Exports up 27% in November but trade deficit hits record

Source: Financial Express, 15 December 2021

Merchandise exports rose 27.2% in November from a year before but an almost 57% surge in imports inflated trade deficit to a record $22.9 billion last month, according to the provisional estimate released by the commerce ministry on Tuesday.

The November deficit is not just double the level witnessed a year before, but also significantly higher than the November 2019 mark. This is a “cause for concern regarding the implications for the size of the current account deficit (CAD) in the second half of this fiscal”, according to ICRA chief economist Aditi Nayar.

She forecast the CAD to widen to $25-30 billion in the third quarter itself, exceeding the full-year deficit recorded in the pre-pandemic year of FY20. Still, it would remain well within control, said a senior government official.

Having hit a monthly record of $35.7 billion in October, merchandise exports dropped to $30 billion in November, as fresh supply bottlenecks across the globe, including a spike in shipping costs and container shortage, hurt exporters’ ability to ship out.

Nevertheless, exports registered a 16.6% rise from the pre-pandemic (same month in FY20) level to $30 billion. However, imports shot up by 37.4% from the pre-Covid level to $52.9 billion.

Of course, imports were driven partly by a spill-over of pent-up domestic demand that remained mostly muted in the wake of the pandemic. But import bill was greatly inflated by elevated global crude oil prices and massive purchases of coal, cooking oil and gold.

Importantly, if the emergence of a new Covid variant in South Africa spread rapidly to other countries, especially a key market like Europe, the growth momentum, witnessed in merchandise exports in recent months, could come under pressure.

Exports this fiscal have been supported by strong order flow from key markets such as the US and China, thanks to an industrial resurgence there and elevated global commodity prices.

Imports of coal, coke and briquettes jumped 136%, while those of petroleum products shot up by 132%. Vegetable oil imports rose by 79%, while gold imports continued to rise at a fast pace, by 40%. Of course, base effect, too, remained unfavourable.

A Sakthivel, president of the exporters’ body FIEO, said while the government has announced a slew of measures to support exports, “the need of the hour is to soon announce extension of the interest equalisation scheme and allow transfer of MEIS”. He called for necessary support if the new Covid variant spreads. These steps could include augmenting the flow of liquidity and setting up a regulatory authority to seek justification of imposition of various charges by the shipping lines, among others, he said.

Parliamentary Panel suggests commerce ministry to resolve issues hindering signing of FTAs with leading trade partners

Source: Economic Times, 30 November 2021

The commerce ministry should resolve issues that are hindering signing of free trade agreements (FTAs) with India’s leading trade partners including the US and European Union and enter into such pacts that are beneficial for the country, according to a report of a parliamentary panel.

The Department Related Parliamentary Standing Committee On Commerce in its report ‘Augmenting Infrastructure Facilities to Boost Exports’ said FTAs should be signed while balancing the interest of the domestic market and exporters. Indian exporters are at a disadvantage in the US and European markets while competing with other exporting countries due to absence of FTAs with the US and EU countries, it said adding there are issues that need to be addressed in negotiating free trade agreements with these regions in view of the concerns expressed by some domestic sectors.

The report stated that while it is crucial to protect the domestic sector, it is equally important to address the disadvantages faced by exporters in global markets. ”The committee, therefore, recommends the Department (of Commerce) to iron out the issues that hindered the signing of FTAs with our leading trade partners and enter into trade agreements that are beneficial for our country while balancing the interest of the domestic market with that of our exporters,” it said. Under an FTA, two trading partners reduce or eliminate customs duties on the maximum number of goods traded between them. Besides, they liberalise norms to enhance trade in services and boost investments.

The report also said the budget allocation of Rs 12,500 crore for RoDTEP (Remission of Duties and Taxes on Export Products) scheme would be ”inadequate” to meet its objectives and the department should engage with Ministry of Finance to provide additional allocation. Besides, the committee recommended extending the interest subsidy scheme for at least five years or till the time ”our interest rates are at par with rates of the competing countries”.

Expressing concerns, the committee stated that India’s exports have contracted since 2019-20, registering a degrowth of 15.73 per cent in 2020. Though the share of India has shown marginal increase, it has commanded only a meagre share of 2.15 per cent in global exports, it said adding India needs to step up its effort in export promotion, expand its export baskets and penetrate new markets to recover from its current slump and increase its share in global exports.

”India needs to revamp its overall domestic manufacturing conditions and logistics chain to enable our products to be competitive in the global markets,” the report said and recommended the department to take appropriate measures, relook its export strategies and policies to achieve positive growth rate of exports and higher share.

Indo-US trade partnership: Different approach, brighter prospects

Source: Financial Express, 26 November 2021

US Trade Representative (USTR) Katherine Tai’s visit to India was certainly not a routine one. It covered an unusual amount of ground in moving forward on bilateral trade concerns and cooperation on emerging issues. The coverage reflected the seriousness with which the US and India are looking to handle their trade partnership in the days to come.

Trade has been an area of divergence between both countries. Notwithstanding robust engagement in other spheres of global and regional geopolitics and geo-economics, trade has been a rare sore spot. The Trump Presidency complicated matters in this regard. During the Trump period, India and the US actively discussed the prospects of a bilateral FTA. The discussions, though, were hit by regular disruptions. These ranged from the US withdrawal of the preferential GSP status to Indian exports in the US market, the unilateral hike in tariffs on steel and aluminium imports into the US;, temporary suspension of H1-B visas and regulatory restrictions cramping the scope of H1-B visas, particularly spouses of their holders, creating great uncertainties for Indian professional migrants to the US.

The Trump administration’s overall attitude towards trade also caused friction between the two countries. Trump’s cynicism of the multilateral rules-based trade framework of the WTO, particularly his refusal to appoint judges to the appellate tribunal for resolving disputes, found India and other major economies at a loss to remove the logjam. Further Trump’s repeated allusion to large developing countries having benefitted heavily from the concessions they get from the WTO, and his pushing emerging market economies out of the scope of non-reciprocal market access preferences, didn’t go down well with India.

India, did, however, stay engaged with the US on a bilateral trade deal. That the deal eventually couldn’t be pulled off has much to do with the insufficiency of trust and comfort between negotiators. India’s trade pessimism, as reflected in its pull-back from a mega-FTA like the RCEP, symbolised its own hesitation over entering into bilateral FTAs and the unhappy compromises they entail. On the other hand, the Trump administration’s overwhelming tendency to ruthlessly extract market access from bilateral FTAs, for political messaging aimed at domestic constituencies, limited flexibilities on both sides.

The Biden administration has taken a more accommodating attitude towards trade. It is back at the WTO with a purpose. While retaining the emphasis on ‘America First’, it is talking to major trade partners in a more purposeful manner. Unlike its predecessor, which failed to balance robust strategic engagement with allies like India with equally meaningful advances on trade, the Biden administration is more sure of its expectations on trade from its allies. This explains why the stress on worker-friendly trade policy notwithstanding, the Joint Statement issued on the occasion of the USTR’s visit documents specific details on bilateral trade concerns.

In a sense, it might have become easier for the US and India to talk trade over the last one year. Strategic realignments after Covid-19, particularly the economic rise of the Quad and Indo-Pacific, including efforts to safeguard strategic supply chains, have made both countries reflect closely on many issues connected to bilateral trade. Both realise the importance of ironing out creases that are holding back more trade if they need to contribute to an economic framework for the Indo-Pacific—a goal announced by the US secretary of commerce Gina Raimondo during her visit to Asia last week, along with the USTR.

Greater engagement between business and government stakeholders of both countries in recent months, along with the urgency to focus on critical areas of mutual concern: clean energy and technology, infrastructure and connectivity, vaccines and healthcare products, have created an enabling and trustworthy environment for discussing bilateral trade. It is hardly surprising therefore that mangoes and cherries from India and the US should be able to cross borders with ease soon. There is also much promise in the areas marked for future work: digital trade, healthcare, environment, standards and conformity assessment. The attention on working on the basics such as bilateral disputes at the WTO, implementation of the global Trade Facilitation Agreement (TFA) and an effective visa regime for professionals, signals eagerness of both countries to correct fundamentals issues affecting bilateral trade.

It is also interesting to note that both countries avoided mentioning a bilateral FTA during the USTR’s visit. The emphasis, instead, was on building ‘an ambitious vision for the future of the trade relationship’ by energising mechanisms like the bilateral Trade Policy Forum (TPF). Avoiding mention of an FTA reflects policy maturity and pragmatism on both sides. Both countries understand that as large countries with numerous vocal minority lobbies, reaching a comprehensive FTA will be hugely challenging. It makes more sense to devote energy on creating the foundation for a trade deal rather than harping on it.

India pitches for Chabahar and INSTC to connect Central Asia with seas

Source: Economic Times, 26 November 2021

Foreign Minister S Jaishankar on Thursday pitched for consultative, transparent and participatory form of connectivity which “conform to the most basic principle of international law – respect for sovereignty and territorial integrity” in what can viewed as a message to China on its Belt and Road Initiative (BRI) that passes thorough Pakistan occupied Kashmir (PoK).

“India believes that greater connectivity is an economic force-multiplier which has acquired greater salience in the post-Covid era. However, any serious connectivity initiative must be consultative, transparent and participatory. It must conform to the most basic principle of international law – respect for sovereignty and territorial integrity,” Jaishankar stated in his address at the 20th Meeting of the SCO Council of Heads of Government organised virtually under the chairmanship of Kazakhsta ..

India has consistently maintained reservations against BRI which not only violates sovereignty by passing through PoK (China-Pakistan-Economic-Corridor) but has also been pushing countries into debt trap. Jaishankar’s comments were pertinent as a number of SCO states are signatories to the BRI but are also open to other connectivity initiatives.

In this context he pitched for India-led connectivity initiatives in the Eurasian region that helps Central Asian states to access the Indian Ocean Region. “India has been taking steps to operationalize the Chabahar port in Iran to provide a secure and commercially viable access to the sea for Central Asian countries. We have also proposed to include the Chabahar port in the framework of International North-South Transport Corridor (INSTC). I would like to reaffirm India’s commitment to cooperate, plan, invest and build physical and digital connectivity in the SCO region.”

India considers the SCO as an important regional group to promote cooperation in various fields based on universally recognized international norms, good governance, Rule of law, openness, transparency and equality, the Minister pointed out.

In a message to Pakistan also a SCO member, Jaishankar noted, “It is unfortunate to note that there have been repeated attempts to deliberately bring bilateral issues into SCO. This violates the well-established principles and norms of SCO Charter. Such acts are counterproductive to the spirit of consensus and cooperation that define this organization and should be condemned.”

The Minister also referred to India’s efforts to fight climate change challenges and suggested that India is ready to share its experience in climate change mitigation and adaptation in the SCO format.

He also announced to share India’s experience in Startup sector with the SCO states. “Despite COVID, India attracted record FDI inflows of $77 billion in 2020-21 and another $22 billion in the first three months of this year. WIPO has ranked India number one in the Global Innovation Index 2021 in the Central and South Asian region. Indian Start ups have so far created 65 unicorns, out of which 28 unicorns were added during 2021 alone. We stand ready to share our experience with other SCO Member States through our initiative to set up a Special Working Group on Startups and Innovation.”

India, EU discuss steps to operationalise decision to resume negotiations for trade pact

Source: Economic Times, 19 October 2021

India and the European Union on Tuesday discussed steps to operationalise the decision of their leaders to resume negotiations for a trade agreement and also launch talks for a stand-alone investment protection pact.

At a meeting of the third India-EU Strategic Partnership Review in Brussels, the two sides also discussed the launching of negotiations on a separate agreement on geographical indications, the Ministry of External Affairs said in a statement.

India and the EU also exchanged views concerning best ways to join forces in tackling the COVID-19 pandemic and its effects on economies, societies as well as individuals.

Following the India-EU Leaders’ Meeting of May 8, 2021, which set a clear path for further deepening ties between India and the EU, the meeting allowed for a comprehensive review of the strategic India-EU partnership, guided by the ‘India-EU Strategic Partnership: A Roadmap to 2025’, the MEA said.

The discussions focused notably on cooperation in addressing the challenges of climate change, biodiversity loss and pollution, and contributing to the success of the upcoming Climate COP26, it said.

The two sides also discussed the next steps on the implementation of the India-EU Connectivity Partnership which was agreed at the May 2021 Leaders’ Meeting.

India and the EU further discussed ways to further cooperate in the areas of research, technology and digital transformation, as well as continued implementation of the Common Agenda on Migration and Mobility, the statement said.

Recalling the successful 9th India-EU Human Rights Dialogue in April 2021, India and the EU looked forward to the next edition of the Dialogue in 2022, the MEA said.

The meeting was co-chaired by Reenat Sandhu, Secretary (West), Ministry of External Affairs and Helena König, Deputy Secretary General for Economic and Global Issues, European External Action Service.

Indo-Japan trade increases to $ 18 bn in 2019: Exim Bank study

Source: Economic Times, 13 October 2021

India Exim Bank’s study titled “ Prospects for Enhancing India Japan Trade Relations”has noted that over the past decade, India’s total trade with Japan has increased from $ 10 billion to almost $ 18 billion, with exports valued at US$ 5 billion and imports $ 13 billion in 2019.

However, despite having a Comprehensive Economic Partnership Agreement (CEPA) with Japan, India has been running a persistent trade deficit with Japan, which has more than doubled during the decade, to almost US$ 8 billion in 2019.

The Study, through the trade complementarity analysis, recommends suitable product categories in which India has a latent advantage in exports. The study suggests that there is significant potential for India’s exports in categories such as mineral fuels and oils, electrical machinery and equipment, machinery and mechanical appliances, optical, photographic equipment, pharmaceutical products, articles of apparel and clothing, etc.

The study also highlights that India’s exports face both tariff and non-tariff barriers in Japan and suggests that in the subsequent CEPA review negotiations India could deliberate upon these issues.

Further, the study observes that the potential for India-Japan relations extend beyond the sphere of bilateral trade. India and Japan have aimed at coordinating India’s “Act East” policy and Japan’s vision of a free and open Indo-Pacific. This policy coordination had given birth to the idea of Asia-Africa Growth Corridor (AAGC), which is a megaregional program aimed at improving ties between Asia and Africa.

Releasing the study last week Harsha Bangari, Managing Director, India Exim Bank in her address highlighted that India and Japan have been enjoying a strong and cordial relationship.

Importer-exporter code not updated after 2005 to be de-activated from Oct 6

Source: Financial Express, 26 September 2021

The Importer -Exporter Code is a key business identification number that is mandatory for exports or imports and no person shall make any import or export except under an IEC number granted by the DGFT.

The Commerce Ministry has decided to deactivate all importer-exporter codes (IECs) that have not been updated after January 2005 with effect from October 6 this year, a move which would help in knowing the actual number of real traders in the country.

The Importer -Exporter Code (IEC) is a key business identification number that is mandatory for exports or imports. No person shall make any import or export except under an IEC number granted by the DGFT.

On August 8 this year, the Directorate General of Foreign Trade (DGFT) was mandated all IEC holders to ensure that details in their IEC are updated electronically every year during the April-June period.”All IECs which have not been updated after January 1, 2005, shall be deactivated with effect from October 6, 2021,” according to a trade notice of the DGFT.

It stated that the concerned IEC holders are provided one final opportunity to update their IEC in this interim period till October 5, failing which the given code would be de-activated from October 6.

“Any IEC where an online updation application has been submitted but is pending with the DGFT RA (regional authority) for approval shall be excluded from the deactivation list,” it added. Further, it said that for re-activation of the code after October 6, the IEC holder has to navigate to the DGFT website and update their IEC online.

“Upon successful update the given IEC shall be activated again and transmitted accordingly to the customs system with the updated status,” the notice said.

According to an industry expert, de-activation of IECs helps in reducing the base load of the directorate and it helps in knowing the actual number of real exporters and importers in the country.

The nature of the firm obtaining an IEC includes proprietorship, partnership, LLP, limited company, trust, and society. After the introduction of GST (Goods and Services Tax), IEC number is the same as the PAN of the firm.

India calls for expanding New Development Bank’s funding horizon

Source: Financial Express, 19 August 2021

In a meeting of the industry ministers of the BRICS grouping on Wednesday, chaired by commerce and industry minister Piyush Goyal, the participants pledged to foster open, fair and non-discriminatory trade environment, and ensure greater participation in global value chains.

India has called for expanding the funding horizon of the New Development Bank (NDB), often referred to as BRICS Bank, so that resources can be utilised for bolstering social infrastructure in a past-Covid world, besides promoting the industrial sector.

In a meeting of the industry ministers of the BRICS grouping on Wednesday, chaired by commerce and industry minister Piyush Goyal, the participants pledged to foster open, fair and non-discriminatory trade environment, and ensure greater participation in global value chains.

The NDB was set up based on the inter-governmental agreement among the BRICS nations (Brazil, Russia, India, China and South Africa) in July 2014. The purpose of this bank is to mobilise resources for infrastructure and sustainable development projects in BRICS and other emerging market economies and developing countries.

Up to May 2020, the NDB had approved 55 projects of member countries for funding, with a total amount of $16.6 billion. Until then, it had approved 14 projects in India worth $4,183 million. In December, the finance ministry said the NDB would lend India $1 billion to support economic recovery from the pandemic through expenditure on rural infrastructure related to natural resource management.

At the virtual meeting on Wednesday, Goyal also said Industry 4.0 will play a crucial role in helping BRICS economies achieve sustainable development goals. However, there are challenges of data protection and cyber security too. “Therefore, it is essential to manage transition to new technologies in line with national policies and legislation. This understanding is at the heart of the BRICS cooperation agenda,” according to the statement.

The meeting was attended by Xiao Yaqing, minister of industry & IT of China; Denis Manturov, minister of industry and trade of Russia; Ebrahim Patel, minister of trade, industry & competition of South Africa and Carlos Da Costa, deputy minister of economy of Brazil, among others.

Trade secy Subrahmanyam: $1 trillion goods exports by FY28

Source: Economic Times, 12 August 2021

India will fast-track free trade agreements (FTA) with at least half a dozen nations, including the UAE, UK, Australia, Canada and the EU, over the next few months, in line with its revamped foreign trade strategy, commerce secretary BVR Subrahmanyam said on Wednesday. He also said that India could clock $1 trillion in merchandise exports and $700 billion in services exports by 2027-28.

Subrahmanyam, who was speaking at an event organised by the Confederation of Indian Industry (CII), said the government is likely to announce refund rates under key tax neutralisation schemes for the exports sector by Friday.

He said the government is likely to notify the tax refund rates for the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme by this weekend and for the textile-specific Rebate of State and Central Levies and Taxes (RoSCTL) Scheme by Thursday.

“We have laid down a roadmap on how we hit $500 billion in goods exports, and when do we hit $1 trillion. Our guess is by 2027-28, very modest estimates, we should hit $1 trillion,” he said at CII’s annual meeting, adding that by then, 20-30% of India’s economy would consist of trade, similar to advanced export-based economies like Japan, the EU and the US.

A market intelligence network will also be set up by the government for the same, he said.

“India has 140 embassies and 60 consulates globally and all of them have a commercial wing with a minister, counsellor or attache. No one has been asking them what you do,” Subrahmanyam said.

Trade documentation simplified

Source: The Hindu Business Line, Mar 12, 2015

New Delhi: Exporters and importers will now need just three mandatory documents each to carry out their business, cutting down significantly on transaction time and cost.

The reduction in mandatory documentation requirement, notified by the government on Thursday, marks a huge improvement over the earlier dispensation. As many as seven mandatory documents were required for exports and 10 documents for imports in India, as per the World Bank’s 2015 Report.

The reduction in documentation is also expected to improve India’s ranking in the ‘trading across borders’ component of the World Bank’s ‘ease of doing business’ report, where the country was ranked 126 of 189 countries last year, an official release of the Commerce Ministry said.

Exporters and importers will now be required to provide the bill of lading/airway bill and the commercial invoice cum packing list. The third compulsory document for exporters is the shipping bill or bill of export while for importers the third document is the bill of entry.