.”

Goyal, also the Leader of the House in Rajya Sabha, said: “I have gone through some of the negotiations that happened 12 or 13 years ago and some free-trade agreements made before our government came to power… and I have also discussed with stakeholders, and what I find is a pretty dismal picture. I find that not adequate due diligence was done on the nation’s interests. We find that many of those agreements don’t have balance between our interests and other countries’ interests.”

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Goyal, who also handles the food and public distribution, and textiles portfolios and is a key figure in the Modi government, said “many of these (past) agreements never visualized that India could become a powerful country… So, we would negotiate from a position of weakness, assuming that India would always be what we were (12 years ago the situation that we did inherit).”

“There were also in some cases we were in little bit of a rush to enter into an FTA. This government has never done that. We enter into negotiations with our eyes wide open. We do extensive stakeholder negotiations. In fact, to the point where certain stakeholders have started telling me, you need not call us so often! We give you a carte blanche that we know the prime minister Modi’s government will look after our best interests,” said the minister.

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Goyal said “we have crystal gazed into the future and we can see that India offers the best business opportunity. And if I may dare say in the history of mankind, there’s never been a better business opportunity than what India offers in the next 25-30 years as we reclaim our lost glory.”

“And therefore, sometimes trade negotiations take time because the other side to understand what really is happening in India, how the India Story is panning out, how New India is emerging… and some people also live in a colonial mindset… Sot it takes that much more time to make them understand that ground realities have changed. What is on offer from the other side is not at all comparable to what we are offering,” said the minister.

“And therefore unless it is a very equitable, balanced… and a fair trade agreement, India does not rush into FTAs any more.

Asked to evaluate the state of Indian economy and the ‘India Story’ so far, the minister said any fair assessment must take into account the state of Indian economy that was inherited by the Modi government that had to spend a substantial amount of time and effort in taking the country out of the deep hole where it was buried by the UPA.

Goyal accused the Manmohan Singh government of losing the plot just three years into its tenure due to “coalition constraints.”

“In 1998 when Atal Bihari Vajpayee came into power, India’s situation was precarious. Even though Vajpayee ran a coalition government, from 1998 to 2004, he did bring the economy back on track. By 2004, the FDI had started coming in, inflation was down, the country had a trade surplus after many years, foreign exchange reserves had tripled.

“The government that followed was an even weaker coalition of so many parties that it was riddled with a variety of complexities and corruption scandals. Once again the economy was brought down to its knees. Growth crashed to 4-odd percent in the year 2013-14. Interest rates shot up to the skies, small borrowers paid as high as 15 and 17 per cent, inflation was in double digits between 2012-13. Banks were under stress for a lot of bad loans given possibly under political pressure so much that they started evergreening loans only to keep books intact, and the net NPAs and evergreening crossed into double digit figures, in many cases as high as 13 and 14 per cent of the banks’ credit portfolio.

“The rupee had fallen, forex reserves were stressed… so much so that in August 2013 the Rupee had fallen to 68 per dollar and our forex reserves were down to maybe six months of import. The then finance minister in his wisdom borrowed at very high interest rates. FCNRB bonds. We had to repay the $34 billion at a high interest post 2014. The UPA 2 left behind unpaid bills in terms of food subsidies, oil bonds. Inflation was up to 8 or 9 per cent. Our exports were getting stagnant.”

“The country had lost steam. Corruption scandals were tumbling out day after day, and then prime minister Singh said these are the constraints of coalition politics.”

Goyal said “Modi inherited in that sense a severe crisis in 2014. He didn’t bring it out to the fore until last month to preserve a sense of confidence and belief. We are strengthening the microeconomics fundamentals while ensuring that the last man at the bottom of the pyramid is catered to. Gone are the days when infrastructure projects are massively delayed resulting in cost overruns.”

He said “the first few years were focused on getting the economy back on track. Modi started startup India, Digital India, Make in India… Series of initiatives which I call beads in a necklace… that brought the economy back on track… India has moderated its inflation, our average inflation has dipped. The interest rates did post Ukraine war but recent trends of inflation show downward still. The economy is in good shape. Forex reserves have doubled in last few yeas. Rupee is doing better in comparison with emerging economies.”

The minister added that “1.4 billion people with their basic needs taken care of are now aspirational. They want better things in life. Women are driving greater demands for microwaves, washing machines etc.. All in all, a young, aspirational India is driving demand, and that’s happening because of strong leadership at the centre. We strongly believe that subsidies cannot run the country for a long period of time. It can give a kickstart, but economy will be taken forward by competitive advantage. The new India is in a position of strength. This is the new India that Modi has offered to the world, and $25 to $30 trillion will be added to the GDP in the next 25 years, make no mistake.”

On the challenges faced by India at the WTO, Goyal said “PM Modi and his team will ensure that Indian business does not suffer. India is on top of this thing. India and US had seven recurring disputes at the WTO. Over the last two years, we have worked relentlessly to work these out bilaterally with US trade representative Katherine Tai, and through effort and TRUST.. We have been able to resolve all seven disputes bilaterally. Two countries who had so many trade disputes, now have zero.”

He didn’t agree with the notion that the WTO is suffering from a ‘midlife crisis’, saying, “I see this more as an organisation getting into adulthood. For all its faults, WTO has played an important role in setting robust rules of business. A platform for dialogue, debate and solutions as they arrive. India is very much engaged with the partner countries to ensure that the guiding principles are respected and maintained.”