TRADE UPDATE #22

Warning: Dangerous Waters Ahead

25/04/2019

India appears to be swimming in shark-infested trade waters -- recently, five more countries (Canada, the US, Thailand, Singapore, and Chinese Taipei) have sought permission to join consultations initiated by the EU at the WTO. The consultations seek to make India roll back import duties on select ICT products. For its part, India has maintained that the allegations of unfair trade practices are baseless, but the international pressure on the country’s growing economy is mounting.

Further red flags are being raised by the proposed widening of the definition of ‘conflict diamonds’ under the Kimberley Process. The suggested change may make exports of diamonds from India extremely difficult, damaging one of India’s biggest export sectors. As reports emerge that export contribution to the GDP has dropped by 4% over the last five years under the present outgoing government, the pressure is mounting on Indian trade and exports.

However, not all the news was bad this week. A study by TransUnion Cibil showed that loans to the MSME sector grew 21% year-on-year in the third quarter of FY19, marking a welcome sign of relief to the cash-strapped sector. Leather exports also rebounded, posting 8% growth in FY19 to end the year on a high note. Unfortunately, these positives are relatively small compared to the problems faced by Indian exporters. Policymakers and stakeholders would do well to pay attention in the coming months, lest Indian trade gets swept under by threatening currents in international trade.


INTERNATIONAL RELATIONS

WTO: Five countries seek to join India-EU talks on import duties on select ICT products

India is likely to come under more pressure at the World Trade Organization (WTO) to roll back import duties on mobile phones, cameras and certain other products in the information and communication technology (ICT) sector with five countries, including Canada, the US, Thailand, Singapore and Chinese Taipei, seeking permission of the dispute settlement body (DSB) to join the consultations the EU has initiated with New Delhi on the matter.


INTERNATIONAL RELATIONS

‘Trump’s assertion of India being the tariff king incorrect’

President Donald Trump’s allegation that India is a ‘tariff king’ does not hold true and India has the right to take appropriate measures to protect its domestic interests in specific sectors, the Trade Promotion Council of India said on 19th April. “US President Trump’s allegation of India being a tariff king is quite unjustified. Like other nations, India has the right to take appropriate measures to protect its domestic interests in specific sectors as and when it is deemed fit,’’ said TPCI Chairman Mohit Singla in a statement in New Delhi.


TRADE

Centre fears broader definition of ‘conflict diamond’ may hurt trade by India, others

India is concerned that the proposed widening of definition of ‘conflict diamonds’ under the Kimberley Process, as suggested by developed countries such as the US and Canada, to include human right abuses and child labor issues may end up as a non-tariff barrier for developing countries. “New Delhi will raise its concerns on the proposed broadening of definition of conflict diamonds at the meeting of the ad hoc committee overseeing the review and reform of the Kimberley Process in Paris this week. We have to make sure that this does not end up as an exercise that may be used to target the business of poorer countries,” an official told BusinessLine.


CREDIT

Loans to MSMEs grew 21% y-o-y in Q3FY19: Study

Loans to micro, small and medium enterprises (MSMEs) grew 21% year-on-year (y-o-y) in the quarter ended December 2018, according to a study by TransUnion Cibil, which also showed private banks and non-banking finance companies (NBFCs) gaining market share over public sector banks (PSBs). Most of the growth in Q3FY19 came from private banks and NBFCs, with their market shares in MSME loans rising 400 bps and 300 bps y-o-y, respectively.


COMMODITY

Leather exports rise 8% in FY19

India registered about 8% growth in export of leather, leather products and footwear during 2018-19 and is aiming to achieve 9% to 10% growth during the current fiscal, said a top industry body official. “In rupee terms, exports during 2018-19 grew to Rs. 36,562.34 crore from Rs. 33,894.71 crore in the corresponding year-earlier period,” said P.R. Aqeel Ahmed, Chairman, Council for Leather Exports (CLE). “Though the exports have grown by 7.87% in rupee terms, it was similar to last year’s level in dollar terms,” he said.


OTHER NEWS

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