Prabhu on fast track; working to speed up exports growth

The new Commerce Minister, Suresh Prabhu on Wednesday said his ministry is looking at ways to quickly boost India's exports which are currently facing "challenging times", partly on account of the implementation of the Goods and Services Tax (GST) from July.

"Exports to GDP ratio has to rise...so we are at a crash intervention sort of a thing. We are trying to work out what is to be done to promote exports in a shortest possible time which includes issues coming up because of the GST," Prabhu told reporters in New Delhi.

The Minister, who took charge of the Commerce and Industry portfolio after cabinet reshuffle earlier this week, said exporters are facing certain issues in the GST regime, which the ministry is taking up with the concerned authorities.

After rising for 10 months in succession, Indian merchandise exports in July fell 6.84 percent to $21.69 billion compared to $23.28 billion in the corresponding month of 2015. Exports in June at $23.56 billion had grown by 4.39 percent over the same month of 2016.

Exporters have said that the GST regime would block working capital worth over Rs 1.85 lakh crore per year with the government as they now have to pay the tax first and then claim refund under a cumbersome process.
Prabhu also said the ministry is working on the support measures "which can facilitate quick increase in exports both in volume and value."

He said the ministry will work on several fronts, including bringing in a new industrial policy, improving logistics for exporters, an agriculture export policy and integrating into the global supply chains.

"Global supply chains are now become a reality. India is part of that in auto components and generic formulations," he said.

Prabhu also described the current times as "challenging" in view of more countries creating protectionist "walls".

"Protectionist ideas are growing. They are stronger over a period time. So we will follow our trade policy in a manner that we will be able to work through these walls," he said.

South Indian sugar mills seek duty-free import of Raw sugar

Sugar mills in Tamil Nadu are looking to get permission from the Centre for duty-free import of raw sugar to tide over a supply crunch brought about by last year's drought.

Mills estimate cane availability for the forthcoming season at 65 lakh tonnes. If the entire stock is used, mills can turn out only upto 6 lakh tonnes of sugar. This would mean a 75% production drop from one of the peaks of 23.7 lakh tonnes recorded four seasons ago.

Holding a mere 2.7 lakh tonnes of sugar in the coffers -the state consumes 1.5 lakh tonnes a month -the inventory will dry up in about 45-60 days, leaving mills in the lurch just ahead of the festival season.

“We find ourselves in a position where it is economically unviable to get sugar from states like Uttar Pradesh, and at the same time run our factories at very low capacity utilisation. So, import is the only resort, or else we may have to suspend operations,“ said Palani G Periyasamy, chairman of Dharani Sugars.

Private sugar mills in the state have seen their production dwindle over the past few years from over 20 lakh tonnes to about half of that lately. The mills had also had cane arrears payable to farmers in hundreds of crores in terms of the State Advised Price, an addition to the Centre's Fair and Remunerative Price announced every year.In such a milieu, if sugar mills were to run their plans at a capacity utilisation of 25%, it could impact cane price remuneration in terms of FRP by `1,000 a tonne procured.

Interestingly, the Centre had allowed import of 5 lakh tonnes of raw sugar in April, of which Tamil Nadu got a share of 1.3 lakh tonnes, but the mills had exhausted that allocation. While they are allowed to individually import, the duty levy of 50% would render the processing an unviable business prospect.

An industry representative told ET on conditions of anonymity: “The current global price of raw sugar enables a situation where we can make a reasonable margin for every kg we sell. But of course, a huge demand from India would buoy global prices in the future too.“ For farmers, the cane shortage had led to the odd advantage of mills willing to pay more than the FRP to keep factories running .K Rajendran, a cane farmer in Ariyalur district in Tamil Nadu, said: “Of course, the little cane to supply means the higher prices would not make much of a diffe rence, but it underscores the desperation of mills to procure raw material.“

 import of Raw sugar 

Pakistan exploring new markets for export of Meat , Dairy Products

ISLAMABAD (APP) - The Government is exploring new markets for export of meat and dairy products with focus on Global Halal Food Trade.

Official sources told Radio Pakistan that many Muslim countries are dependent on imported meat and Pakistan can significantly increase its exports by focusing on modern and hygienic slaughter houses that can meet international standards for frozen or chilled red meat.

They said efforts are being made for market access in Russia, China, South Africa, Egypt, Hong Kong and Indonesia besides Middle-East countries for meat and meat products.

The sources said the United Arab Emirates has lifted ban on import of poultry and poultry products from Pakistan. This would go a long way in promoting export of poultry products.

They said Netherlands-based multinational company Friesland has acquired fifty-one percent share of Engro Food Pakistan, which is one of the largest private sector Foreign Direct Investment in dairy sector of Pakistan amounting to $450 million.

Dairy Products

Indian auto components industry clocks $43.5bn revenue in FY2017

The overall turnover for the industry stood at Rs 292,184 crore, a double-digit growth of 14.3 percent (FY2016: 255,600 crore), and a CAGR pegged at 7 percent over the last six fiscals from FY2012.
According to Vinnie Mehta, director general, ACMA, "With demand set to grow in the near future across segments in the industry, and especially with the four-wheeler sector's growth outlook of 8 percent, the graph for the components industry is set to grow further between a sustained 10-12 percent for the next 2-3 years."

The cumulative revenue is a resultant of component supply to the OEs, aftermarket and exports. Out of the OE space, supplies to the PV sector is the major contributor with a major share of 49 percent, followed by the two-wheeler industry with 22 percent, and M&HCVs, LCVs contributing 11 percent and 8 percent respectively.

Indian auto components industry

How to Fix India-China Trade

The Indian government is exploring the possibility of restricting the import of electronics and information technology products from China. Ostensibly, the reason is to bolster security and prevent data leakages. However, the immediate provocation for reviewing its trade agreement with China was the India-China standoff at the Doklam plateau.

India-China Trade

As both the countries have now agreed to deescalate the tension by withdrawing their troops, India could now turn to trade issues with China, with the aim of correcting the present one-way trade, where China continues to be the beneficiary because of its protectionist policies.

Although trade is skewed heavily in favor of China, any move to put a restriction on the import of Chinese goods will hit Indian industries hard, as India imports over $22 million in cheap electronics and information technology products for its own electronics and power sectors.

Chinese media had recently criticized India for imposing anti-dumping duties on more than 93 Chinese products. The anti-dumping duties on chemicals and machinery items imported from China have already been in place for some time. Other Chinese products on which India has imposed anti-dumping duties include steel and other metals, fibers and yarn, rubber or plastic, electronics, and consumer goods.

The logic behind imposing anti-dumping duties is mainly to protect domestic industries, as they are not able to match the price of cheap Chinese products. Anti-dumping duties aim to create a level playing field for Indian manufacturers.

Yet any step to impose unreasonable restrictions of imports from China would amount to a contravention of the World Trade Organization’s laws. Secondly, as local manufacturing companies in India are not geared up to supply goods to the rising power and telecom sectors, India may be forced to import such good from the United States and Europe at a prohibitive cost, which may put an additional financial burden on these two sectors.

Today, China is India’s largest trading partner, with a bilateral trade of $71.5 billion. The total imports from China during the last fiscal year stood at $61.3 billion against India’s export to China worth $10.2 billion. The trade deficit, which stood at $37.2 billion a few years ago, now stands at a whopping $51.1 billion.

One of the main reasons for this unfavorable trade balance is that India exports only raw materials like iron ore and copper to China. The deficit can be reduced only when India starts exporting value-added products. Unfortunately, the Indian manufacturing industries have to go a long way before they are geared up to export value-added products to China.

India is one of the largest manufacturers of generic drugs. But it has not been able to export to China because of Beijing’s protectionist policies. While Indian pharmaceutical companies exporting generic drugs to the United States and Europe, as most of the drugs have received FDA and EU approval, it is quite striking that China does not allow imports of drugs from India.
Indian pharmaceutical companies have taken up the issue with the Indian Commerce Ministry to facilitate export of generic drugs to China, especially since a Chinese delegation completed inspections of their manufacturing facilities a year ago. The Indian Commerce and Industry Minister has also taken up the matter with his Chinese counterpart in this regard.

Healthy trade between two countries has the potential to reduce tensions. The leaders of both the countries have so far shown flexibility in improving relations. India should reconsider imposing restrictions on Chinese goods, as it has the potential to aggravate an already fragile status quo. China, on its part, should help India reduce the trade deficit by importing generic drugs and IT enabled services.

Chinese companies have huge investments in the cell phone business, telecom, and power sectors. Such goods have become the backbone of India’s own manufacturing. One of the reasons for the popularity of Chinese goods is that they are cheap, compared to locally manufactured goods, as well as comparable imports from the United States or other Western countries.

If India decides to put an embargo on Chinese goods, and decides to import from other countries, it would involve a huge cost escalation which would translate into rising costs of goods and services, such as power generation. Similarly, the telecom and IT industries, which depend on import of hardware from China, will also be affected.

Despite the Indian prime minister’s “Make in India” initiative, India is finding it difficult to increase its manufacturing capabilities in a short time span. Until India is able to create a sound manufacturing base, it should refrain from imposing any unreasonable restrictions on Chinese goods, as it would stand to suffer more than China. It must be mentioned here that the Chinese exports to India account for only two percent of its overall exports. In case of any boycott of Chinese products, it is the Indian manufacturing companies that will be hit the most.

Both the Chinese president and the Indian prime minister are known for their mature leadership and gravitas. Both should immediately engage in a dialogue to defuse the tension between the two countries. The BRICS forum scheduled in September in China would be the ideal platform for both the leaders to address the trade imbalance.