To give a boost to the labour-intensive textile sector, a high-level expert panel constituted by the Commerce Ministry has recommended a review of free-trade pacts with countries such as Bangladesh that have zero-duty access to the Indian market, amendment of labour laws to allow flexibility in hiring and firing and fast-track disbursal of subsidies for technology upgradation. “Modify labour laws (such as the Industrial Disputes Act, 1947) to remove limitation on firm size and allow manufacturing firms to grow,” the 12-member panel headed by economist Surjit Bhalla recommended in its report submitted to the government last week. The textile industry, which is the second highest job generator after agriculture and directly employing about 45 million people, has been demanding removal of rigid labour laws that hurt operations. The bone of contention has been the law prescribing that any firm employing 100 or more workers has to seek permission from the Labour Department, with jurisdiction over the firm, before any layoffs or retrenchment. “The high-level group has suggested that limitations on firm size that need not take permission from the Labour Department before terminating employment should go and all firms given the flexibility to decide on the matter to encourage efficiency,” a government official told BusinessLine. Free-trade pacts like the South Asia Free Trade Agreement (SAFTA) have led to intense competition from countries like Bangladesh which have zero-duty access to the Indian market. The expert group recommended that the government should take a re-look at such pacts and try to work out a solution. The panel also recommended that the government should aim at driving scale across the textiles value chain by encouraging large investment, consolidation of firms and enlargement of clustersThe panel suggested that there should be fast-track disbursal of subsidies for technology upgradation under the TUFS scheme to help the industry modernise operations.
Source: The Hindu Business Line
For the first time, the US placed India in its currency monitoring list of countries in May 2018 with potentially questionable foreign exchange policies. The U.S. on Tuesday removed India from its currency monitoring list of major trading partners, citing steps being taken by New Delhi that addressed some of the Donald Trump administration’s major concerns. For the first time, the US placed India in its currency monitoring list of countries in May 2018 with potentially questionable foreign exchange policies. Switzerland is the other nation that was removed from the list. “India has been removed from the monitoring list in this report, having met only one out of three criteria — a significant bilateral surplus with the United States — for two consecutive reports,” the Treasury Department said in its report on macroeconomic policies. After purchasing foreign exchange on net in 2017, the central bank steadily sold reserves for most of 2018, with net sales of foreign exchange reaching 1.7 per cent of GDP over the year, it said. India maintains ample reserves according to the IMF metrics for reserve adequacy, the Treasury Department said in its report. In both Switzerland and India, there was a notable decline in 2018 in the scale and frequency of foreign exchange purchases, the report said. “Neither Switzerland nor India met the criteria for having engaged in persistent, one-sided intervention in either the October 2018 report or this report. Both Switzerland and India have been removed from the monitoring list,” the Treasury said in its report running into over 40 pages. A country can intentionally undervalue its currency by selling its own currency to drive down its value, making its exports cheaper and more competitive. India for the first time was placed by the US in its currency monitoring list of countries with potentially questionable foreign exchange policies in May 2018 along with five other countries - China, Germany, Japan, South Korea and Switzerland. In its next report in October 2018, the Treasury had said that India has made improvements and its name would be removed from the currency manipulation list in the next report. “India’s circumstances have shifted markedly, as the central bank’s net sales of foreign exchange over the first six months of 2018 led net purchases over the four quarters through June 2018 to fall to USD 4 billion, or 0.2 per cent of the GDP,” the Treasury had said in its October 2018 report.
Source: The Hindu
Escalating trade tensions between the US and China can turn into a blessing in disguise for the Indian economy. Industry watchers and economists hope the ongoing tussle may slow down the world’s two biggest economies and channel some overseas investment to India. The ongoing tariff war may also benefit select industries and cap the upside in crude oil prices, which can help ease the pressure on India’s current account deficit. In an escalation of the standoff, the US on May 10 increased tariff on $250 billion worth of Chinese goods from 10 per cent to 25 per cent. President Donald Trump also threatened to impose higher tariffs on the remaining $325 billion Chinese imports in the coming months if China fails to agree on a trade deal. China retaliated by increasing tariffs on $60 billion worth of US imports from 5 per cent to a 5-25 per cent. This provides an opportunity for companies from countries like India to grab market share. “From a de-risking perspective the US companies importing goods from China could be looking at alternative countries for imports,” says Rusmik Oza, Head of Fundamental Research, Kotak Securities. Economists look at both China and India as long-term growth stories. The trade war will also rattle investors who are looking at China from the emerging markets pack with a long term perspective. Karun Marwah, head of international business at Motilal Oswal Financial Services, said any trade war like this brings lots of volatility with it. “Investors from North America like to see substitution towards a market like India where they perceive lesser volatility and which is not subject to the vagaries of trade war with the US. Chinese capitalists may also look at India if things worsen,” he said. Overseas brokerage UBS earlier this month said India has not been able to gain much from the trade war and managed only a marginal growth from the increment that it was already witnessing from usual diversification away from China. A majority 37 per cent of fund managers who took part in a recent BofA-Merrill Lynch Global Fund Manager Survey rated trade war as the biggest tail risk for markets followed by China slowdown (16 per cent) and US Politics (12 per cent). Leading Indian industrialist and Mahindra Group Chairman Anand Mahindra on Wednesday said a wave of Chinese investment to India may be imminent in the wake of intensifying trade war between the US and China. "Even if they settle, a Chinese firm with large exports to the US would be wise to hedge and invest in a subsidiary in India and transfer its scale-manufacturing skills," he said in a tweet. Sher Mehta, Director of Macroeconomic Research and Econometrician, Virtuoso Economics, says Chinese investment in India is likely to rise and oil prices might be capped due to escalation of trade war, which could be positives for India’s current account deficit, the rupee and inflation. He said select commodity exports and industries like chemicals, lubricants, mobile phone makers and readymade garments will also benefit the ongoing trade tensions. “One space where India could truly benefit is China’s commodities market. Indian exports to China in this category can be a lucrative proposition, given that US exports a substantial amount of commodities to China. We can tap export opportunities in corn, oranges, wheat and certain dry fruit varieties to China. India has additional duty concessions compared to other countries under the MFN (most favoured nation) status of APTA agreement,” said Mehta. Meanwhile, if China allows yuan to depreciate against the US dollar to reduce the impact of higher import duties, it may impact other emerging market currencies, including the rupee. Oza believes that if yuan is allowed to depreciate then there could be same kind of depreciation in other emerging market currencies, which could be beneficial for India’s export-driven sectors. The rupee is already hovering around its two-and-a-half-month-low of 70.51 against the dollar due to foreign fund outflows and renewed worries over rising crude oil prices. Brokerage ICICIdirect.com said crude oil above $70 is likely to keep the rupee appreciation in check. A move in the Chinese yuan would also be a key trigger for emerging market currencies, including the rupee, in the backdrop of renewed escalation in trade tensions.
Source: Economic Times
India should look at ways to boost its trade with the US in the wake of current pattern of international Trade. The current pattern of international trade, which over the past few decades has coalesced around the concept of global value chains (GVCs), is under strain. Changes in technology and increased costs in key manufacturing nations, such as China, are leading to a pull-back from dispersed and specialised production hubs. The world’s two largest trading nations, the US and China, are engaged in disputes that are challenging the nature of global trade altogether. With these shifting dynamics, corporate choices about investment destinations are likely to be repositioned. India is uniquely positioned to capture some of the migration in foreign direct investment (FDI) that will inevitably occur. With India’s elections just concluded and a new government readying to be sworn in tomorrow, the time is right to strategise how to leverage these changing undercurrents in trade and investment. In particular, India should look at ways to boost its trade with the US — its largest exports market and the second biggest source of imports. Hundreds of US firms are reportedly considering shifting their manufacturing operations from China to India over the coming few years. US firms have been some of the ‘first movers’ when it comes to cutting edge and advanced manufacturing, deploying new technologies, and state of the art production processes. FDI by such large firms is the need of the hour in India, since such companies have been shown to galvanise economic activity, create jobs and also spur the establishment of intermediate firms — especially in the small and medium sector — leading to an expansion in exports over time. India must also look at the areas where our exports to the US may become more competitive in the current scenario, in which products from China and certain other nations are now more expensive in the US market. The top Indian exports to the US include items such as precious metals and diamonds, pharmaceuticals, machinery, mineral fuels and vehicles. Though India has expanded exports of its more traditional products to the US, there are additional categories of exports where India could make inroads into the US market.
New Product Lines
CII’s research shows that the products with high potential in US markets include mineral fuels (World Customs Organisation’s Harmonised System (HS) 27), machinery (HS 84), rubber products (HS 40), carpets (HS 57), man-made staple fibres (HS 55), and leather articles (HS 42) These are products that are already competitive in the US market and could expand with concerted efforts. Exports of some such products to third countries could also be re-assessed to potentially re-direct to the US, based on the relative export value. Access to credit for SMEs, especially those engaged in manufacturing intermediary components or final goods exports, also needs specific attention. Given that India’s major export promotion schemes such as the Merchandise Exports from India Scheme (MEIS) are under scrutiny at the World Trade Organization , the government must, in consultation with industry, quickly devise new support mechanisms that could aid exporters while remaining in compliance with global trade rules. The US accounted for 15.9% of India’s total exports in 2018-2019 (April-February), making it the largest exports market for Indian goods. The US is also the second largest source of imports into India, making up 6.8% of India’s total imports in the same period. Two-way trade in 2000 was only $20 billion — the trade partnership has, thus, ballooned by more than seven times in less than two decades to $142.3 billion in 2018.
Unfettered Market
US companies have found a large, and generally unfettered, market for their goods in India as companies like Coca-Cola, Proctor & Gamble, Johnson & Johnson, Dupont, Whirlpool, and Honeywell, have become household names. On the other hand, India has purchased defence and aerospace products worth $18 billion from the US over the past decade, and has also opened up new avenues for US exporters including in crude oil and shale gas. Through such dedicated efforts, India has managed to reduce its trade surplus with the US by almost 7% between 2017 and 2018, responding to a major demand by the current US administration. For the US and India, two-way trade has been a force for good — it has helped complement each economy’s strengths, boosted mutual export capacities, and helped create jobs. As both countries devise ways to get to the $500 billion two-way trade target, the new opportunities for export growth must also be analysed in sectors such as robotics and automation, artificial intelligence (AI), electric vehicles, digital economy and ecommerce. These hold enormous potential for growth and must be leveraged further. It is clear that the nascent US-India relationship requires constant nurturing. Expanding avenues for trade in both countries will further help fortify the relationship during times of stress. A well-thought out trade architecture would further help in this context. FDI and exports tend to be two sides of the same coin. It is important that India gets the equation right on both fronts to leverage this window of opportunity to expand its own trade profile. The new government in India must make this a priority.
Source: Economic Times
India-Africa trade has multiplied and diversified in the last 15 years. India on Friday in a subtle message for China asserted that it’s partnership with Africa is free of conditionalities and totally demand driven. “India’s partnership with Africa is based on a model of cooperation which is responsive to the needs of African countries. It is demanddriven and free of conditionalities. It is based on our history of friendship, historical ties, and a sense of deep solidarity. As Prime Minister has underlined, African priorities are our priorities,” pointed out T S Tirumurti, Secretary (Economic Relations) MEA in his speech on the occasion of Africa Day at the Institute of Defence Studies and Analyses. He is charge of India’s ties with Africa. “There has been unprecedented intensification of our political engagement with Africa with 29 visits to African countries at the level of President, Vice President and Prime Minister apart from several Ministerial visits.The visits have been in both directions. Subsequent to the visit of 41 Heads of State/Heads of Government who attended IAFS-III, we have hosted over 35 leaders from Africa for various events in the last nearly five years. India has already opened 6 of the 18 additional Missions in Africa,” Tirumurti recalled. “Our engagement is not limited only to the bilateral political level. Today, India and Africa have comprehensive diplomatic mechanisms at all three levels - continental, regional and bilateral and through multilateral fora. In addition to Summits (IAFS I, II, III), we have had three meetings with the Regional Economic Communities (RECs) of Africa. We are looking at ways to enhance cooperation,” he noted. India-Africa trade has multiplied and diversified in the last 15 years. India is ranked as the third largest export destination in Africa. India sources nearly 18% of its crude oil and also its LNG requirement, mostly from the West African region. “Our bilateral trade stood at US $ 62.16 billion for 2017-18 which reflects an increase of 21.56 % over the previous year.” “With the African continent, our investments are steadily growing in a range of sectors and India has become the fifth largest investor in Africa with cumulative investments at over USD 54 billion. Sizeable investments have been made in Oil and Gas, mining, banking, pharma, textiles and other sectors in African countries. Several Indian companies have entered into Joint ventures in Africa. They have the experience, technology and capital to unlock these African resources and create value for host governments. Many important firms from Africa also have established their presence in India,” Tirumurti noted referring to Indo-African economic partnership. “The Duty Free Tariff Preference Scheme announced by India for Least Developed Countries (LDCs) benefitted African nations and has contributed towards steady increase in our trade figures by extending duty-free access to 98.2 % of India’s total tariff lines. 38 African countries enjoy the benefits of our DFTP Scheme.” African Continental Free Trade Area Agreement (AfCFTA), which is expected to boost intra-African trade by elimination of import duties and non-tariff barriers providing opportunities for expansion of trade ties, will make Africa the largest free trade area in the world. India views this development as yet another opportunity to boost trade and economic ties with Africa, he told audience comprising African envoys to India. “Africa is a continent which receives nearly 20% of our pharmaceuticals. We hosted the first India-Africa Health Sciences Meet in 2015. Many of our Pharma companies have established units in various parts of Africa, including Ethiopia, Uganda, DRC, Zambia and Ghana. Our medicines and medical equipment such as Bhabhatrons and phototherapy machines are saving lives in Africa. Many of our hospitals have entered into joint ventures for establishing health care facilities.” In pursuance of trilateral cooperation with Africa, India is collaborating with Japan and Kenya to build a cancer hospital, and is collaborating with UAE and is in discussion with Ethiopia to set up a Centre for IT Excellence. Trilateral partnership has considerable potential. “This is also in line with the nascent Asia-Africa Growth Corridor and we hope to further this area of cooperation,” according to the senior diplomat. India is also helping the African countries to bridge the digital divide. “We have launched 2nd phase of the Pan Africa e-Network project – e-VidhyaBharati and e-ArogyaBharati Network Project (E-VBAB), which aims to provide 5 years free tele-education to 4000 students, free medical education to 1000 doctors/nurses/paramedics and free medical consultancy. “Every year, thousands of bright minds from African Continent come on self-financing basis to our Universities and colleges. These young people show the world that Africa has the drive to forge a new future.” As many as 13 current or former Presidents, Prime Ministers and Vice Presidents in Africa have attended educational or training institutions in India. The list includes current President of Nigeria, President of Mozambique and Vice President of Tanzania. Six current or former chiefs of armed forces in Africa trained in India’s military institutions. Referring to Indias Line of Credit for Africa, Tirumurti said, “Our development cooperation is a key feature of our engagement with the continent. After South Asia, the African continent is the largest recipient of Indian overseas NSE -0.42 % assistance. 181 Lines of Credit have been extended to 41 countries for a total amount of USD 11 billion which is Credit have been extended to 41 countries for a total amount of USD 11 billion, which is 42% of the total amount under LoCs. We are working together with EXIM Bank to streamline our development assistance delivery to our African partners, especially after the adoption of 2015 IDEAS guidelines. During the last 4 years, 6 IT Centres were established in South Africa, Egypt, Morocco, Lesotho, Ghana, Namibia and Tanzania; a CGARD Technology Centre in Madagascar; 7 Vocational Training Centres in Ethiopia, Rwanda, Burundi, Burkina Faso, The Gambia,Zimbabwe, and Egypt. A Technology Centre was also established in Zimbabwe. Entrepreneurship Centres are being set up in some countries. Several similar projects are at various stages of execution. During the Third India-Africa Forum Summit, India offered USD 10 billion for development projects over the next five years. “We also offered grant assistance of USD 600 million. You will be happy to know that we are well on course to achieve those targets. I hope to have a mid-term review with my African Union counterparts next month. Under our grant in aid programs, we provided food grains, vehicles, IT equipments, books and miscellaneous items to several countries in Africa.” The senior diplomat also referred to India’s cooperation with Africa in the areas of defence and security has only strengthened over the years to reflect new threats and transnational crimes. “Maritime security links have been strengthened. We have just recently given two Naval vessels to Mozambique. Terrorism now comes in various shapes and we are determined to fight it together. We are one of the largest contributors to UN Peace Keeping Missions in Africa which have played an important role in bringing peace and stability to the African continent.”
Source: Economic Times
NEW DELHI: The Department for Promotion of Industry and Internal Trade (DPIIT) will come out with a strategy to promote exports through ecommerce, detailing the role of the Reserve Bank of India, India Post, customs authorities and export promotion councils. A Parcel Directorate for ecommerce packages, standardisation of PIN codes and integration of India Post tracking with foreign postal systems are some of the initiatives the government is considering to boost exports through ecommerce. “We plan to prepare a document in a month’s time with deliverables for all stakeholders involved in import and export,” said an official privy to the details. The department had a meeting with stakeholders including representatives from Amazon, eBay and PayPal, other government departments and export promotion councils on Wednesday. It has decided to set up four working groups comprising industry and government officials to promote exports through ecommerce. The working groups are focussed on RBI, customs, Goods and Services Tax, and India Post, and will detail the norms that can be eased for ecommerce exports. “We want a seamless factory-to ship system wherein the product meant for export is tested, quality parameters are checked and gets customs clearances with adequate handholding,” the official added. As per Local Circles estimates, India exported products worth $1.2 billion via the ecommerce channel in 2018-19. These include categories like home décor/furnishings, medicinal products, books, fashion apparel, beauty products and office products. About 75,000 sellers or exporters are currently enabled to sell on ecommerce. To achieve 10 times growth, it has proposed RBI to give exporters the flexibility to sell goods at a premium based on product demand or at a lower price in case of stock liquidation, permit higher inward remittance of invoice value at the time of export, and allow realisation of export proceeds up to a period of 24 months from the date of export. “Such growth of ecommerce exports will benefit the Indian economy by creating jobs at local levels, bring additional foreign exchange and provide a significant boost to Make in India,” said Sachin Taparia, chairman of LocalCircles.
Source: The Economic Times
The demand for the policy from domestic traders came after multi-national retail firms entered the Indian markets and started providing huge discounts of goods. The Department for Promotion of Industry and Internal Trade (DPIIT) has proposed to formulate a national retail policy to support growth of domestic trade, an official said. This proposal is part of the 100-day action plan prepared by the department, under the commerce and industry ministry, for the new government. “A national retail policy will be formulated to support development of the sector that would benefit 65 million small traders,” the official said. In February, the subject of domestic or internal trade was shifted to DPIIT from the consumer affairs ministry, which was earlier the nodal agency for regulating the fast-growing sector. The department is already in the process of formulating guidelines on e-commerce and, hence, it would be appropriate for the ministry to come out with norms for retail trade, the official added. Views of all stakeholders, including state governments, would be taken while framing the policy as retail trade is also governed by the Shops and Establishment Act, which is implemented by states. Domestic traders’ body Confederation of All India Traders (CAIT) has time and again requested the government for the policy. It has said these steps will not only strengthen the domestic trade but also improve export performance of the country. According to CAIT, over 6.5 crore small businesses are engaged in the sector across the country. The demand for the policy from domestic traders came after multi-national retail firms entered the Indian markets and started providing huge discounts of goods. According to the action plan, large-scale programme for capacity building of managers of small businesses would be undertaken to improve productivity.
Source: The Hindu Business Line
From socks and sneakers to washing machines and watches, Asian countries are hoping the US-China trade war will permanently boost manufacturing as brands dodge the row by choosing cheaper locations to make their goods. Business has fanned out from China, often referred to as the 'Factory of the World', into Vietnam, Cambodia, India and Indonesia for years. But the shift has accelerated as the world's two biggest economies slap tit-for-tat tariffs on each other. In the latest round of the bruising spat, US President Donald Trump this month raised tariffs to 25 per cent on USD 200 billion of Chinese goods, prompting Beijing to retaliate with higher duties on USD 60 billion worth of American products. That "really became a kicker to force people to move", said Trent Davies, manager of international business at the advisory and tax firm Dezan Shira & Associates in Vietnam. A surge in relocations from China or plans to scale up production has strengthened the manufacturing hubs of Southeast Asia and beyond. Casio said it was moving some of its watch production to Thailand and Japan to avoid the US penalties, while Japanese printer-maker Ricoh said it was also shifting some of its work to Thailand. American shoe giant Steve Madden plans to boost production in Cambodia, and Brooks Running Company, Haier washing machines and sock maker Jasan -- which sells to Adidas, Puma, New Balance and Fila -- are all eyeing Vietnam. The country is a logical move for manufacturers, wooed by low-cost labour, attractive tax incentives and close proximity to China's unparalleled supply chains. "It's not just a result of the trade war, a lot of it is opportunity in Vietnam," Davies said. Some Vietnamese suppliers say the trade dispute has fast-tracked the trend as companies scramble to dodge fresh tariffs that could affect some 4,000 categories of exports to the US. On a busy stretch of road in Hanoi, the bustling Garco 10 factory is churning out men's shirts for American brands like Hollister, Bonobos and Express. The company says exports to the US were up seven per cent last year, with an expected 10 per cent jump this year. "Thanks to the trade war... several sectors of the Vietnam economy have gained, especially our garment sector," Garco 10 director Than Duc Viet told AFP. "We want to open more factories, we want to expand our capacity," he said at one of his facilities where an army of workers made shirts destined for American shopping malls and department stores. US imports from China during the first three months of this year reached nearly USD 16 billion, up 40 per cent from the same period last year, according to US trade data. And that number could rise. More than 40 per cent of US companies in China are now considering moving or have already done so, mainly to Southeast Asia or Mexico, according to a poll this month from the American Chamber of Commerce in China. But the shift is not expected to be seamless. While Southeast Asia offers low-cost labour -- monthly factory salaries are about USD 290 in Vietnam and USD 180 in Cambodia and Indonesia, compared to around USD 540 in China -- workers are less experienced. "Labour costs are three times higher in China, but the efficiency is also three times higher," said Frank Weiand, co-chair of the manufacturing committee at the American Chamber of Commerce in Vietnam. There is also a smaller labour pool to draw on. Vietnam employs around 10 million people in the manufacturing sector compared to 166 million in China, according to data from the International Labour Organisation. Indonesia employs 17.5 million, and Cambodia 1.4 million. Experts warn companies may also face supply chain woes, infrastructure challenges and land shortages in less developed markets without the capacity to absorb overspill from China. This could be a problem for Indonesia, whose clunky bureaucracy has left it trailing some of its neighbours. But now the country is hoping to soak up foreign investment from the trade war. "We're trying to make it easier for investors by speeding up the process for getting business permits," said Yuliot, a senior official at the Indonesian Investment Board who goes by one name. The country is also beefing up infrastructure and skills training while offering corporate tax breaks, he added. With no end to the trade war in sight, analysts say the manufacturing shift out of China is likely to continue -- and could redefine long-entrenched global trade patterns. "Certainly it will end China's dominance as the 'Factory for the US'," Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, told AFP. US companies and consumers may also get the short end of the stick: higher tariffs on goods out of China means the average American will likely have to pay more for a pair of Nike sneakers or Levi's jeans. And if Trump was hoping to drive US manufacturers back home by imposing those tariffs as part of his 'Make America Great Again' clarion call, he's not likely to get his wish. American industries -- and wages -- are not set up for low-cost manufacturing on the scale of China. Instead, countries like Vietnam are likely to continue scooping up those jobs. Le Thi Huong, who sews hems at Hanoi's Garco 10 factory, said: "I hope there will be more orders... so we have more jobs and more income.
Source: Business Standard
Department for Promotion of Industry and Internal Trade (DPIIT) is setting up a task force with an eye on boosting exports done by traders and merchants through online retail portals like Amazon India and eBay. The government wants to increase the size of the market at $1.2 billion, estimated by Citizens' engagement platform-Local Circles, by ten times in the next 5 years. After a meeting today with executives from Amazon, PayPal and eBay, the government is now looking to remove bottlenecks around payments, taxes, among other areas of concern. A DPIIT official said it will create a draft of the changes based on industry feedback in the next three weeks in consultation with the customs department, RBI and India Post. “The idea is to remove the barriers and scale up e-commerce exports. We are moving fast on this. After the consultation, we would also engage with different states to focus on exports of products based on state-wise specialities,” said Shailendra Singh, additional secretary, DPIIT. This comes at a time when Amazon recently announced its Indian sellers have sold goods worth $1 billion in overseas markets in the last three and a half years. Sources added DPIIT wants to increase the overall size of the e-commerce market to bring more traders to online commerce. “DPIIT is looking to expand the e-commerce pie by doing whatever it takes to remove the bottlenecks and enable hundreds of thousands of exporters,” said one of the industry players present at the meeting. The DPIIT will look to boost exports in sectors like home decor, textiles, handloom, leather, gems and jewellery, etc. The task force will include customs department, RBI and India Post besides other concerned departments to relax various rules. People present in the meeting said, there are several transactional issues, including the fact that exporters can realise only 75%-125% of the invoice value of those products as inward remittances. This has been proposed to be increased to 50-150%. Another proposal is for RBI to increase the window of proposed realisation from 9 months to 24 months and competitive pricing from India Post. This would also include setting up special desks at India Post’s offices focusing on e-commerce exports to give it a boost. “This will be the new government’s first major e-commerce boost for Make in India products. The global e-commerce export is a $450 billion market and the opportunity will be captured by China, if things don’t change. It will help create more jobs, increase our foreign exchange and improve our product quality by creating a community around e-commerce exports,” said Sachin Taparia, founder of Local Circles.
Source: Times of India
India needs to respond creatively to China’s ‘ASEAN plus three’ gambit. Perhaps exasperated by the slow progress over RCEP talks, China has once again floated its ‘ASEAN plus 3’ idea (ASEAN, Japan, China and South Korea). The move, which leaves out India, Australia and New Zealand, is a clear message to India, which has resisted RCEP demands on tariff reduction, to ‘like it or lump it’. India apprehends that, given its $60-billion trade deficit with China, the RCEP demand to reduce tariffs on 90 per cent of the traded goods to zero will have a disastrous effect on its already struggling MSME sector. India’s FTA experience with ASEAN, Japan and South Korea has been a mixed one. The Economic Survey 2015-16 notes: “We find that the average effect of an FTA is to increase overall trade by about 50 per cent over roughly four years. We also find that the ASEAN FTA has had the greatest impact, possibly because tariff reduction by India has been greater under it. The results also suggest a bigger impact on metals on the importing side and textiles on the exporting side.” Apart from being reluctant to slash tariffs for political economy reasons, India has expressed its reservations over inclusion of e-commerce in the RCEP talks. The RCEP draft is opposed to data localisation, while India fears the monopoly power of digital giants which includes the likes of Tencent and Alibaba. With no easy solution in sight to these issues and China threatening to pull the plug on India by junking RCEP, it would seem that India is in a tight spot. However, the bright side of this story is that there are a number of Japanese, Korean and Chinese companies invested in the domestic market, who would, in fact, prefer a tariff wall for finished goods. Moreover, China is turning into a high cost producer, and needs lower tariffs and a softer currency in days to come. To that extent, India’s export markets in the ASEAN may not recede in a hurry. The Centre must adopt a considered approach, keeping its domestic interests in mind, while at the same time being flexible in certain areas. For instance, India can offer to liberalise foreign participation in education, accountancy and legal services. Its e-commerce rules are restrictive. The ASEAN plus three grouping (provided Japan plays ball) is not without strategic significance. It raises China’s heft in the East. If this grouping pushes for an FTA with the EU, now facing issues with the Trump administration, it could further China’s global influence. China’s Belt and Road Initiative as well as its strides in digitisation could be leveraged here. India’s trade diplomacy needs to be reviewed, with both the US and China applying pressure to secure access to its markets. The earlier multilateral consensus has collapsed. In its place, tariff wars and arm-twisting have assumed centrestage. India must support exporters through WTO-compatible means in these uncertain times.
Source: The Hindu
The new government will have to overhaul the trade framework if India is to play any meaningful role on the world stage. As the government starts its second term, it will have to focus on one area where it did not deliver in the last term - boosting exports. In 2018/19, India's merchandise exports hit a record $331 billion, but did not cross the government's target of $350 billion. More importantly, they were just 5.3 per cent over the $314.4 billion achieved in 2013/14. Also, the export to GDP ratio in 2018/19 was 12.2 per cent, almost half the 23 per cent achieved in 2013/14. What should the government do this time round? It needs to overhaul the trade policy. The focus has to be on goods and services where India is competitive. There is a need to widen the portfolio of products in the export basket and enter newer markets. These products can be part of the global value chain-led trade. Doing that requires not just backward integration of export policies and agreements but also a fresh look at how new opportunities are approached. Arvind Panagariya, former Vice Chairman of NITI Aayog, has suggested creation of a new entity that will negotiate trade agreements. This department should be placed with the Prime Minister's Office, quite like the Office of the United States Trade Representative. The commerce ministry is contemplating setting up an autonomous body on the lines of Australia's National Productivity Commission, accountable to Parliament. The Australian authority not only vets bilateral and multilateral agreements but also monitors their implementation. These ideas have merit as they are outward looking and coordinate with stakeholder ministries. But implementing them requires a radical change in outlook.
New Territories, Newer Products
The first Narendra Modi government did some work in tapping new markets. This included getting trade infrastructure ready to reach out to Central Asia via Iran and Asean nations via road through the North East. There was an exercise to identify new products as well. For example, the UAE and Saudi Arabia negotiated to set up export-oriented food processing units in India. The talks couldn't fructify because of challenges of acquiring land, and the tedious Agriculture Produce Market Committee Act. Various companies are pushing for changes in laws governing agricultural produce. "The way the GST Council ironed out glitches in implementation, there is a case for having an APMC council or an agriculture council," says Ajay Shriram, Chairman and Senior Managing Director, DCM Shriram Group. To test waters, the Exim Bank conducted a study for the commerce ministry to understand requirements in some African and Latin American countries. These were the first steps in shifting the ministry's approach towards the demand side, a senior official in the commerce ministry says. The report, however, was not accepted. Another challenge for India has been the lack of trade agreements. The commerce ministry is negotiating with the African block on the Comprehensive Economic Cooperation Agreement. In the last fiscal, India's trade with Africa alone was $63 billion. In 2018, the countries that comprise the Africa block had free trade agreements among themselves, which makes the region a lucrative market. Moreover, their concerns about falling in a debt trap with China works to India's advantage. "The newer free trade agreements are back-loaded and a win-win for both India and Africa," Suresh Prabhu, Minister of Commerce & Industry in the first Modi government, told Business Today. "The plan is to make the manufacturing sector worth $1 trillion by 2025, and exports play a pivotal role in this strategy." To achieve this, changes are needed in the way diplomats are trained. There is also a need to develop skillsets needed to identify opportunities. It is easier said than done. A senior official said this requires not only policy changes but alteration in the structures as well. The to-do list includes better trade negotiations, preparing domestic players to take advantage of opportunities and removing bottlenecks in policies. Amid global trade wars, the biggest opportunity for India is the global value chain (GVC) led trade. This requires India to put in place its global integration strategy. In the last decade, manufacturing centres in the European Union and North America were the traditional hubs of GVC-oriented production. But the EU is yet to recover from the shocks of the global crisis, and production has moved to China. However, with China's manufacturing slowing down, there are emerging opportunities for East Asian and South Asian countries.
Tightrope Walk
Can the new government prepare India to take advantage of this? Globally, the emphasis is now on domestic integration. But there will be a price to it. China is pushing India to join the Regional Comprehensive Economic Partnership (RCEP). India is reluctant, because there are 74 products on which it will have to reduce import tariff to zero; of these, 40 products are being dumped in India by Chinese companies. India is seeking differential and lower levels of preferential market access for its non-FTA partners. Those who back RCEP say India must not view this group with the prism of bilateral trade deficit with China. Pradeep S. Mehta, Director General of think tank CUTS International, argues that the RCEP has to be seen as a mega-regional trade agreement which is a means to both trade liberalisation and integration with regional value chains. Those opposing it say this can be achieved via existing FTAs itself. Many Chinese textile and apparel players are moving to Vietnam, the Philippines and Bangladesh. India will have to compete as well as integrate with them. Economist Rathin Roy, a member of the PM's Economic Advisory Council, says, "India's demographic distribution can offer solutions. Relocation of labour intensive units to eastern India can cut labour costs. For this, the government will have to come forward." India's contribution in global textile and apparel exports is a dismal 4-5 per cent, whereas Bangladesh's has risen from 4.5 per cent in 2001/02 to 8.1 per cent now. China leads the pack at 37 per cent. "The biggest threat is that China is working on robotics and artificial intelligence in this segment. If we don't move quickly, forget gains, it will be difficult to even compete for export markets," cautions another trade expert. On his recent tour to New Delhi, US Commerce Secretary Wilbur Ross said, "India has overly restrictive market access barriers and the average applied tariff rate is the highest of any major world economy." India is closing its markets with moves like the e-commerce policy, data localisation, and by raising tariffs on several manufactured products such as auto parts and mobile phones. In return, the US has withdrawn duty-free access to over 3,000 Indian products under the Generalized System of Preferences trade programme. India can't brush off America's concerns as it has to negotiate with it on H1B visas and sanctions on Iran, which is affecting crude oil imports. The commerce ministry has come out with a strategic paper on methods to bring balance to India's trade with China. The plan includes increasing tariff to permissible rates and introduction of standards for products. "Theres nothing against MNCs, but the law of the land should not be changed to accommodate them. They must change their ways to do business in India," says Ashwani Mahajan, National Co-convenor of the Swadeshi Jagran Manch, an RSS think tank. India's new export policy is due in March 2020. The wish list is long, and the market expects the new government to bring changes quickly.
Source: Business Today
Iran oil, bilateral trade with US, and growing Chinese assertiveness are among issues that Modi needs to handle deftly. Prime Minister Modi’s first-term was marked by his placing his own distinctive stamp on the conduct of Indian foreign policy. Just a few weeks preceding commencement of the general election campaign, he received a message of greetings from President Putin, who conferred the “highest decoration” of the Russian Federation on him. This was accompanied by his being conferred with the highest award of the UAE by its ruler, Sheikh Khalifa bin Zayed. The personal rapport that characterised Modi’s relations with other leaders like Presidents Obama and Trump, French President Macron and Bangladesh Prime Minister Begum Khaleda Zia, is also widely acknowledgedDays before election results were officially announced, China’s Global Times, praised Modi’s policies in an article entitled: Modi’s Reelection Further Reinforces China-India Trust. The Global Times lauded his meeting with President Xi Jinping in Wuhan and his role in resolving tensions over Doklam. It also praised him for India joining the Asian Infrastructure Bank, in the face of opposition from the US and Japan. This Chinese approach, hopefully, signals encouraging prospects for continuance of cooperative efforts by India and China, to maintain peace along the border. One cannot, however, be sanguine about any significant narrowing of divergent approaches by New Delhi and Beijing on regional security issues, including China’s military and nuclear support for its “all weather friend,” Pakistan. Promoting India’s interests in a growingly uncertain world order is going to be a far more challenging task for Modi than what he experienced in his first term. An important factor behind these uncertainties and tensions is the volatility that has been introduced in global relations, by the mercurial President Donald Trump.
Trade under Trump
The Trump Administration has rocked relations with close allies in Europe, like France and Germany. Even the British are wary of him. He strained trade relations with neighbouring Canada and Mexico, by imposing duties on steel and aluminum, which were withdrawn after retaliation by them. India has faced similar challenges on bilateral trade, which would need careful handling, bilaterally and in the WTO. US relations with China are now under severe strain, because of punitive duties placed on a vast range of China’s exports. Trump has also placed stiff sanctions on China’s communications giant, Huawei, which can cause severe damage to China’s vital electronics industry. Such moves will inevitably result in a setback to the efforts of President Xi Jinping to make China the most important and influential power, globally. These are, however, actions that Trump can justify internationally, given China’s propensity to blatantly violate international norms on trade and patents. Moreover, the US Pacific Fleet is now defying China’s untenable maritime boundary claims, across the Pacific Ocean. India has to deal with this situation carefully, backing friends like Vietnam and Indonesia against untenable Chinese maritime boundary claims, without being perceived to be acting at American behest.
Arms deal
India appears confident of settling its differences on trade with the US bilaterally, and through the WTO. Strains in bilateral relations with the US could well arise, because of American sanctions on arms purchases from Russia. The US can grant sanctions waivers on specific arms purchases from Russia, like it has done in the case of the S400 Air Defence Missiles we are acquiring from Moscow. There also appears to be no intention to place sanctions on purchases of spare parts for equipment already acquired from Russia. But, we are preparing for large purchases from Russia of weapons systems including submarines, tanks, fighter aircraft, frigates and AK 203 assault rifles, for indigenous manufacture. While it was averred during the Putin visit that we had banking arrangements in place to deal with Russian acquisitions, it is not clear how and whether this could be done, in present circumstances. American banking sanctions are also rendering the purchase of oil from Iran almost impossible. While Iraq, Saudi Arabia and the UAE can enable us to meet our requirements, Iranian oil is cheaper and its transportation costs lower than oil from other sources. The European Union, Russia and China do not accept the legality of US sanctions on Iran. The US sanctions are unilateral and in violation of the agreement to end all nuclear sanctions on Iran, which all these powers signed. While most countries worldwide regard these US sanctions abhorrent, it would be useful for India, Russia and China to discuss measures on how they can be overcome or bypassed. Consultations with the EU, which is chary of challenging the US, are also essential. It would be only prudent not to take any unilateral steps on this issue.
Regional initiatives
India’s bilateral and regional initiatives in the recent past have enhanced its influence across the entire Indian Ocean Region, from the Straits of Malacca to the Straits of Aden. While ASEAN has been weakened and divided by China’s actions, viable policies are being devised to balance growing Chinese influence and assertiveness, involving subtle diplomacy with countries like Japan, Indonesia and Vietnam, together with enhanced interaction with the US. The vast improvement in our relations with the Arab Gulf countries where over six million Indians live remitting back over $60 billion annually has been remarkable. Indian workers are welcomed and our professionals are steadily replacing their western counterparts, across this region. Finally, in the sub-continent, Pakistan has excluded itself from economic integration within South Asia, by its aversion to promoting economic ties with India and denying India transit rights to Afghanistan. While we need not rush into any high profile “composite dialogue” with Pakistan, we should discreetly engage its government and army. International pressure has increased on Pakistan after the Balakot airstrike. Prime Minister Modi has called Pakistan’s nuclear bluff. The opening of the Kartarpur corridor should be accompanied by initiatives to expand educational and cultural ties and moves to promote group tourism to religious shrines and historical sites. Such moves will be welcomed by people in Pakistan, and by the world at large.
Source: Business Line
Bangladeshi Prime Minister Sheikh Hasina is wooing Japan for aid, trade and investment in a visit that highlights cordial relations with the administration of Prime Minister Shinzo Abe. Hasina, who is beginning a third consecutive five-year term, arrived late Tuesday and is set to meet Abe and hold a joint news conference Wednesday. A dinner is also being held in her honour. The leaders will discuss the Bay of Bengal development project and strengthening economic and security partnerships, according to the Japanese Foreign Ministry. Japan has been weary of the security and economic threat of neighboring China and has been courting other nations in Asia as well as the U.S. and Europe. This week alone, Abe is meeting with leaders of the Philippines, Cambodia, Malaysia, Vietnam, Singapore and Laos in addition to Bangladesh. He just finished playing host to a four-day visit by President Donald Trump, which ended Tuesday. Hasina has visited five times before, as prime minister and opposition leader, but this marks her first visit since taking office in her latest term. Promoting trade between Japan and Bangladesh is important for both sides, with Bangladesh importing mostly steel, autos and machinery from Bangladesh, and Japan importing clothing products and jute. Japanese imports from Bangladesh have quadrupled recently compared to 2009 levels. Japanese companies setting shop in Bangladesh are also growing, mostly in textiles and manufacturing. Japan has long seen Bangladesh as a key partner because Bangladesh has supported Tokyo's wish to become a permanent member of the U.N. Security Council, as well as backed its position on nuclear weapons. Hasina won an overwhelming victory in the December elections. The opposition alliance is demanding new elections, saying the polls were rigged, an allegation the Election Commission and Hasina have rejected. More than a dozen people were killed in election-related violence on the day of the polls, and the election campaign was undermined by allegations of arrests and the jailing of thousands of Hasina's opponents. Authorities said the arrests and the jailing were not politically motivated.
Source: Outlook India
The Infrastructure Development Company Limited (Idcol), will be seeking $100 million in loans from the GCF, and hopes to secure a further $66 million through borrower co-financing. Bangladesh is looking to secure $166 million in financing to improve energy efficiency in the textile sector, with some one hundred million dollars being sought from the Green Climate Fund (GCF). The Infrastructure Development Company Limited (Idcol), one of two local direct access accredited entities empowered to handle GCF monies, will be seeking $100 million in loans from the GCF, and hopes to secure a further $66 million through borrower co-financing. Improving energy efficiency in Bangladesh’s textiles industry is considered key to retaining global competitiveness. “Bangladesh is going to graduate from LDC status which means that business as usual for the textile sector will no longer work. We need to clean up our act,” explained Saleemul Huq, director of the International Centre for Climate Change and Development (ICCCAD), an implementing partner. Stakeholders exchanged views at a city hotel on Wednesday at a workshop on energy efficiency in the textile sector and its influence on the environment, society and gender, organised by Idcol with support from implementing partners EY and ICCCAD. “We’ve taken a very aggressive approach. This is probably one of the fastest proposals to the GCF,” EY associate partner Ashish Kulkarni said. Suraj Pandey, a GCF expert at EY, led the stakeholder discussion at the event. Idcol's assistant manager for corporate affairs Mafruda Rahman explained that blended funding – mixing low interest GCF funds with financing available in the markets – effectively produces single-digit interest rates. The funds being sought will have a 5-year disbursement period and a 10-year repayment period with a two-year grace period. Idcol, a non-bank financial institution working in the medium to large-scale infrastructure and renewable energy financing space, is accredited by the GCF to handle loans of up to $250 million. The company includes both senior government officials and three private sector representatives on its board. Textiles manufacturers have already begun cleaning and greening their operations. Hasan Mahmud, executive director at Bitopi Group which has two LEED certified factories, explained the business case for embracing energy efficiency: “We run business cases - we put it on paper and look at the payback period. It makes sense when we are getting our money back.” Fakhrul Alam, sales and marketing manager at Noman Terry Towel Mills Limited, added: “I want to make the environment cleaner for my children. It isn’t always about the money.” The UNDP’s Arif Faisal, programme specialist on environmental sustainability and energy, advocated a paradigm shift from a linear to a circular economy. “Very visible solar panels on factory roofs are good. But if the same factory is dumping effluents into the river, that is not so good,” he said. Mizan Khan, programme director of the LDC University Consortium on Climate Change at ICCCAD, agreed: “There is a lacuna in the conceptualisation of this issue and that is the significance of behavioural change as a part of energy efficiency.” Special guest Mallick Anwar Hossain, additional director general of the department of the environment said: “I request industrialists to introduce innovative technology to make their industry clean and green.” Abdullah Al Mamun, vice president of the |Bangladesh Textile Mills Association, responded: “We have accepted the challenge of making our country cleaner, greener and more efficient.” Md Helal Uddin, additional secretary of the Sustainable and Renewable Energy Development Authority, attended the workshop as chief guest. The proposal to the GCF will likely be submitted by September this year. If it is approved, Idcol will be authorised to identify local recipients of funding. There are currently three approved GCF funded projects in Bangladesh.
Source: Dhakha Tribune
Vietnam reaped export turnovers of over 100.7 billion U.S. dollars in the first five months of this year, seeing a year-on-year increase of 6.7 percent, while making import turnovers of nearly 101.3 billion U.S. dollars, up 10.3 percent, its General Statistics Office said on Wednesday. Specifically, Vietnam gained 19.9 billion U.S. dollars from exporting phones and their components, up 3 percent; 12.3 billion U.S. dollars from computers and components, up 11.1 percent; 12.1 billion U.S. dollars from garments and textiles, up 10.3 percent; and 7.1 billion U.S. dollars from footwear, up 14.3 percent. Between January and May, the United States remained Vietnam's biggest importer with turnovers of 22.6 billion U.S. dollars, tailed by the European Union with 17.3 billion U.S. dollars, and China with 13.4 billion U.S. dollars, the office said. In the same period, Vietnam spent 19.8 billion U.S. dollars on importing electronic appliances and components, up 17.3 percent; 14.8 billion U.S. dollars on machines, equipment and spare parts, up 14.9 percent; 5.4 billion U.S. dollars on cloth, up 5.8 percent; and 4.1 billion U.S. dollars on iron and steel, up 0.7 percent. Meanwhile, China was Vietnam's largest exporter with turnovers of 29.6 billion U.S. dollars, up 18.9 percent, followed by South Korea with 19.2 billion U.S. dollars, up 1.1 percent, and the ASEAN (the Association of Southeast Asian Nations) with 13.9 billion U.S. dollars, up 9.3 percent, according to the office. Vietnam reaped export turnovers of over 243.5 billion U.S. dollars in 2018, up 13.2 percent against 2017, and import turnovers of 236.7 billion U.S. dollars, up 11.1 percent, seeing a trade surplus of 6.8 billion U.S. dollars.
Source: Xinhua
Turkey is the world's fourth-largest denim exporter with a 2% share in the denim fabric exports, worth $338 million, and a 7% share in denim clothing exports worth $2.1 billion, according to the Uludağ Textile Exporters' Association (UTİB). According to a UTİB statement, the association participated in the Denim Premiere Vision Milan, a two-day fashion and cultural denim event held in Italy. UTİB Chair Pınar Taşdelen Engin noted that Turkey became the fourth biggest supplier in the international denim market with the investments made in the 1980s and subsequent projects. She added that they lent support to each year to increase the power of the companies in this market. "We took our place among the most participating countries with 27 companies," she said. "At our UTİB booth, we carried out all kinds of projects to meet the needs of our companies. In addition, we published a catalog to provide information on Turkish companies participating in the event and distributed them to the visitors." Referring to the rapid rise in textiles, Engin said this was due to the Turkish firms' success in the production, marketing and evaluation of their proximity to Europe as a geographical advantage. "Since speed is a crucial part of the production, industrialists who could adapt to the requested capacity and quality standards, have achieved success in production and export without difficulty," she continued. "Turkey, which once produced the designs of foreign brands, has now become a country that creates its own brands and directs the world denim fashion with its designs and technological products. In 2018, we took our place among the most successful countries of the world in both denim fabric and denim garment exports," she said. Engin said that Tunisia, Egypt, Italy, Morocco, and Bangladesh took the lead in Turkey's denim fabric exports. "The fact that the production shifted to the east in terms of costs and that many of the global firms carried out their production activities in these countries increased exports to the region," she said. She further stressed that Germany, Spain, the U.K., the Netherlands and Denmark were among the top players in Turkey's denim clothing exports, which clearly demonstrated Turkey's ability to produce top-end denim garments. Pointing to China, Bangladesh and Vietnam in the Far East; Italy in Europe; Mexico and the U.S. in the Americas; and Tunisia and Egypt in the Middle East as the prominent target markets for Turkey's denim fabric imports, Engin said the U.S., all of the EU countries, Japan, and Hong Kong stood out as the priority target markets in denim clothing.
Source: The Daily Sabah
Pakistan’s five export-oriented manufacturers’ bodies, primarily based in Sialkot, have urged the government to continue the zero-rating sales tax regime in the budget 2019-20, fearing the country’s export might drop further to $21 billion from $23.7 billion now. Such a step would have adverse effect on the policy to generate 10,000,000 jobs, they feel. The five zero-rated exporters’ bodies—of value-added textiles, leather, carpets, surgical instruments and sports goods—recently called an emergency meeting hosted by the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA). PRGMEA chief coordinator Ijaz Khokhar observed that Pakistan’s textile exports have already witnessed a flat growth at $11.1 billion in the first 10 months of the current fiscal, though the value-added garment sector showed some improvement owing to the positive measures of the commerce ministry, which is now being reversed by the finance ministry to generate interest-free liquidity of Rs 2,000 billion at the cost of plummeting exports. The participants decided to have a meeting with the prime minister to apprise him that if this facility is withdrawn, many businesses may simply collapse, according to Pakistani media reports. Khokhar said the zero-rating regime was removed twice in the past but proved unsuccessful due to sales tax refund issues. He wondered why was it being considered for the third time by the finance ministry when refunds of over Rs 200 billion were already pending for the last few years. Criticising the Federal Board of Revenue’s (FBR) proposal to suspend this facility, he said FBR wants to end the incentive just to make its balance sheet correct. (DS)
Source: Fibre2fashion
