News, leads and analysis related to India’s trade and all that’s happened on the policy front during the month of October 2014 UAE-India Trade Poised to grow manifold Why look further away

According to a study by the Federation of Indian Export Organisations (FIEO), United Arab Emirates (UAE) is poised to become India’s top trading partner by 2030. It’s worth noting that in FY2014, UAE was India’s second biggest destination for exports and the third biggest source of imports, behind China and US. Trade between the two countries has grown from $11.9 billion in FY2005 to almost $60 billion in FY2014. “India has emerged as UAE’s top trading partner in 2013, accounting for 10% of its total trade,” FIEO said in a statement and added that Dubai, which is one of the most prominent trading centers in the world, offers great market opportunities for India. “Import growth for UAE will be fastest for goods originating from China, India, Turkey and Vietnam. India is likely to become the world’s fastest growing exporter and UAE’s top export and import destination by 2030,” the statement added.

Exim Bank

Project Exports

Killing two birds with one...

The Export Import Bank of India (Exim Bank) has plans on the anvil to boost Indian project exports from the current levels of $27 billion to over $50 billion in the next five years, through innovative initiatives and by leveraging the increasing opportunities in Asia and Africa. Talking about this, while addressing ‘Stakeholders Seminar on Project Exports’, Chairman and Managing Director, EXIM Bank, Yaduvendra Mathur, said, “The Government of India’s support would be critical to achieve this target.” According to Exim Bank, 374 project export contracts, valued at Rs.1,61,083 crore (about $26.85 billion) and supported by the bank, are under execution by 112 Indian companies in 78 countries across Asia, Africa and CIS. These projects have been facilitated through a mix of funded and non-funded facilities. Exim Bank’s flagship programmes – Lines of Credit and Buyer’s Credit – are designed to offer funding options to overseas buyers, in order to enable Indian project exporters get access to new markets in developing countries and increase exports of goods and services from India. It’s worth noting that Exim Bank, in collaboration with the African Development Bank, is also setting up a Project Development Company (PDC) in Africa to identify and develop infrastructure projects. The objective of the PDC is to provide India’s private sector an opportunity to invest in and implement such projects.  

US Poultry

WTO Overturns India's Ban

Time for some more Yankee Fried Chicken

India’s ban on the import of poultry meat, eggs and live pigs from United States has been overturned by the World Trade Organisation’s dispute settlement panel. India had imposed the ban in 2007 as a protective measure against avian influenza. The office of the US Trade Representative (USTR) observed that if India responds to the panel’s decision by lifting the ban, United States’ export to India of poultry meat alone could exceed $300 million a year and is likely to grow substantially in the future as India’s demand for high quality protein increases. About India’s justification for the ban, USTR pointed out that United States has not had an outbreak of High Pathogenic Avian Influenza (HPAI) since 2004, during which time India had over 90 HPAI outbreaks. The WTO panel, according to USTR, concluded that the ban breached India’s obligations under the WTO Agreement on the Application of Sanitary and Phytosanitary Measures because it is not based on international standards. India had claimed the ban was in conformity with the World Organisation for Animal Health’s Terrestrial Code, a risk assessment that takes into account available scientific evidence. The panel also considered the ban arbitrary discrimination against exports, which also constituted a disguised restriction on international trade.

USA expects the demand for high protein food in India to rise exponentially in the next few years

South Korea

CEPA

Weighing the pros & cons  

In what could be a sign of the future of India’s pending FTAs and PTAs, the Ministry of Commerce is believed to have rejected South Korea’s request for upgrading the Comprehensive Economic Partnership Agreement (CEPA) between the two nations. The decision comes on the heels of a study conducted by the government on how several of India’s trade agreements have impacted the country’s exports, imports and inward FDI. The study reveals that Indian exporters have not been able to benefit from such trade agreements, particularly as compared to their peers in the partner countries, resulting in rising deficits. It’s worth noting that India’s trade deficit with South Korea has stayed above $8 billion for the last 3 years from just $5.2 billion in FY2010, when the CEPA was signed.  

Coastal Shipping

New Directive

To get the house in order

In a bid to boost coastal shipping, the Ministry of Shipping has directed all 12 major ports in the country to accord priority berthing to at least one berth, through a specific window, for dry bulk/general cargo coastal vessels. The ministry expects this would enable shippers to transport goods from one port to another in India, irrespective of origin and final destination of the cargo. This would be in addition to the dedicated berths for handling of coastal thermal coal that already exist at major ports, the ministry said. At present, India occupies the 17^th slot in global shipping capacity and measures are on to enhance it, with the ministry planning to boost coastal shipping four-fold by 2020. It’s worth noting that India has a coastline of over 7,000 km, yet coastal shipping in the country is still in its infancy with a fleet of about 700 ships accounting for just 10% of the total tonnage. It’s also worth noting that India’s EXIM cargo is approximately 611 million metric tonne (MMT) and is valued at about $279 billion.

Despite its immense potential, inland shipping has just managed to get lip service in India  

Fireworks

Chinese Imports 

For safer and better festivities

In a major relief to the Indian fireworks industry, the Department of Industrial Policy and Promotion (DIPP) has banned the illegal import, possession and sale of fireworks manufactured abroad. The order, which came just a few days before Diwali, was welcomed by domestic fireworks manufacturers, particularly those in Sivakasi, who had long been complaining against the illegal import of fire crackers from China. It’s worth noting that the Director General of Foreign Trade (DGFT) has already declared fireworks as restricted items. Reacting to the order, K. Mariappan, Vice-President, Tamil Nadu Fireworks and Amorces Manufacturers’ Association (TANFAMA), said, “Chinese firecrackers are cheaper than ours because of the use of cheaper raw material, but are very hazardous and dangerous.” Taking a step further, the DIPP statement said, “General Public/Stakeholders are requested that information about possession and/or sale of such fireworks may be reported to the nearest Police Station or District Authorities for suitable action.”  

Marine Exports

New High

From strength to strength

A surge in shrimp harvest has helped India’s marine products exports to a new high  According to the Marine Products Export Development Authority (MPEDA), the value of marine product exports from India is expected to reach $6 billion in FY2015, another quantum jump from the FY2014 all-time high of $5 billion. MPEDA claims the historic jump in exports during the last fiscal was triggered by a jump in the production of Vannamei shrimp, better quality control measures, better infrastructure facilities and improved diplomatic relations with important markets. These improved circumstances would facilitate the achievement of the envisaged target during the current fiscal, MPEDA stated and added that as compared to FY2013, seafood exports recorded a growth of 5.98% in volume (9,83,756 MT), 60.2% in rupee and 42% in US dollars terms in FY2014. Frozen Vannamei shrimp continued to be the major export item (in value terms), accounting for 64.12% of the total dollar earnings. Overall, shrimp exports during FY2014 had increased by 31.85% and were worth $3.21 billion. United States was the largest market, in volume terms, as the country bought 95,927 MT of frozen Indian shrimp, followed by the European Union and Japan. Similarly, according to MPEDA, farmed shrimp accounted for 73.31% of the total value of shrimp exports, experiencing a growth of 36.71% in volume and 92.29% in dollar terms, led by Vannamei shrimp exports, which grew by 92% in volume and 178.8% in dollar terms, to 175,071 MT and $1.94 billion, respectively.  

Swiss Made

No Takers

Swiss products after Swiss banks

Dr. Linus von Castelmur, Swiss Ambassador to India 

Switzerland’s exports to India continue to decline in the first half of CY2014, following a 39.9% decrease in FY2014. Commenting on the downtrend in exports at an ASSOCHAM seminar on ‘Switzerland – the Business Gateway to Europe’, Swiss ambassador to India, Dr. Linus von Castelmur said, “This is a considerable setback. A thriving Indian economy, with robust growth and a strong and stable rupee, is very much in the interest of Swiss exporters and investors in India. He expressed hope that the much awaited Trade and Economic Partnership Agreement that India and Switzerland, together with other European Free Trade Association (EFTA) states like Iceland, Liechtenstein and Norway have been negotiating for the last seven years (in order to give an additional impetus to trade between these countries), would materialise soon. S. C. Aggarwal, Chairman, India-EU Business Promotion Council, addressing the seminar, said that while India’s exports to Switzerland consists of textiles and garments, organic chemicals, precious stones and jewellery, machinery and parts, leather products, cotton, coffee and tea, Swiss exports to India comprise machinery and equipment, precision instruments, pharmaceutical products, dyes and chemicals, fertilisers and watches.  

Nepal

Preferential Trade Agreement (PTA)

To ward off darkness

India and Nepal have signed a new power trade agreement, which allows easier electricity trade between the two countries. The PTA follows Prime Minister Narendra Modi’s visit to Nepal in August, during which the two countries had agreed on increased cooperation in this sphere. After signing the agreement, India’s Energy Secretary Pradeep Kumar Sinha said, “This agreement will throw up new vistas of cooperation between India and Nepal in the power sector.” The PTA also has a provision to setup a joint working group, headed by joint secretaries of the two countries. After signing the agreement, Sinha’s counterpart, Secretary in the Nepalese Ministry of Energy Rajendra Kishore Kshatra said, “I am confident that the governments of Nepal and India are committed towards implementing the agreement immediately after the signing in ceremony.”  

The Commonwealth of Independent States

Free Trade Agreement (FTA)

Blast from the past

With Russia staring at more sanctions from the West, thanks to its Ukraine-adventure, it seems to have found a new ally in old friend India. If reports are to be believed, India is all set to start negotiations on a free trade agreement with the Customs Union of Russia, Kazakhstan and Belarus. According to Ajay Sahai, Director General, FIEO, “The embargoes by EU and US provides an opportunity for India to enter the Russian market. For certain products, they have no choice but to look at India. Focus should be on penetration into the market and retain it when competition opens up.” It’s worth noting that despite decade-old close ties, India-Russia trade hasn’t really taken off the way one would have expected, with total trade at just $6 billion in FY2014. The figures are even more dismal when it comes to Kazakhstan and Belarus, with total trade between India and the two countries at barely $900 million and $200 million respectively in FY2014.