Jute fiber being dehydrated after retting, alongside a road in Howrah
News, leads and analysis related to India's trade and all that's happened on the policy front during the month of July 2014
Chinese Milk
Extension of Ban
The Directorate General of Foreign Trade (DGFT) has extended the ban on imports of milk and dairy products from China until June 22, 2015 over concerns of melamine contamination. The ban covers chocolates, chocolate products, candies, confectionery and food preparations made with milk or milk solids. It’s worth noting that milk production in India – the world’s largest producer – increased by about 7.6 million tonne to about 140 million tonne in FY2014. However, consumption is rising at a much faster pace and is expected to reach around 200 million tonne by 2024. In fact, India’s Minister for Agriculture recently said, “India may have to import milk in the future if production does not grow by 6 million tons per year for the next 10 years.”
Chinese Gelatine
Demand for Ban
India’s pharmaceutical industry has urged the Drugs Controller General of India (DCGI) to ban gelatine imports from China due to excessive presence of chromium. 
Gelatine is used by pharmaceutical companies to make the outer covering of some capsules. However, Indian pharmaceutical companies claim that in China gelatine is made out of the waste from leather factories and contain harmful levels of chromium. According to the US Food and Drug Administration (USFDA), numerous companies in China use industrial-grade gelatine to make pharmaceutical-grade gelatine capsules. “This industrial-grade gelatine contains more chromium than the edible gelatine that firms should have used,” it says. Indian pharma companies claim that although the Chinese Food and Drug Administration (CFDA) shut down certain factories manufacturing pharmaceutical-grade gelatine in China in 2012, the Indian government is yet to ban imports of chromium-tainted gelatine, which is cheap but harmful. It’s worth noting that in a recent report, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) observed that while India is a leader in pharmaceutical exports with exports to over 200 countries, it is heavily dependent on imports from China for many essential and large volume drugs.
Jute Industry
Revival Attempts
The Indian government is trying to revive the domestic jute industry that has been on a decline due to dropping demand for jute products and lack of modernisation. Although India is by far the world’s largest producer and consumer of jute products, increasing popularity of plastic substitutes and lack of modernisation has hurt its jute industry. In the last 10 years, five units of National Jute Manufacturers Corporation Ltd. (NJMC) have been declared sick and jute prices have plunged close to the minimum support prices (MSP).
In order to revive the sagging fortunes of the industry, the government recently approved Rs.1,562.98 crore, which includes financial restructuring and grant for Voluntary Retirement Schemes (VRS) of mills under NJMC. The government has also launched the Jute Technology Mission (JTM) under which a subsidy of Rs.104.36 crore has been provided to help jute mills install new machinery. Experts say demand for environmental friendly products is growing all over the world and the jute industry in India and Bangladesh (the world’s largest exporter of jute products) should grab this opportunity.
India-Bangladesh Trade
Trade dynamics
The Confederation of Indian Industry (CII) claims India-Bangladesh trade could double to over $10 billion by FY2018 if Non-Tariff Barriers (NTBs) and infrastructure related concerns are addressed on both sides. At present, trade between the two countries is heavily tilted in favour of India. According to CII, two-way trade between India and Bangladesh stood at $6.6 billion in FY2014 with India’s exports at $6.1 billion and imports at a mere $462 million. 
Decline in exports to India poses a serious challenge for the Bangladeshi government and might trigger protectionist measures in future.
While revving up imports from Bangladesh may be difficult, CII suggests the skewed trade dynamics between the two nations could be redressed with greater investment participation of Indian companies in Bangladesh. Indian investments in Bangladesh stood at $2.5 billion in FY2013, and have surged in the last three years. “This can grow further,” says CII. CII suggests addressing NTBs such as harmonisation and non-recognition of technical standards can help. In addition, resolving infrastructure problems, and improving the investment process in Bangladesh with single window clearances, upgrading the tax holiday system and improving connectivity can help bolster economic partnership between the two nations. As per CII, some potential sectors for investment in Bangladesh include electrical machinery and equipment, vegetable/roots and tubers, agro-processing, automobiles, textile (including home textile), organic chemicals and light engineering. In the services sector, ICT, pharmaceuticals, hospital & medical equipment, tourism and professional services offer good opportunities.
Essential Items List
Onion & Potato
The Cabinet Committee on Economic Affairs (CCEA) has put onion and potato under the purview of stock holding limits under the Essential Commodities Act, 1955 to control prices and check hoarding. Prices of onion and potato increased sharply in May-June, with a 40% increase in wholesale prices of potato just in May. The government has already set a minimum export price (MEP) of $450 per ton (about Rs.27 per kilogram) on potato which is expected to reduce exports. The government has also increased the MEP on onion to $500 per ton (about Rs.30 per kilogram) after the MEP of $300 per ton (about Rs.18 per kilogram) set in June failed to have any impact on onion exports and domestic prices.
Sacks of potato waiting to be loaded to a ship before being exported
Bhubaneswar
WTC Branch
The World Trade Centre (WTC) has opened its new branch in Bhubaneswar, Odisha, making the state a part of the WTC network of 343 branches in 100 countries. The facility is the fifth WTC branch in India. Odisha’s Chief Minister Naveen Patnaik has promised that the branch will move into its own building within three years. The new WTC is expected to help boost trade in the state and act a as a bridge between local companies and global businesses. WTC Bhubaneswar will have top-end facilities to spur trade, including a convention centre and a 1.7-km skywalk to connect it with hotels. Odisha aims to increase exports from the state to Rs.29,693 crore in 10 years, for which exports must grow at a CAGR of 10% from its FY2013 level of Rs.11,448 crore. The state government has identified minerals & metallurgical products, engineering, chemical and allied products, marine products, electronics & software, agricultural products, handloom, textiles & handicrafts and tourism as sectors with vast potential for exports. To boost exports, Odisha plans to set a B2B exchange facility, a district level export promotion committee, and incentives like exporter’s green card for seamless passage of export consignments.
Reserve Bank of India
Increase in Credit Period
The Reserve Bank of India (RBI) has extended the credit period given by a foreign supplier to Indian buyers of rough, cut and polished diamonds to 180 days. Until now, the same was 90 days. According to the RBI, “Credit given by a foreign supplier to its Indian customer/ buyer, without any Letter of Credit (Suppliers’ Credit)/Letter of Undertaking (Buyers’ Credit)/Fixed Deposits from any Indian financial institution for import of rough, cut and polished diamonds, may be permitted for a period not exceeding 180 days from the date of shipment.” The RBI took the decision after considering proposals received from diamond importers and GJEPC. GJPEC has welcomed the move saying, “Supplier’s credit limit of 90 days was ‘severely hampering’ the business cycle and had become an impediment for export of cut and polished diamonds.”
Health Supplements
Court verdict
Hearing the petition of Vital Neutraceutical, a Mumbai-based food business operator (FBO) and Indian Drug Manufacturers Association (IDMA), the Bombay High Court has quashed an advisory issued by the Food Safety and Standards Association of India (FSSAI), which had made prior product approval mandatory for dietary food and health supplements already licensed and existing in the market. The Court called the Product Approval (PA) advisories issued by the FSSAI unlawful. According to the Advisory, manufacturers were required to take approval for a spectrum of food products including “novel foods, functional foods, food supplements, irradiated foods and genetically modified foods.” Clause 22 of the FSS Act/Rules & Regulations states that food business operators (FBOs), who are the manufacturers of proprietary foods, genetically modified articles of food, functional foods, health supplements or nutraceuticals are required to apply for the product approval with the central licensing authority.
North-Eastern States
Floriculture Exports
The Agricultural and Processed Food Products Export Development Authority (APEDA) is fast-tracking the development of a road map that will enable flower exports from North-Eastern states to countries with high demand like Japan. India’s floriculture exports grew strongly to about Rs.455.9 crore in FY2014, which is about 25% higher than that of FY2013. The floriculture sector in India is very fragmented, with most of the commercial cultivation in West Bengal (32%), Karnataka (12%) Maharashtra (10%) and almost half of the export units based in Karnataka, Andhra Pradesh and Tamil Nadu. In recent years, flower production in several states have declined due to warm weather conditions. However, experts feel the temperate cool weather in the North East is more suitable for floriculture and encouraging exports can act as a game changer for the domestic economy of the region.
Organic sugar exports
Ceiling removed
The Directorate General of Foreign Trade (DGFT) has removed the ceiling of 10,000 tonne when it comes to the export of organic sugar, provided the export is registered with DGFT and certified by Agricultural and Processed Food Products Export Development Authority (APEDA). The move is aimed to help improve exports of sugar and allow more funds into an industry that hasn’t paid for a long time now. In FY2014, India’s sugar production stood at around 242.27 lakh tonne – down 4% y-o-y – of which 240 lakh tonne is expected to be consumed domestically. The surplus stock is estimated at 2.27 lakh tonne, which will push overall stocks to around 67.4 lakh tonne. However, industry insiders feel the removal of the quantitative ceiling on sugar exports is cosmetic because of the ‘organic’ rider as very few sugar mills in India have the certification. The certification process for organic sugar is also very lengthy.
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