News, leads and analysis related to India’s trade and all that’s happened on the policy front during the month of January 2015

India–Australia

Free trade agreement

They call it the kangaroo trick!

Australian Minister for Trade and Investment Andrew Robb, during his recent visit to India, said his country is looking forward to sign a free trade agreement (FTA) with India by the end of 2015. He said the two countries are likely to complete trade negotiations by the end of the year following which the agreement will be signed. The talks for a comprehensive economic cooperation agreement between the two countries started in 2011. Several rounds of discussions have been held since then between the two countries for further liberalising and broadening the base of merchandise trade, removing non-tariff barriers and encouraging investments. “The high level of bureaucratic hindrance in many ways is the reason why our two-way trade with India is 10 times shy of the two-way trade with China,” Robb was quoted by Australian media. Australia has recently finalised FTAs with China, Japan and South Korea.

India - WTO

TFA implementation

TFA, the key to success

Roberto Azevêdo, Director-General, World Trade Organisation (WTO), has said that implementation of the Trade Facilitation Agreement (TFA) and reducing trade barriers will be crucial for the success of India’s “Make in India” programme. Speaking about India’s importance in policy measures that WTO plans to take this year, Azevêdo said, “It is in the interests of developing countries that the WTO is seen as an organisation that delivers. So we must succeed in these efforts – and, as ever, India’s leadership will be vital.” India is a founding member of the WTO. Since 1995, India’s applied tariffs have dropped from an average of around 39% to around 13.5% now. In the same period, India’s exports have increased to around ten times the level seen in 1995.

India - Japan

Trade ties

One step closer

Japanese External Affairs Minister Fumio Kishida, who recently paid a two-day visit to New Delhi, during a meeting with Sushma Swaraj referred India as a promising investment destination. The two leaders discussed areas for greater partnership and agreed to continue discussion on nuclear cooperation between the two countries. Civil nuclear negotiations between the two countries have been facing issues due to restrictions on the part of Japan. The ministers also reviewed the progress of Indo-Japanese US-2 Amphibian Aircraft project. Senior officials from the Ministry of Commerce also attended the meeting. The leaders also discussed a number of infrastructure projects like Western Dedicated Freight Corridor, high-speed train network between Mumbai and Ahmedabad, and communication between India and ASEAN region.

Indian Textile

Export subsidy

Flying under the radar

Subsidy for textiles, the fourth-largest export item from India, has come under the scanner of WTO. According to the WTO’s agreement on subsidies and countervailing measures, when the share of a developing country, with per capita income below $1,000/year, in global exports touches 3.25% in any product category for two consecutive years, the country attains export competitiveness. Hence, the country has to call off export subsidies for the items eight years from the second year of breach. US, the appellant, in its appeal before the WTO said that India’s textiles and clothing exports first crossed 3.25% mark in 2005 and remained above the level in 2006. Therefore, it should end its export subsidies for these items by January 2015. India has objected to the appeal and said that it has time till January 2015 before revoking all incentives for the product category.

Make in India

United States of America

Uncle Sam’s dilemma

Catherine Novelli, the United States Under Secretary, recently said that several companies in USA are keen to join India in promoting electronic manufacturing in the country. However, she felt that the constraints of global supply chain must be considered while implementing the “Make in India” programme. Responding to Novelli’s statement, Ravi Shankar Prasad, India’s Minister of Information Technology, promised US companies of unbiased treatment with Indian companies and assured that US companies manufacturing in India can also avail export incentives offered by the Indian government to domestic companies.

Indian Exports

Slowdown

Time to ring the alarm

The Federation of Indian Export Organisations (FIEO) has said that the decline in India’s exports reflect the contraction in demand in major markets, and the plunge in prices of crude oil, commodities and metals in the international market. According to the Ministry of Commerce, while India’s cumulative exports in April-December FY2014-15 stood at around $241.1 billion, which is up around 4% y-o-y, monthly exports continue to be low, reaching around $25.4 billion in December 2014, which is down about 3.77% y-o-y. With India’s exports in April-December 2014 standing at $241 billion, it remains a challenge to meet the $340 billion in the remaining 4 months of FY2014-15, and may adversely impact the economy.

JNPT

Aiming big

The sky’s the limit

Locational advantage, growing demand and policy changes will be the fulcrum around which India’s largest container port, the Jawaharlal Nehru Port, aims to transform and grow to one of the top 10 global container ports in the next five years. Recently, the government announced the establishment of the Special Economic Zone (SEZ) at Jawaharlal Nehru Port Trust (JNPT) at a cost of around Rs.4,000 crore in phase 1. The project will develop free trade warehousing zones for engineering goods sector, textile and other sectors, says the government. The SEZ could also play a big role in boosting India’s exports, says JNPT. The proposed SEZ is conceived to have all the integrated facilities and shall be a Port City in itself along the similar lines of other world class Port-based SEZs, N. N. Kumar, IRS, Chairman, JNPT, told The Dollar Business.

Finance Ministry

Pre-budget consultation

When FM comes calling

Finance Minister Arun Jaitley met top executives of IT companies at a pre-budget consultative meet at New Delhi. Addressing the delegates, the Finance Minister appealed for support from the sector to make the ‘Digital India’ campaign a success. During the consultation session, representatives from software and hardware industry made various suggestions for the union budget. Infosys CEO Vishal Sikka, Wipro CFO Suresh Senapathy, HCL Technologies CFO Anil Chanana, TCS Executive Vice President Phiroz Vandrevala, among others were present at the meeting.