Bilateral ties
Will good optics result in great action?
The hype surrounding Prime Minister Modi’s first trip to US was conspicuously absent this time around. Though 20 top US CEOs, including Sundar Pichai of Google, Jeff Bezos of Amazon and Tim Cook of Apple, met Modi for a roundtable and promised more investments, the meeting lacked the fervour of his last trip to Silicon Valley. Even the ‘working dinner’ between US President Donald Trump and PM Modi lacked the usual buzz. Understandably so, tensions were high and expectations low in the run-up to what media described as a no-frills visit.
US President had made remarks about India wanting “billions and billions and billions of dollars” for participating in the Paris Climate accord. This, naturally, did not go down well with India. Trump’s hardline stance on H-1B visa issue has also been a major concern for India, as US accounts for nearly 60% of India’s IT exports. However, Modi and Trump, consummate showmen that they both are, put up a rather warm display of friendship during their joint statement. On the agenda, for the meeting between Trump and Modi, were issues such as cyber security, trade and terrorism. As is usual, geopolitics took centre stage with Trump declaring Modi to be a ‘true friend’ on twitter. However, the all-important H-1B visa did not make its way into the discussions. Trump discussed, or rather demanded, the easing of Indian trade barriers to give US companies easier access to the Indian market. On the surface Trump’s aim of bringing manufacturing jobs back to US to ‘Make America great again’ seems to be at odds with Modi’s ‘Make in India’ initiative. Will the two leaders be able to agree on a deal which will do justice to the two great democracies? Or will we have to satisfied with just bear-hugs and handshakes?
GDP Slowdown
Running out of steam?
Is Indian economy finally losing steam? Well, that’s what the March 2017 quarter GDP number indicates. A slowdown, which had already set in last year, seems to be intensified by the demonetisation initiative of the Indian government.
A major decline was seen in the last quarter of FY2017, where the gross GDP growth dipped to 6.1%. This decline puts India behind China which reported a GDP growth rate of 6.9% for the January to March period. India’s GDP growth slowed to 7.1% for FY2017, down from 8% in FY2016. While it is in keeping with official estimates, it is still the lowest growth rate for the country in the last two years.
This decline has raised concerns amongst many. While some analysts have asked for a downward revision of interest rates by Reserve Bank of India (RBI), others are keeping their fingers crossed that the decline is on its way out and will not impact next year’s numbers. The optimists state the good monsoon and an expected boost from GST as reasons behind their positive outlook. They are sure that with a cut in the interest rates by RBI the Indian economy will be back on track. The economy is expected to gather enough momentum to see 8% growth in three-four year’s time.
Visa card
Travel with ease
Discussions on the framework for the Regional Comprehensive Economic Partnership (RCEP) are now in full swing. Concurringly, Indian Commerce Minister Nirmala Sitharaman recently suggested the possibility of introducing an “RCEP business visa card”. This card is being proposed on the lines of the Asia Pacific Economic Cooperation (APEC) business card, which facilitates business travellers within APEC nations such as Australia, China, Mexico, Peru, Vietnam, etc. Similarly, the RCEP business visa card will facilitate travel between the 16 proposed signatories of the RCEP agreement.
RCEP is a major regional free trade agreement that is being discussed by 10-member ASEAN and six ASEAN FTA partners. This trade bloc is being looked at as an alternative mega regional free trade agreement along the line of the failed Trans Pacific Partnership (TPP). The 19th round of RCEP talks is expected to be held in Hyderabad in India in July 2017. Negotiations are expected to be concluded by 2018.
FTA
Round the corner?
With the snap elections in UK out of the way and Theresa May holding on to power, talks on the importance of the long awaited EU-India FTA seem to be gaining momentum. German Chancellor Merkel and Spanish Prime Minister Mariano Rejoy have both stressed, on the need to revive the ambitious FTA.
India and EU began talks for a bilateral trade agreement in 2007. But despite multiple meetings, EU and India have failed to conclude the deal. Now, with UK out of the equation, courtesy Brexit, and Merkel’s push for strengthening EUs trade ties with the developing worlds, hopes of the revival of this trade agreement has been raised. Studies supporting the agreement have emphasised the benefits of this trade agreement which include an increase in the amount of FDI inflows into India from EU.
But, the Bilateral Trade and Investment Agreement (BTIA) is not the only topic that received a push. The Indian government also stressed on the need for an “early commencement and conclusion of FTA talks with the Eurasian Economic Union (EAEU).” This agreement is expected to help increase bilateral trade to as high as $62 billion. In FY2017, the trade between India and the EAEU nations (Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia) stood at around $8.40 billion.
Successful negotiations with EU and EAEU will not only boost India’s exports to the two trade blocs, but also position India as a force to be reckoned with in a global order that has seen many upheavals in the last few months.
TRADE COOPERATION
From Russia, with love
Four nations were in the limelight during Indian PM Narendra Modi’s recent trip to Europe. But, it was the stopover in Russia that caught everyone’s attention. Other than celebrating 70 years of Indo-Russian relationship, the visit concluded an agreement between Russia and India to set up two more units of the Kudankulam Nuclear Power Plant in Tamil Nadu.
During the meeting between PM Modi and Russian President Vladamir Putin, five MoUs and agreements were signed between the two nations. Apart from the nuclear plant agreement, the other four deals include: A memorandum of cooperation (MoC) between Russia’s ALROSA Joint Stock Company and the Gems and Jewellery Export Promotion Council of India; a contract between Russian Railways and the Ministry of Railways, India for a high-speed rail service between Nagpur and Secunderabad; an agreement between Federal Service for Intellectual Property of Russia and the Indian Digital Library of Traditional Knowledge; and an agreement on a cultural exchange programme.
A joint statement released said that the partnership covered all aspects of “political relations, security, trade and economy, military and technical field, energy, scientific, cultural and humanitarian exchanges and foreign policy.”
Both parties are confident that they will meet their target of $30 billion worth of bilateral trade by 2025.
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