‘Chilly’ Days Expected This Summer
News, leads and analysis related to India’s trade and all that’s happened on the policy front during the month of March 2016
Ban Lifted
Saudi Arabia decided to lift a seven-month old ban on imports of green chilly from India recently, giving Indian agri-commodity exporters a reason to cheer. In May 2015, Saudi Arabia had imposed a temporary ban on imports of green chilly over issues related to sub-standard quality of goods shipped by Indian exporters. Therefore with practically the whole of FY2016 lost due to the ban, Indian green chilly exporters are hoping to making this opportunity count. “Saudi Arabian authorities have lifted the temporary ban imposed on import of green chilly from India. Exporters are hereby advised to follow the strict guidelines set by Saudi Arabia to start exports of green chilly,” the Agricultural and Processed Food Products Export Development Authority (APEDA) said in a statement. The authority has, however, advised Indian exporters to take utmost care with respect to quality and adhere to Saudi Arabian import norms. Exporters have also been advised to strengthen backward linkages to have full control, monitoring and supervision of specified quality. “The procedure for export of vegetables is an attempt to facilitate adhering to the quality requirements,” APEDA said. The Saudi Arabian market will give an opportunity to Indian green chilly exporters, who otherwise have to be dependent on its exports to USA and European Union, where demand for this commodity has diminished in recent years. India’s green chilly exports to Saudi Arabia shrank by about 31% to 31,140 tonnes in FY2014-15 as against 46,540 tonnes in 2013-14. Indian green chilly is largely exported to the Middle East region, mostly in the United Arab Emirates, Qatar and Saudi Arabia.
Exports of coaches
Shipped in time
It seems like apart from the pending FTA between India and the Land Down Under, there are other strong trade ties emerging between the two. The Indian government has shipped a batch of six metro coaches to Australia as part of a deal to export 450 ‘Made-in-India’ coaches over a period of two-and-a-half years. The maiden consignment of six metro coaches built in a manufacturing plant in Baroda was shipped from Mumbai Port recently. “This is the first shipment of the planned 450 coaches that will be exported to Australia over a two and half year period,” the Shipping Ministry said in a statement. The coaches are 75 feet long and weigh 46 tonnes each. The Mumbai Port Trust carried out the entire stevedoring operation of these oversized metro coaches without any help from private operators, as according to the same statement, “Mumbai Port holds supremacy in handling of oversized cargo”. ‘Make in India’ finally seems to be taking shape.
Depreciation against the dollar
Fall not worrying yet
In late January, the Indian rupee did the unthinkable – it dropped by 22 paise to its lowest value in over two years to 68.05 against the dollar. Additionally, various currencies were hit as oil prices continued their downward slide. The fall continued in February too as the Indian currency plummeted to 68.43 per dollar level again after a brief recovery (as on February 20, 2016), mainly due to sustained dollar demand from banks, oil refiners and other importers. It’s worth mentioning that the Indian currency had logged its all-time closing low of 68.80 per dollar on August 28, 2013. Last year, rupee fell 2.7% against the US dollar as all emerging markets felt the jolt of decreasing crude prices and depreciation of the yuan. Referring to the rupee movement, Reserve Bank of India stated that it was not “too worried” about the volatility in the market as the country’s macroeconomic factors were strong enough to resist the fall. [Good news for exporters in the short term, we reckon.]
lifting of ban
Gaining ground, once again
After an impasse of nine months, Vietnam has lifted the ban on the import of Indian groundnuts, giving hope to Indian exporters. The Vietnam Ministry of Agriculture and Rural Development (MARD) has formally communicated the decision to the Indian government stating that Plant Protection Department of Vietnam (PPD) will issue import permits for groundnuts w.e.f. January 18, 2016, the Indian Agricultural Ministry said. Till April last year when Vietnam imposed a blanket ban on Indian shipments, the country was one of the largest markets for Indian groundnuts. Vietnam restricted Indian groundnuts citing interceptions of quarantine pests in consignments exported since January 2015, prodding the Indian government to probe into the matter and take remedial measures. Finally, the ban was lifted nearly a month after a Vietnamese delegation visited India and was convinced with the safety parameters.
“The delegation was satisfied after seeing fumigation facilities, export procedures and export certification system for export of groundnuts from India, as per the Standard Operating Procedure developed by Directorate of Plant Protection, Quarantine and Storage, Faridabad,” the Ministry of Agriculture said in a statement. Though the withdrawal of restriction has triggered a ray of hope, exporters expect the country’s total outbound shipments of groundnuts to fall drastically during FY2016.
Fiscal Policy
A word of caution, though
The Reserve Bank of India (RBI) Governor Raghuram Rajan has said that more government spending at this juncture will hurt debt dynamics and affect stability in the economy, and has asked the government to exercise caution with its spending in order to spur growth. Giving the example of Brazil, Rajan said, “the enormous costs of becoming an unstable country far outweigh any small growth benefits that can be obtained through aggressive policies. We should be very careful about jeopardising our single-most important strength during this period of global turmoil, macroeconomic stability”. Rajan reiterated that there would be no deviation from the inflation framework decided on by the government and assured that 7% was a reliable growth rate given the state of the world economy. The Governor pointed to the struggles of the industrial countries, to achieve economic growth. At present Brazil, Russia and South Africa seem to be in deep trouble, confidence in China is waning and India appears to be the only one which is thriving amid global turmoil.
Voting Rights
Changing dynamics
In what can only be called a “sweeping change”, the International Monetary Fund (IMF) has decided to accord 4/5th of BRICS – India, Russia, China and Brazil – greater voting rights, thus putting them in the top ten largest members of the body. Apart from this, a number of pending quota reforms also got the go-ahead. As per the revision, India’s voting rights increase to 2.6% from the current 2.3%, and China’s to 6% from 3.8%. More than 6% of the quota shares will shift to emerging and developing countries from US and European countries. According to a statement by the agency, “These reforms will reinforce the credibility, effectiveness, and legitimacy of the IMF”. Additionally, for the first time ever, as part of the reforms, IMF’s Executive Board will consist entirely of elected Executive Directors, getting rid of the category of appointed Executive Directors. Currently the members with the five largest quotas appoint an Executive Director, a position that will cease to exist.
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