India to Oppose Any U.S. Move Toward Protectionism

By Rakteem Katakey and Subramaniam Sharma

Feb. 20 (Bloomberg) -- India will oppose any move toward protectionism in the U.S. as Asia’s third-biggest economy spends more to stimulate demand to counter a drop in exports and factory output.

“We are already witnessing signs of protectionism in the world’s biggest economy,” Pranab Mukherjee, acting finance minister, said at a conference in New Delhi today. “We will need to argue against this trend at the international fora.”

Mukherjee’s statement follows similar concern raised by World Trade Organization Director-General Pascal Lamy earlier this month and pledges on closer scrutiny of national trade policies to guard against new barriers. Lamy has cautioned against protectionism, including a “buy American” clause in draft U.S. economic-stimulus legislation.

Economic expansion in India may slow to 7.1 percent in the year to March 31, the weakest pace since 2003, according to the government. India’s industrial production fell the most in almost 16 years in December and exports declined for a second straight month in November as the global recession damped demand.

The World Bank forecast a 2.1 percent decline in global trade this year, the first drop since 1982, after 6.2 percent growth in 2008. The WTO estimates last year’s growth at 4 percent.

The U.S. accounted for about 61 percent of India’s software and related services exports of $31.3 billion in the year ended March 31, 2007, according to the Web site of the National Association of Software and Service Companies.

Export Destination

North America is estimated to have contributed 16 percent of India’s exports in the year ended March 31, 2007, according to the Planning Commission, a government body that formulates five- year plans. Imports to India from the region accounted for 7.4 percent of the total in the period, it said.

Prime Minister Manmohan Singh is counting on interest rate cuts and steps including a farm loan waiver, the increase in salaries of 5 million government employees by 21 percent in the past nine months, reductions in some taxes in December and an extra spending of 1.5 trillion rupees ($30 billion) to stimulate the economy.

The government is making all efforts to ensure flow of credit especially for consumption, trade and investment, Mukherjee said today.

Jobs should be protected even if that means some reduction in compensation, Mukherjee said. India has asked state-controlled companies to help “maximize” employment, he said.

To contact the reporters on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net; Subramaniam Sharma in New Delhi at ssharma@bloomberg.net.
Source www.bloomberg.com