Year: 2024

President of US-India Business Council (USIBC) Nisha Desai Biswal has said India should present its growth vision and why businesses should look to invest in the country at a time when the global economy is beset with challenges.Citing media reports of challenges facing the Indian as well as the global economy, Biswal said the same challenges could be seen as opportunities. She lauded the recent reforms announced by Indian Finance Minister Nirmala Sitharaman, saying they would address concerns about flagging FDI and make the country attractive for investments.”The recent economic reforms announced (in India) have assured global investors that the Modi government is very seized with managing this economy and bringing India back into a more robust growth scenario,” she said.

Indian Prime Minister Narendra Modi is scheduled to visit the US later this month. Biswal, 55, said the USIBC members are eager to hear from him.”There’s a great deal of hope and expectation that Prime Minister (Modi) with the robust mandate that he has and with his track record for being able to make bold, decisive moves – which we’ve seen on a number of different fronts – India will be able to come out of this in a much stronger position,” said Biswal.

She further added “The (next) six to 12 months are going to be really critical. You have a UK that right now is very focused on Brexit. What the impact of Brexit is going to be on the UK economy… There is some economic uncertainty in other major markets as well,” Though India can benefit from the changing global markets, Biswal noted, it can do so with major reforms.”India has an opportunity to take the broader challenges that are besetting the global economy and say, ‘here’s what we are doing’ and articulate a very clear and compelling vision to attract investment,” she added. Biswal said some of the protectionist elements in Indian policies could be looked into.

She lauded the recent reforms announced by Indian Finance Minister Nirmala Sitharaman, saying they would address concerns about flagging FDI and make the country attractive for investments.”But what investors are looking for is a certainty and stability of economic policies that project the vision for India’s economy over the next five years and beyond. In this more volatile global climate, investors are looking for a safe harbour for their investment,” Biswal said.

India, she asserted, needs to project a strong and consistent policy direction that will guide it over the next five years.It needs to create policy and regulatory coherence.Biswal said government reforms should be implemented with great coherence to ensure separate policies are not clashing with each other.” That policy stability and coherence will reassure investors and attract for investment,” she said. She observed more topdown direction and coordination across the board would reassure the global investor community that India is the bet for the long-term that they should be making right now.” While we’re still not quite there, I think some really important positive steps have been announced over the past two weeks,” Biswal said.

Observing that the Indian economy is driven by domestic consumption, Biswal said now was the time for the country to foster export-oriented growth”India would benefit from a more open and liberalised trade policy that allows companies to make in India and export globally that eases restrictions on local content. I think India is taking some steps on that. I know that they announced 100 per cent FDI in contract manufacturing. I think that’s a big step,” Biswal said.

India’s exports shrank for the first time in nine months in June as global trade tension hit shipments and the country braced for the impact of the US withdrawing some benefits. Exports shrank 9.71% last month to $25.01 billion while imports declined 9.06%. The trade deficit narrowed to $15.28 billion from $16.6 billion a year ago, data released by the government showed.

Exports to China fell by a sharp 14.1% as the country struggled with the impact of the trade war with the US — its GDP growth slowed to a 27-year low of 6.2% in the June quarter. India’s shipments to the United Arab Emirates fell 15.31% and those to Hong Kong dropped 9.68% in June.

“The decline in exports in June is due in large part to a base effect of an extraordinarily good month in June 2018,” said commerce secretary Anup Wadhawan, adding that the decline was also consistent with certain global trends, which have impacted exports in recent months.

“The United States Tariffs are having a major effect on companies wanting to leave China for non-tariffed countries,” US President Donald Trump tweeted.

The decline in crude prices also weighed on petroleum exports. The last time exports contracted was in September 2018, when they fell 2.15%. Data showed a decline in shipments for 21 out of 30 sectors with the steepest fall registered in gems and jewellery, engineering goods and petroleum products in June. Healthy exports are key to the government’s plan to revive the economy. “The temporary shutdown of ONGC Mangalore Petrochemical Ltd for maintenance has adversely impacted exports of petroleum products,” the commerce ministry said in a statement. “Jamnagar refinery also experienced a routine maintenance related disruption in June 2019.”

Global trade is projected to grow at 2.6% this year — a full percentage point below the previous forecast. China’s June exports fell 1.3% while imports shrank 7.3%, explaining the sharp drop in shipments from India.

“This is a reflection of sluggish global demand and rising tariff war,” said Federation of Indian Export Organisations president Sharad Kumar Saraf. “The high exports base of June 2018 contributed in no less measure. The softening of crude and steel prices also pulled down exports.”

The US-China trade war and developments in Iran further aggravated the situation, he said.

Wadhawan said there is a likelihood of exports improving in the coming months. Engineering goods have been affected because of a fall in the global prices of steel, according to the ministry.

Oil imports declined 13.33% to $11.03 billion while gold imports rose 13% to $2.69 billion from the year earlier. The increase in customs duty on gold in the budget could dampen imports.

Electronics goods, another major import item, saw a 1.66% decline in June. Non-oil and non-gold imports fell 9% to $26.5 billion, indicating weak domestic demand.

The US terminated preferential tariffs to India under the Generalized System of Preferences (GSP) effective June 5. While officials had said the move will not have an immediate impact on India’s exports, experts said there are some signs of this. “Though it is too early to comment on the GSP impact, a decline in gems and jewellery exports signal towards that trend because this is a major item of export to the US and UAE,” said a Delhi-based expert on trade issues, adding that the opportunity for India to increase exports to the US due to the latter’s trade war with China seems to have been lost.

In a report last month, rating agency Crisil said that the withdrawal of GSP will affect exporters of gems and jewellery the most with around 15% of these having availed of the benefits in 2018.

“Now there will be an additional duty of 7% on exports of precious metal-based and imitation jewellery,” the rating agency had said.

“That will reduce competitiveness of domestic exporters and put pressure on margins.”

The Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) President Sheikh Fazle Fahim said bilateral trade between Bangladesh & India was $9.5 billion in FY2017-18 with exports to India pegged at $0.87 billion and imports, at $8.6 billion. He further added that bilateral trade between the two countries can increase through investments in green field projects as well as mergers and acquisitions.

Says Fahim: “Our long proven relations with India have been marked by humanity, heritage, dynamic partnership and exchange at the highest level. Complimenting the G2G initiatives, the two nations offer untapped potential to maximise on bilateral synergy. As a strategic partner and major source of FDI, India has been financing many of our development projects in power, railways, road and transport, health and technical education in addition to investments in textiles, banking and telecommunications. Bangladesh has a competitive edge in production cost including labour, flexible FDI incentives and duty free quota free market access to most advance economies.”

It is part of FBCCI’s policy to maintain business relationship with neighbouring nations, especially with India’s trade bodies in different states. CWBTA’s member pool of Trade Associations of West Bengal is a strong network of more than 1 million traders. CWBTA network are part of potential value chain for buy back from Bangladesh as well as exports to SAARC, BBIN, Bay of Bengal Initiative for Multi- Sectoral Technical and Economic Cooperation (BIMSTEC) and additional markets.

Adds Fahim: “As our economy is in a transition stage, it is imperative that our bilateral ties reflect the potential opportunities we have in areas such as joint high tech research, development and innovation incubators, JVs on light, medium and heavy industries, knowledge transfer to transition from 3rd IR to 4th IR including service sector cooperation in ICT, nanotechnology, robotics, IOT, cyber security, AI, quantum computing, quantum internet among others.”

Also, knowledge transfer for trade, investment & revenue regulatory framework, policy planning, business process re-engineering of MSMEs, joint exploration and joint ventures on blue economy, knowledge transfer for industry academia HR skill gap are some of the other areas of cooperation between the two nations.

To improve ‘ease of doing business’, FBCCI is closely working with Prime Minister’s office, relevant ministries, Bangladesh Investment Development Authority and other stakeholders to facilitate ease and cost of doing business. These reforms are being overseen by PM H.E Sheikh Hasina herself. “We will see significant update on the index this year and a more substantial one in 2020.”

This apart, FBCCI Alternate Dispute Resolution (ADR) Centre facilitates commercial ADR for both (domestic and international) enterprises with a vision to create a trade facilitation eco-system.

“Our competitive strengths in leather goods, pharmaceuticals, shipbuilding, frozen seafood, ceramics, jute products, ICT, FMCG, home appliance, agro processing, fisheries and others are leading the way for business diversification. Keeping in mind the production competitive advantages, population density with increasing purchasing power and markets access, agro, manufacturing, service and quaternary sector of our economy have potential. Through technology & knowledge transfers and JVs, we can tap into regional and global value chain and market access,” Fahim signs off.

A huge jump in duty-free garment imports from Bangladesh under the free trade agreement has put the domestic industry in a fix. This comes amidst slowing domestic demand and banks curtailing credit to 80 per cent of MSMEs (micro, small and medium enterprises) in the sector.

Import of garments from Bangladesh was up 82 per cent to $365 million last fiscal. It has been growing steadily at a CAGR (compounded annual growth rate) of 52 per cent and is expected to touch $3.6 billion by 2024-25. This will render about 10 lakh people jobless with most of the small garment industry shutting shop.

Bangladesh, which has signed an FTA with both India and China, has been sourcing fabric duty-free from China and exporting garments to India, thus providing a back-door entry for Chinese fabrics into the country.

Ironically, export of garments from India to Bangladesh attract a duty of 125 per cent, said Rahul Mehta, President, Clothing Manufacturers Association of India, at an event to announce the launch of the 69th National Garment Fair between July 15 and 18 in Mumbai.

The government should ensure that Bangladesh sources a part of its fabrics requirement from India as putting a cap on their export looks difficult, he said.

The association expects business transactions worth ₹800 crore with the participation of 1,000 brands, 899 stores and 45,000 retailers in the fair.

Premal Udani, former Chairman, Apparel Export Promotion Council, said Bangladesh’s garment export was at $3 billion in 2005 and India’s was at $5 billion, but today their exports have touched $36 billion while India is struggling at $16.5 billion.

Vietnam, which was not even counted among the top exporters then, has recorded garment export of $24 billion last year, he said.

Instead of announcing piecemeal policy measures, he said the government should come out with stated policy for the next five years to boost exports. This will help manufacturers plan their expansion and achieve scale, he said.

For the first time ever, garment exports had fallen by four per cent to $16.1 billion last fiscal, against $16.7 billion logged in 2017-18, Udani said. However, exports have revived partially in the last two months with the government’s export incentive schemes.

On the Union Budget, Mehta said the Finance Minister has hinted at special sourcing concessions for foreign-owned single- and multibrand but details are not yet out.

It will be a big blow if the government eases the current mandatory 30 per cent domestic sourcing norm, he said.

A Bloomberg report adds: Bangladesh which is the world’s second-largest garment exporter, has seen the value of its overseas sales rise to a record $40.5 billion in the year ended June 30, coinciding with US President Trump boosting tariffs on $200 billion of Chinese goods to 25 per cent from 10 per cent. The US-China trade war has seen American and Chinese orders for more than half of the 1,981 tariffed products so far being rerouted to other countries, including Vietnam and Malaysia.

For Bangladesh, which aims to double total exports to $72 billion by 2024, snaring part of the $41 billion of the clothing business that goes to China will provide a fillip to an economy that the Asian Development Bank forecasts will expand a record 8 per cent for the next two years.

The US dragged India to the WTO by filing a complaint against New Delhi’s move to increase customs duties on 28 American goods, alleging the decision is inconsistent with the global trade norms. According to a communication of the Geneva based World Trade Organisation (WTO), the US said that the additional duties imposed by India “appears to nullify or impair the benefits accruing to the US directly or indirectly” under the GATT 1994.

The General Agreement on Tariffs and Trade (GATT) is a WTO pact, signed by all member countries of the multi-lateral body, aims to promote trade by reducing or eliminating trade barriers like customs duties.

The US has alleged that the duties imposed by India appears to be inconsistent with two norms of GATT.

The US has stated that India does not impose these duties on like products originating in the territory of any other WTO member nation.

“India also appears to be applying rates of duty to US imports greater than the rates of duty set out in India’s schedule of concessions,” the communication said quoting the US application.

The duties are inconsistent because “India fails to extend to products of the US an advantage, favour, privilege or immunity granted by India with respect to customs duties and charges of any kind imposed on or in connection with the importation of products originating in the territory of other members…,” the US has alleged.

As part of the dispute, the US has sought consultations with India under the aegis of the WTO’s dispute settlement mechanism.

“We look forward to receiving your reply to the present request and to fixing a mutually convenient date to hold consultations,” it said.

As per the WTO’s dispute settlement process, the request for consultations is the first step in a dispute. Consultations give the parties an opportunity to discuss the matter and find a satisfactory solution without proceeding further with litigation.

After 60 days, if consultations fail to resolve the dispute, the complainant may request adjudication by a panel.

This case assumes significance as officials of both the countries would be meeting next week here to discuss trade related issues.

The two countries are also at loggerheads at the WTO on other issues. The US has challenged certain export promotion schemes of India, while India has challenged USA’s unilateral hike on customs duties on certain steel and aluminium products.

The US has rolled back export incentives from India under its GSP programme and New Delhi has imposed higher customs duties on 28 American products including almond, pulses, walnut, chickpeas, boric acid and binders for foundry moulds.

The other products on which duties were hiked include certain kind of nuts, iron and steel products, apples, pears, flat rolled products of stainless steel, other alloy steel, tube and pipe fittings, and screws, bolts and rivets.

The duties were hiked as retaliation to the US move to impose the highest customs duties on certain steel and aluminium goods.

India’s exports to the US in 2017- 18 stood at USD 47.9 billion, while imports were at USD 26.7 billion. The trade balance is in favour of India.

The RCEP, India most-ambitious trade pact, is currently under negotiation. It includes the 10-nation bloc of the Association of Southeast Asian Nations (ASEAN) and their six free-trade partners — China, India, Japan, South Korea, Australia and New Zealand. The countries working towards finalizing RCEP comprise a quarter of global gross domestic product, 30% of global trade, 26% of foreign direct investment flows, and 45% of the world’s population.

“Engagement with ASEAN is at the core of India’s ‘Act East’ policy. ASEAN is the gateway to the Indian Ocean region and as close partners, there is convergence of views in India’s and ASEAN’s outlook in the region,”.

India’s bilateral trade jumped threefold from $21 billion in 2005-06 to $96.7 billion in 2018-19. ASEAN countries together have emerged as the largest trading partner of India in 2018-19 (followed by the US), with a share of 11.47 per cent in India’s overall trade, while India was ASEAN’s sixth largest trading partner in 2018.

Investment flows are also substantial both ways. The foreign direct investment (FDI) inflows into India from ASEAN in the April-March 2018- 19 period was about $16.41 billion which is approximately 36.98 per cent of total FDI flow into India.FDI inflows from India to ASEAN in 2018 was $1.7 billion, placing India as ASEAN’s sixth largest source of FDI.

Commerce and Industry Minister Piyush Goyal is representing India at the Trade Ministers’ meeting of member countries of the Regional Comprehensive Economic Partnership (RCEP) in Bangkok and the East Asia Economic Ministers Summit in Bangkok between September 8-10.The Minister is also scheduled to hold bilateral meetings with his counterparts from Japan, Singapore, China, Indonesia, Australia, New Zealand, the Philippines, Thailand and Russia, according to an official release.“The meetings will be attended by Economic Ministers and senior leaders of the 10 ASEAN member countries and eight East Asia Summit (EAS) countries,” according to an official release.The Trade

Ministers of RCEP countries, which includes the 10-member ASEAN, India, China, South Korea, Japan, Australia and New Zealand, will try to give a final shape to the proposed free trade pact which includes several areas such as goods, services, investments, intellectual property and government procurement.

Twenty-eight rounds of talks have concluded, apart from eight ministerlevel meetings.The RCEP meet in Bangkok this month is aimed at closing a mega trade deal that has been in the works since 2012. The Bangkok meet this month hopes to narrow differences in the deal that has been in the making since 2012.

India’s Commerce Minister Piyush Goyal did not attend a ministerial meet in China last month against the backdrop of Indian concerns of cheaper imports from China overwhelming India’s manufacturing sector, if India joins the grouping. India’s trade deficit with China in 2018 was more than $60 billion.Representatives of iron and steel, dairy, textiles, marine products, electronics, chemicals, pharmaceuticals and plastic industries have been the most vocal against the trade deal.There is a general feeling that India’s trade agreements have not worked out well.

The first point of objection with the RCEP is that India’s trade deficits have always widened with nations after signing free-trade-agreements (FTAs) with them. The same is true for India’s FTAs with the ASEAN, Japan, Korea, and Singapore, most of which are RCEP nations. So far, the rise in Indian trade deficit with its FTA partners has occurred due to cheap imports of final products that have led to an increase in consumer surplus (or consumer well-being), but adding to the angst of the domestic producers.

The second point of contention lies with exposing vulnerable sectors to market forces and the vagaries of competition emerging from global trade. Even after more than quarter of a century of economic reforms, Indian manufacturing are yet to mature to be competitive enough to face the vagaries of competition brought about by international trade.

Under such circumstances, the Indian industry is hardly in a position to compete in a level playing ground in a free-trade region. “Make in India” is meant to create enabling conditions for both domestic and foreign businesses to thrive. If domestic industry has to thrive,

it needs protection as also the enabling conditions created by factor and product market reforms. Megatrade deals like the RCEP may derail the timing and coordination of such plans.

The country is also not in any mega trade pact that includes China, which is a part of RCEP. There is concern that Chinese imports will become a bigger problem if a deal is signed. Aware of its massive trade deficit, India is preparing a final list of products on which it may retain import tariffs for China in the proposed Regional Comprehensive Economic Partnership (RCEP) agreement, said official sources.

The government has been preparing such a list for a while now, based on its plan of a “differential tariff reduction”. China, which has benefited the least, has opposed this move, along with richer economies such as Australia and New Zealand.“Considering our sensitivity to imports from China, this has been the case throughout,” said a senior government official, who did not want to be named, adding: “An extensive list is being prepared.”He also said the list was unfinished and was being drawn up after extensive consultation with domestic industry.

Sources also said India had suggested a mechanism to fix an import ceiling, again particularly for China. This is the first time New Delhi will fix such a ceiling in any trade deal. Government officials did not confirm this, but they said similar proposals had been opposed by other nations before. Earlier, India had agreed to reduce tariffs on 76 per cent of all items for all nations, apart from special measures for China. Others had demanded New Delhi open up at least 90 per cent of all items.

Currently, it is broadly accepted the RCEP will lead to tariffs being eliminated on 28 per cent of the traded goods to begin with. This will be followed by 35 per cent of all products being eliminated in phases.

Officials also said the final deal would necessarily include all negotiating countries. India had been on the receiving end of repeated questions by other nations on whether it is serious about signing the deal. Senior leaders of Asean, including Malaysian Prime Minister Mahathir Bin Mohamad, had said the mega Asia-Pacific deal could be negotiated without India “for the time being”. Senior diplomatic sources of other nations confirmed that commitments to reduce tariffs were now dependent on individual nations. This may result in each nation setting a specific tariff reduction for each of the rest.

The government has also dismissed the idea of an “early harvest” approach to the RCEP talks. If this approach was adopted, it would mean the agreement would be signed after some issues had been agreed upon, while others would be resolved eventually.

The current stance is a shift from India’s earlier position of adopting a “package of early deliverables” created by the trade-negotiating committee of the RCEP. Australia’s lead trade negotiator James Baxter has said the last ministerial meet in Bangkok saw all negotiating trade ministers unanimously decided to complete the negotiations in full by November, seven years after the talks started.

“As long as India’s domestic industry and our national interests is protected, the faster it (RCEP) is done, the better it is for India,” Commerce and Industry Minister Piyush Goyal, has said.