India-Iran-afghanistan
Infrastructure diplomacy
India has finally signed the much anticipated Chabahar project deal with Iran. PM Narendra Modi signed the deal alongside representations from Iran and Afghanistan on May 23, 2016. The much-awaited trilateral agreement saw the signing of an MoU for the provision of a $500 million line of credit that is bound to convert the Iranian port into a transit hub, clearly bypassing Pakistan. In fact, this deal will anger both China and Pakistan as it is meant to give all three nations an alternative to the China-Pakistan Economic Corridor project (that has Gwadar as its epicentre, which lies only 72 km away from Chabahar). The Chabahar project once completed will connect India to Afghanistan and Central Asia, while Afghanistan will get a parallel route connecting it to East India and Asia. The deal is therefore clearly a strategic move to counter China’s influence in the region. Concurring to the progress, Exim Bank has offered to loan Rs.3,000 crore through the Export Development Fund (EDF) to seven Iranian banks.
The money will be utilised to import steel rails from India and development of the port. Officials claim it will take around 18 months to complete phase one of the construction. Highways and Shipping Minister Nitin Gadkari has said that India Ports Global Pvt. (a joint venture of the Jawaharlal Nehru Port Trust and the Kandla Port Trust) will alone invest about $85 million in developing two container berths and three multi cargo berths at Chabahar.
Washington is apparently pleased with the deal, as it creates a situation where the power of logistics stands divided between two very powerful Asian blocs, with China on one side and India on the other.
India-Vietnam
Groundnut Exports
A nuisance that has resurfaced again in the groundnut export business is Carryedon Serratus, also known as groundnut bruchid (a brown beetle). The pest was discovered by Vietnam’s food inspecting officers in the first trial shipment that was dispatched after Vietnam lifted a nine-month-old suspension on Indian groundnut. This was the same pest that had earlier caused delays in exports of groundnut to Vietnam. This time, the live bruchid was detected within the stored groundnut pods, by the Vietnamese food inspection officers from seven consignments, out of the 100 consignments that were sent to Vietnam as part of a trial shipment. Earlier, a suspension was called by the Ministry of Agriculture and Rural Development (MARD), Vietnam, after live bruchid was found in the samples. It took intense lobbying and stringent quality assurance, including adoption of Standard Operating Procedures (SOP) to convince MARD officials in January 2016, to revoke this suspension. Agricultural and Processed Food Products Export Development Authority (APEDA) had announced and enlisted operating procedures in accordance with the Directorate of Plant and Protection, Quarantine and Storage, Faridabad (DAC&FW) as guiding rules to be followed for exports. Four Indian agencies have been suspended for wrongly fumigating the consignment with Aluminium phosphide & Methyl bromide, instead of treating with phosphine gas. This trouble is certainly bad news for India, which is currently the largest exporter of unprocessed groundnuts to the world.
Iphones
Second-hand imports
Apple’s dream to sell refurbished iPhones at throw-away prices in India met its end as the Indian Ministry of Telecom poured cold water on the proposal. The reasons were clear – the idea not only breaches India’s anti-dumping policy but also poses as a threat to the ongoing Make in India campaign. Concerns were also shared by domestic phone manufacturers, including Consumer Electronics and Appliance Manufacturers Association to Apple’s second-hand phone imports strategy.
Interestingly, Cook during his visit to India in the second half of May 2016 went about meeting start-ups heads and top policymakers, but made no loud and firm commitment in manufacturing in the country to support Make in India. As such, it is highly unlikely that unless there is a give and take that works in favour of both India and Apple Inc., will the government budge from its earlier decision. Apple claims that it would be wrong to call these products “refurbished”, as they were “certified pre-owned”. That was a clever effort to export second-hand phones with extended warranties to India. It’s clear that Apple is excited about the sub-Rs.15,000 category smartphone buyers in India (a segment where Apple doesn’t exist at all!) and is making strides to grab some good portion of this market. For now though, its refurbished deal isn’t going through.
An interesting parallel development however is that Foxconn, Apple’s largest manufacturer, is close to signing a deal to build a $10 billion manufacturing facility in Maharashtra. The nearly 1,200-acre facility will enable Apple in domestic production, thereby overcoming trade barriers and customs procedures.
India-Oman
Defence partnership
The India-Oman relationship deepened, as the duo agreed on a common bilateral defence cooperation programme. India’s Defence Minister Manohar Parrikar visited Oman between May 20 and 22, 2016, to meet Badr Bin Saud Bin Harib Al Busaidi, Oman’s Minister for Defence Affairs.
During the visit, the two countries signed four MoUs, covering defence cooperation, maritime issues, marine crime prevention, and flight safety information exchange. The countries agreed on regional developments of mutual interest and to tighten the existing bilateral defence cooperation.
As per the MoU terms, the duo will explore the probability for India to export weapons to Oman, which would also mean setting up defence production facilities in Oman. Also, the two parties appreciated each other’s cooperation and support to each other; Parrikar mentioned Oman’s support for the Operational Turnaround (OTR) and technical support to IAF planes.
The India-Oman comradery in Defence exim matters, goes back to the 1970s, as Oman was the first gulf country to procure the Indian small arms system (INSAS), built by the state-run Ordnance Factory Board (OFB).
India-Mauritius
Tax treaty
In what may be a death knell to treaty abuse and round tripping of funds between India and Mauritius, the two countries signed an amended tax treaty to plug gaps on capital gains. The protocol states that unlike in the present times, investors from Mauritius will have to start paying taxes on capital gains tax in India. And this is effective April 1, 2017. For all share transactions in Indian companies, capital gains tax will be applicable, though at a lower rate than the standard 15% until March 31, 2019. Beyond that point, short-term capital gains tax will be chargeable at full 15%. It is expected that this move will incentivise offshore fund managers to relocate to India, in the process making the country a fund management hotspot.
Import Ban
Canine Breeding
Pet owners and animal rights activists appreciated the DGFT’s decision to ban imports on pedigree dog breeds for breeding and other commercial activities in India. Many NGOs lauded the move, stating that the ban will help address unethical practices of canine breeders and solve issues related to import of breeds, such as St. Bernard that find it impossible to adjust to India’s climatic conditions.
The order does not restrict imports for R&D, defence and internal security purposes as long as the recommended guidelines are followed and the canines are accompanied by relevant records and documents.
But there are breeders who feel that this will make pedigrees more expensive! The urban Indian household has developed an affinity for specific pedigrees, Beagles, German Shepherds, Rottweilers, Labradors, Dobermanns and Pugs.
India-Pakistan
Trade
Pakistan plans to export merchandise and services worth $1 billion to India in 2016 – that’s more than double of what it managed in CY2015. Pakistan’s Commerce Minister, Khurram Dastagir, while addressing a delegation of Pakistani merchants of the Pak-India business council, stated that Pakistan’s textile products and readymade garments have huge export potential to India.
Dastagir highlighted that easy availability of land route would allow India to import agricultural and textile products at competitive prices. Today, goods travel from Lahore to Delhi through Karachi, Dubai and Mumbai, making the journey 11 times longer. With respect to a preferential trade agreement, the minister added, “Trade concessions to India cannot be offered unilaterally. India also needs to extend access to Pakistani products.”
According to the delegation, Indian food manufacturers were keen to partner with Pakistani agricultural product manufacturers for produces like mango, kinnow and green peas. The business interlocutors were of the view that the two countries should cooperate in promoting Small and Medium Enterprises, agriculture, tourism & culture and research. The issue of Basmati Rice branding was also discussed at length.
India-Ghana
Pharma exports
Going forward, exports to Ghana will become much easier for Indian pharmaceutical companies. Ghana FDA’s CEO, Hudu Mogtari, at the recently concluded Pharmexcil expo – that saw participation by more than 600 international buyers – announced that Indian Pharmacopoeia (IP) will be recognised in Ghana soon. Once the IP standards are recognised in Ghana, Indian companies need not manufacture the products as per other accepted pharmacopoeia standards and can export drugs that are manufactured in India as per IP.
Domestic drug production in Ghana serves a mere 30% of its healthcare needs, prompting the country to depend significantly on imports. “We do not have our own standard, but work with US, British and the International pharmacopoeias, and from today we will also work with the Indian standards. The Indian standards are built on qualitative research and would enable our people to have safe medicines,” Mogtari said.
Africa is a large and important market for Indian pharmaceutical companies, as the continent imports about 70% of its medicines, of which Indian companies have enjoyed a 55-60% market share in recent years.
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