News, leads and analysis related to India’s trade and all that’s happened on the policy front during the month of September 2014

HSBC

Indian export growth

To tide over domestic woes

India’s intransigence and concerns over food security, which has raised global furore, came up for discussion in a re-cent meeting between Law Minister Ravi Shankar Prasad and German Vice-Chancellor Sigmar Gabrial, who is also the federal minister for economic affairs and energy. In the meeting, Gabrial raised WTO issues with Prasad and hoped that a solution could soon be found. On the other hand, Prasad expressed India’s deep commitment to the processes of WTO but highlighted India’s food security concerns, which must not be construed by the developed world as a stumbling block to WTO negotiations. According to the official statement released after the meeting, “The German Vice-Chancellor respected the concerns of India with respect to food security.” It’s worth nothing that India had decided not to ratify WTO’s Trade Facilitation Agreement (TFA), which is dear to the developed world, with-out any concrete movement in finding a permanent solution to food security issues. Prasad and Gabrial also used the occasion to discuss several other issues on bi-lateral trade. Referring to the success of German firms such as Audi, BMW and Rolls Royce in India, Prasad sought increased investments by them in the Indian market. He said India has great potential in electronics manufacturing and non-conventional energy. He mentioned the initiatives taken by the government such as Digital India, National Optical Fiber Network, and Electronics Manufacturing Clusters to boost economic growth. On his part, Gabrial expressed happiness over the changed investment climate in India after the formation of the new government and lauded its efforts for financial inclusion. Citing concerns over Germany’s demography, he also invited young Indian professionals to come and work in Germany.

Ravi Shankar Prasad, Minister of Law, GoI

Plastic Exports

Ambitious target

Entering American homes

India’s plastic exports is all poised to reach $15 billion by FY2019 from the present $8 billion. This, according to The Plastics Export Promotion Council (Plexconcil) Executive Director, R.P. Kalyanpur. Explaining the strategy to make this happen, Kalyanpur said, “We are now looking at entering into export of housewares and consumer items, which have huge demand in US.” He also said that the industry was also pushing for the Technology Up-gradation Fund (TUF) and establishing plastic parks to encourage India’s plastic industry.  

Solar Panels

Anti-Dumping

Better late than never

The Indian government seems to have realised the impracticality of imposing anti-dumping duties on solar panel imports. This comes on the back of the industry’s efforts to convince policy makers about the infeasibility of such measures, particularly when there is a huge need for solar panels to tide over the power crisis. The government has now decided not to impose anti-dumping duties on solar imports from China, US and other countries. [65% of India’s imports of diodes, transistors and similar semiconductor devices come from China.] It’s worth noting that the previous government had imposed the duties following complaints by some domestic solar panel manufacturers. Announcing her decision, Commerce Minister Nirmala Sitharaman said, “There was no notification for the congress government’s order. We allowed it to lapse.” India has set a target of generating 20,000 MW of grid-connected solar power and 2,000 MW of off-grid generation by 2022.  

Food Exports

New norms

Some food for thought

The Ministry of Commerce is in the process of sorting out certain issues related to food trade. According to Commerce Secretary Rajiv Kher, “When it comes to exporting fruits and vegetables, we have now made it mandatory that they can only go from pack houses. To begin with, there will be some relative decline in exports, but eventually it will pick up.” With a view to fully capitalise on India’s potential in export of agriculture and marine-based products, the ministry is focusing on improving the food processing environment in the country, Rajiv Kher said and added “Our focus is to improve the processing environment so that the realisation from superior markets would be more. We have done remarkably well in our agricultural exports, while the trend continues in the marine exports as well. The growth in marine export has been 32% during April to August period this fiscal. This is one sector which is doing well.” He also informed that the new FTP would be different from the previous one and would offer a sustainable environment and direction to foreign trade.

Rajeev Kher, Commerce Secretary  

Steel

Chinese dumping

United against the dragon

Following a meeting between honchos of six steel majors and Steel and Mine Minister Narendra Singh Tomar, India has decided to impose a safeguard tax on cheap imports from China. At the meeting, the CEOs referred to the problems faced by the industry due to increasing input costs and slow market conditions and stated that cheap imports was leading to further corrosion of the industry. Pointing out that last year’s imports from China exceeded all previous records, they asked the government to contain the situation. They also alleged that Chinese imports don’t meet required quality standards. There is a need to either impose an anti-dumping duty on flat stainless steel products from China (whose imports have risen 500% since FY2011) or at least increase the import duty from current levels.

Narendra Singh Tomar, Minister of Steel and Mines

Exim Bank

African Safari

Creating a market for rice bowls 

In line with its objectives to foray deeper into Africa and boost their economies, the Export Import Bank of India (EXIM Bank) has extended a $62.95 million Line of Credit (LoC) to the Republic of Senegal for a rice self-sufficiency programme. Under the LoC, which are generally aimed at pushing the country’s exports, Exim Bank will reimburse 100% of the contract value to Indian exporters, upfront. With this latest commitment, the total amount committed by Exim Bank for LoCs involving Senegal has touched $269.36 million. The LoCs involve agricultural machinery and equipment, buses and vans, medical equipment, equipment for rural electrification projects, meat processing projects, fisheries development projects, IT training projects and irrigation projects, the EXIM stated. The bank now has 196 LoCs covering 75 countries, with credit commitments of over $10.77 billion.

EXIM Bank’s LoCs have till date, helped build several hospitals in Africa

HSBC

Indian export growth

To tide over domestic woes 

If you believe banking major HSBC, India is all set to become one of the world’s fastest growing exporters. Despite a slowdown in the domestic economy, HSBC thinks “there is scope for India to rebalance away from the domestic economy towards exports” and “move from being the 14th largest exporter of goods to the world’s 5th largest by 2030.” Most of the countries in HSBC’s list are emerging markets, with five of the top six – India, China, Malaysia, Vietnam and Indonesia – located in Asia. The report expects that on an average, export growth in these five countries would be between 8% and 11%. When it comes to sectors, HSBC believes that machine and transport would be the fastest growing sector over the next 16 years. “Trade in this area is projected to grow by around 8% a year from 2014 to 2030, reflecting the ongoing evolution of global supply chains,” the report says. As the rupee depreciates, there are signs that global car companies are increasing their interest in expanding operations in India, with the weaker rupee ensuring that India’s skilled labour force is available at a discount, the report says.

HSBC expects India to focus more on exports as its domestic economy continues to fight a major slowdown

Fixation of SION

New entry at Serial No. E - 132

Much done. Much left to do

DGFT added another export product – Namkeens / Mixtures / Savouries, in the Handbook of Procedures Vol. II, via Public Notice 69 (RE-2014)/2009-14, on September 16, 2014. The list of products for which SION has been fixed under the ‘Food Products’ category thus stands increased to 132. The products which have been newly included are considered one of India’s signature offerings around the world. Of the total value of “Mithai, Namkeens, Mixtures, Bhujia, Chabena” (as classified under HS Code sub-head 21069099) exported by India in FY2014, over 58% were to the four markets of USA, Australia, UAE and Canada. The notice is thus not only a move towards streamlining efforts of India’s export community, it also appears a conscious effort towards encouraging growth of brands from India across mature geographies. The only problem is the existence of Notification 31 that reduces legroom for India exporters. SION imposes “responsible” limits to the imports of inputs against FOB value of exports. But the killing of powers of “Transferability” (that’s what notfn. 31 does) makes living tough for Indian exporters. Can there be an imposition of responsible limits without due powers (liberty) being given to exporters? Hopefully this concern is attended to sooner rather than later.  

Logistics

Rice import

Not a proud feeling

Despite being one the world’s largest exporters of rice and allowing massive surplus of it to rot due to the non-availability of enough warehousing facilities, India is all set to import rice from Myanmar this year. And the reason is not lack of domestic supply, but poor logistics. According to reports, India will import 100,000 MT of rice from Myanmar over the next several months to cater to the needs of states in North-East India. One of the main reasons for this is the disruption of rail network connectivity and freight movement to the North-East. This will be the first occasion in the last 25 years, when India will be ‘compelled’ to import rice. Critical yes, but this isn’t a proud moment.  

Vegetable Oils

Rising imports a concern

Too ‘oily’ for comfort

India has recorded a 76% y-o-y increase in vegetable oils (edible & non-edible) import in August 2014. According to the Solvent Extractors’ Association of India (SEAI), nil duty on palm products imported from Malaysia w.e.f. September and expected nil duty on Indonesian exports (from October), are likely to further increase India’s imports, which will put more pressure on the already depressed domestic prices. SEAI feels there is an urgent need to support local farmers by increasing import duty on crude vegetable oils from the current 2.5% to 10% and on refined vegetable oils from the current 10% to 25%.