India-Japan trade deficit widens post Cepa signing.

Comprehensive economic partnership agreement (Cepa) with Japan from August 1, 2011, seems to have done little good for India with trade deficit widening between the two countries and trade tilting in favour of Japan.

Commerce ministry officials told Financial Chronicle that trade deficit between India and Japan has widened from $2.7 billion in August 2010-March 2011 to $2.9 billion in same period last financial year post signing of Cepa.

Trade deficit in August 2009-March 2010 stood at $1.9 billion. India’s export to Japan went up from $3.9 billion to $4.6 billion in August-March 2011-12 while its imports from Japan went up from $6.7 billion to $7.5 billion in the comparative period.

Indian exports to Japan between August 2011 to March 2012 was higher at 17.5 per cent vis-à-vis 13 per cent increase posted by Japanese exports to India owing to textiles. But, balance of trade continues to be in favour of Japan due to a boost in export of high-end products like medical instruments and rubber to India after the agreement came into force last year, an official said on condition of anonymity.

As part of Cepa, the two countries had agreed to eliminate about 94 per cent of tariffs within ten years (about 97 per cent by Japan and about 90 per cent by India) on a trade value basis. Japan agreed to eliminate almost all the tariffs on industrial products as the agreement become operational and also made commitments on agricultural products.

“Japan’s commitment on reducing tariffs on textile, agricultural and marine products are clearly reflecting export of these commodities to Japan in the eight months of last financial year since the agreement came into force. However, as they are low value products vis-à-vis medical and optical machinery being exported from Japan to India, the trade is still in favour of Japan,” the official said. He admitted that it’s really going to take long before we see any reversal in trend, if any.

India’s major gain from this agreement has been the export of textiles, yarn and fabric that together has 2,000 articles as Japan has done away with import duties on these products with immediate effect under the agreement. Consequently, the overall export of textiles from India to Japan saw a jump of 51 per cent.

Source : wrd.mydigitalfc.com