The Indian government jolted global markets on 29th September, by banning all onion exports from the country virtually overnight. This massive step, spurred by delayed harvests and reduced supplies because of extended rains across the country, sent shockwaves across commodity prices in Asia and elsewhere. India is the world’s largest onion exporter, and the ban on exports, aimed at controlling domestic inflation, has sent global traders into a tizzy and evoked a fresh series of protests by Indian farmers claiming damages to their livelihoods. In yet another shocking development, India lost a key trade dispute with the US at the WTO this week. The US had claimed that India’s export subsidies were illegal, and the WTO’s dispute settlement panel upheld the claim. India will now likely be forced to reevaluate its export promotion schemes, particularly the widely used MEIS. Given the government’s push to overhaul Indian exports and make them less reliant on subsidies, perhaps this shock might be just what the sector needs. One only hopes it does not cripple the sector at a time when it is already facing global headwinds. It was not all bad news, however. At its Annual General Meeting, the Export Promotion Council for EOUs and SEZs (EPCES) revealed that India’s SEZs had registered remarkable 32x growth in exports over the last decade, shipping Rs. 7,01,179 crore of goods in 2018-19. At a separate event, MSME Minister Nitin Gadkari also highlighted the contribution of MSMEs to India’s GDP and recommended that they list themselves on the NSE to access more capital easily. With the new foreign trade policy expected to be around the corner, it is do-or-die time for India’s exports. One only hopes that the shock therapy measures being considered/implemented by the government are the right solution.
Trade Update
5TH OCTOBER
# 44
From Kathmandu to Colombo, it’s a kitchen nightmare: onion prices have gone crazy. That’s because India, the world’s biggest seller of the Asian diet staple, has banned exports after extended monsoon downpours delayed harvests and supplies shriveled. And dedicated buyers across the region, like Nepalese housewife Seema Pokharel, are flummoxed. “This is a terrible increase,” said Pokharel, out shopping for vegetables in Kathmandu.
With India losing a key trade dispute with the US at the World Trade Organization (WTO) on export subsidies, it will likely expedite a process to replace or restructure various WTO-incompatible export schemes in the coming months, a source told FE. A WTO dispute settlement panel is learned to have ruled in favor of the US that had claimed that New Delhi offered illegal export subsidies and “thousands of Indian companies are receiving benefits totaling over $7 billion annually from these programs”.
The Export Promotion Council for EOUs and SEZs convened its 16th Annual General Meeting on 27th September 2019 at New Delhi. The AGM was attended by more than 70 members. While welcoming the participants, Bhuvnesh Seth, Vice Chairman, EPCES informed that exports from the SEZ sector have gone from Rs. 22,000 crore in 2005-06 to Rs. 7,01,179 crore in 2018-19, registering a remarkable growth of 32 times.
Union Minister of Road Transport and Highways and Ministry of Micro, Small and Medium Enterprises Nitin Gadkari has reiterated his call to support Indian MSMEs and the government’s attempt to boost the sector. Addressing the 114th Annual Session of the PHD Chamber of Commerce and Industry, Gadkari said that the MSME sector is the heart of the Indian economy and contributes 29% to India’s GDP. He urged MSMEs to register themselves with the National Stock Exchange, which would help them gain easy access to capital.
Amid the ongoing global trade war, the political economy of trade policy has been undoubtedly receiving attention both globally and in India. The political economy dynamic has been burnished in public recall by US President Donald Trump through his strategic fixation on India’s initial inclusion of the iconic Harley-Davidson motorcycles in its list of retaliatory duties submitted to the World Trade Organization. This deft use of symbols and rhetoric serves to popularise the issues, but also reaps concomitant political rewards domestically, providing ample fodder for lobbyists in Washington and Delhi to engage in frantic activity to influence trade policy.
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