Lifting of western sanctions on Iran will present an opportune time for India to start negotiations on inking a preferential trade pact with Tehran, which can fill up the demand gap for Indian exporters in many other economies, said the Associated Chambers of Commerce and Industry of India, also known as Assocham.
"Lifting of international sanctions on Iran provides an opportune time to start dialogue on India-Iran preferential trade agreement. This should encompass trade, investment and services. A preferential trade agreement with Iran will help India expand the volume of exports to Iran, particularly of pharmaceuticals, iron, steel and auto components. Also, Iran could serve as an outlet for Indian goods to countries in Central Asia and Afghanistan," the chamber stated.
Unlike Pakistan, which has a limited preferential trade pact with Iran, India can seize a new opportunity with the easing of sanctions and sign a trade pact with the key West Asian nation, the Indian daily Economic Times reported.
The analysis by Assocham reveals that the PTA with Pakistan is focused on few commodities and marginal preferential customs duties and has not strengthened trade relations between the two countries. In fact, trade turnover between Iran and Pakistan has shrunk, the chamber claims.
According to the Economic Times, the timing of Iran-Pakistan PTA was also not right in the wake of full blown sanctions squeezing the Iranian economy.
Pakistan-Iran trade started declining gradually from $1,321 million in 2008-09 to a mere $218 million in 2013-14. Pakistan's exports to Iran in 2013-14 declined to $53 million from $97.7 million in 2012-13.
Iran proposed a preferential trade agreement with India when the head of Trade Promotion Organization of Iran, Valiollah Afkhamirad, met with the Additional Secretary to India’s Ministry of Commerce and Industry, Rajani Ranjan Rashmi, in March. The matter resurfaced during the recent visit of India’s Commerce Secretary Rajeev Kher to Tehran to attend the first meeting of the joint working group of the two countries, ISNA reported, citing Delhi-based Press Trust of India.
Iran currently has PTAs with nine countries, including Pakistan, Tunisia, Bosnia, Uzbekistan, Kyrgyzstan, Syria, Venezuela, Cuba and most recently Turkey.
The PTA with Turkey was signed in January 2014 and went into effect in January 2015. According to the agreement, each side agreed to reduce tariffs on a list of imports from the other side. The list includes 142 Iranian products and 120 Turkish goods. Both sides have also agreed to revise import tariffs or change some items in the list every three months to protect their domestic industries.
According to Trade Promotion Organization of Iran, Iranian products included in the PTA accounted for $84 million of Iran’s non-oil exports to Turkey between January and May 2015. This is while Iran exported only about $35.5 million worth of similar items in the preceding five-month period (August-December 2014).
Furthermore, Iran's trade deficit with Turkey during the same period declined $44 million compared to the preceding period thanks to the PTA. Iran registered a trade deficit of $136 million with Turkey during August-December 2014. The deficit shrank by $44 million to $92 million during the corresponding duration in 2015.
"With the rest of the world facing a severe demand slowdown, Indian exporters can leverage the Iranian consumer sentiment which has been pent up for the last several years. As Iran and the US work out the finer details of lifting of sanctions, India should enhance its engagement with Iran and be ready for the opportunity which is set to arise in the near future," said Assocham Secretary-General D S Rawat.
Iran's trade with India in 2014-15 totaled $13 billion. In 2011-12, before sanctions hit, it was more than $16 billion—a measure of the ground that may be recovered, the chamber said.
Assocham is one of the apex trade associations of India representing the country's interests of trade and commerce and acts as an interface between industry, government and other relevant stakeholders on policy issues and initiatives.
