TRADE UPDATE #57

The Lay of the Land

31/01/2020

The first Economic Survey was published in 1950-51 as part of the Union Budget. Separated from the Budget since 1964, the document is a key indicator of the Ministry of Finance’s view of the state of the Indian economy. Although non-binding, its recommendations are seen as key guidance for the government’s spending vision under the Budget and set industry expectations accordingly. That being said, the Economic Survey 2019-20 has likely raised industry expectations for the Union Budget 2020, due to be presented by Finance Minister Nirmala Sitharaman on 1st February.

The Survey has projected a growth rate of 6-6.5% for India’s economy in FY2020-21, a significant jump up from FY2019-20’s effective growth rate of 5%. The Survey has highlighted that various steps will need to be taken to achieve this growth, with exports playing a significant role. A focus on service exports in India’s bilateral trade negotiations will help reduce the country’s trade deficits and a greater focus on boosting agri exports has also been recommended.

The Survey’s optimistic note is particularly important given growing concern over global trade in the wake of rising protectionism and the recent Coronavirus outbreak in China. The outbreak, centered in the city of Wuhan in China, has plunged global markets and exporters into worry over a negative impact on trade. Indian industry, particularly SMEs and exporters, are in desperate need of some good news to boost sentiment, and on Saturday, all eyes will be on the Union Budget for the same.


ECONOMY

Focus on service exports in bilateral trade talks to curb deficits: Eco Survey

The Economic Survey 2019-20 on 31st January advised the government to focus on service exports in India’s bilateral trade negotiations to reduce its trade deficits. “From a long term perspective, the Survey advises that focusing on boosting service exports during bilateral trade negotiations augurs well for India in mitigating bilateral trade deficits with trading partners,” said Chief Economic Adviser Krishnamurthy Subramanian in the pre-Budget Survey.


ECONOMY

Economic Survey suggests to boost agri exports

There is a need to give increased focus on exploring global markets for agricultural commodities to give an additional source of market for the surplus of agricultural produce India currently has, said The Economic Survey 2019-20. The survey said that India has been a net exporter of agri products since the economic reforms began in 1991. “India has remained consistently a net exporter of agri-products, touching Rs. 2.7 lakh crore exports and imports at Rs. 1.37 lakh crore in 2018-19,” the survey said.


INTERNATIONAL TRADE

Exporters fear Coronavirus impact

The outbreak of the coronavirus in China is turning out to be a cause for concern for the industry as a large number of exhibitors from that nation will be participating in the upcoming auto and components expo. Exporters have also urged the government to review the possible trade impact because of the restrictions. “There would be around 200 exhibitors from the neighboring country. Chinese participation in the components show has always been there. We have a dedicated pavilion for Chinese companies this year. Of the total 1,500 exhibitors, 200 of them are Chinese. I would say they will occupy less than 10% of the total space of 56,000 square meters,” said Deepak Jain, President of the Automotive Component Manufacturers Association (ACMA).


INTERNATIONAL TRADE

China taps India for masks, exporters unsure

Indian exporters have received at least 15 inquiries in the last week from China and Hong Kong including the Wuhan province -- the epicenter of the coronavirus outbreak -- to export surgical masks. Exporters said there is a need for around two million masks and the Indian mission in Hong Kong has sought a list of manufacturers in India who can provide these masks. “In the last one week, there have been many inquiries, at least 15-20 from many provinces in China including Chengdu,” said Ajay Sahai, Director General, Federation of Indian Export Organisations (FIEO).


UNION BUDGET

Digital lenders seek measures to ease the liquidity situation in the budget

Fintech companies operating in the digital lending space are expecting measures in the Budget that they say will improve cash flow for small and medium enterprises (SMEs). Steps to improve the liquidity position of digital lenders, which have seen a rise in the cost of capital in the past year, will also activate the credit demand in the digital lending space, industry officials said. “Facilitating debt flow to SMEs via digital lending non-banking financial companies (NBFCs) will help unlock capital for borrowers at the grassroots level,” said Gaurav Hinduja, Co-founder and Managing Director (MD) at Capital Float.


OTHER NEWS

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