Eighth annual summit
Unequal partners?
Earlier last month, BRICS – Brazil, Russia, India, China and South Africa – one of the most influential socio-economic blocs in the world, held its 8th summit in Goa, under the banner ‘Building Responsive, Inclusive and Collective Solutions’.
It was one of the most anticipated events to be held in India this year, not only to discuss trade and commerce but also to raise concerns related to geopolitics. While Indian Prime Minister Modi called for trade between the member countries to double by 2020 to $500 billion (a figure deemed to be unrealistic in a sluggish global economy), China’s call for free trade among the BRICS members did not get the response it expected. Russia, it seems, was the clear winner, with India rekindling the relationship with its once closest ally.
On the energy front, Russia and India announced their biggest agreement, where a group led by Russian state-controlled oil giant Rosneft would pay $13 billion for a controlling stake in both India’s Essar Oil and the port facilities that it owns. Many believe that it could be a win-win situation because while oil and gas forms Russia’s economic backbone, India’s industrial progress largely depends on oil and gas. To emphasise the growing closeness, Modi, in his joint press conference with Russian President Vladimir Putin, said in Russian, “Stariya droog luchhey novikh dhwukh (an old friend is always better than two new ones).”
Leaders of BIMSTEC, a grouping comprising India, Nepal, Bangladesh, Bhutan, Sri Lanka, Thailand and Myanmar were also invited as part of the BRICS outreach. The bloc is a big market for BRICS, and China has already made a big play in these countries, upping the ante by announcing large investments in Bangladesh just before the commencement of the BRICS summit. Russia too was not far behind with Putin meeting leaders from these countries to enhance bilateral trade relationship. India as the host, managed to get terrorism from its estranged neighbour in the spotlight, but will need to focus on trade to emerge as the first among equals.
Chinese investments
Dragon’s smart move
At a time when Indians have unleashed an unprecedented protest against Chinese goods, two Chinese smartphone manufacturing companies, Oppo and Vivo have expressed interest to invest Rs.2,000 crore each to establish manufacturing facilities in Uttar Pradesh in India. This initiative is part of their India expansion plans. Incidentally, these two companies have been among the more aggressive smartphone players in the lead-up to this festive season. The two phone makers are likely to acquire 200 acre of land each in Greater Noida region of Uttar Pradesh. It’s worth noting that Oppo and Vivo are among the top 10 smartphone companies (by volume) in India. Just last month, another Chinese smartphone maker Huawei, in partnership with Flex Telecom, opened its manufacturing unit in Chennai. It seems that the Chinese know that the nationalistic furore will die down soon and it will be business as usual.
Tea Exports
Change brewing in a cup
Tensions between India and Pakistan always have an impact on their bilateral trade! And not surprisingly, tea trade through Wagah Border has come to a halt once again. Instead, shipments are now being routed through Dubai, which is significantly increasing the product’s retail price in the country. Meanwhile Pakistan is also increasingly importing tea from Kenya. For, Indian teas retail between Rs.95-110 per kg, while Kenyan teas are 30% cheaper. But, not all is bleak! Demand for Indian teas is still fairly consistent from corporates and tea retailers of Pakistan.
On the other hand, China’s purchase of black tea from India is increasing and there has been pronounced interest from retailers in Szechuan, Fujian, Guangdong and Yunnan and even Beijing. Tea houses in China are placing a premium on the rich golden colour of Indian black tea, which is much darker than the unfermented white and green teas that are generally sold in China.
Products boycott
To buy or not to buy!
Indian politicians and trade unions have belligerently launched a campaign to boycott goods from China as a form of protest against China’s opposition to a UN ban on Jaish-e-Mohammed chief Masood Azhar. However, many Indian’s feel that this is not a step in the right direction.
Chinese media naturally expressed their displeasure on this boycott and even Indian trade analysts have predicted that the boycott might not work, as Indian industry remains significantly dependent on imports from China. Retail sales data too paints an interesting picture, with sales figures for Chinese products hitting a record high by the top three Indian online retailers in October. Obviously, Indian consumers are not walking the talk, and the result is no surprise because cellphones, laptops, displays and earphones are some common gift purchases during the festival season, and these are imported from China in big numbers.
The academia and the business community realise that bilateral trade is one of the pillars of the Sino-Indian relationship. Many trade experts and political analysts are of the opinion that this boycott does not translate to any economic sense, when the governments of the two countries are focusing on strengthening commercial cooperation through mega regional agreements like the RCEP.
Auto exports
A crisis on wheels
Two wheeler manufacturers in India are in for a rude shock, as exports to a traditional market like Africa continues to plummet. In the first half of this fiscal, exports of two wheelers from India into the African continent have steadily declined. This, experts say, can be attributed to the falling prices of crude oil and devaluation of key African currencies. To add to that, the data from Mexico and Argentina has also been lacklustre. Needless to say, this has become a cause of worry for Indian two wheeler manufacturers as the African and Latin American markets account for a lion share of their exports. According to trade analysts, inflationary pressures have dented the purchasing power of these countries and the situation does not appear to be a short-term phenomenon.
Dwindling two wheeler exports (exports shrank 12.45% in the first half of FY2017) is a cause of concern also because the segment accounts for 80% of India’s total automobile exports.
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