India Trade February 2017 March 2018 issue

India Trade February 2017

India

GDP

Overestimating Growth?

It is unsurprising that India’s GDP forecast for FY2017 elicited varied reactions post the demonetisation initiative. Earlier in January 2017, the Central Statistical Organisation (CSO) revaluated India’s GDP for FY2017, bringing down growth forecast for the fiscal from 7.6% to 7.1%. CSO also reported that the anticipated real gross value added (GVA), based on current prices, is expected to be 7.0% [which is down by 0.2% from FY2016].

However, CSO’s report received criticism from ICRA Ltd., an independent credit rating agency. As per ICRA, the CSO ratings are unreliable because it failed to include demonetisation [a policy that in one fell swoop had removed 86% of India’s currency in circulation]. According to ICRA, India’s GDP and GVA growth rates are estimated to be around 6.8% and 6.6% for FY2017.

Meanwhile, the World Bank, in a new round of estimations, projected a more optimistic economic growth for India. While agreeing that demonetisation had definitely impacted the GDP, it reported that India would bounce back like most world economies. However, interestingly, its latest report also cuts down India’s growth forecast to 7.1% for FY2017 [its earlier GDP forecast for FY2017 was 7.6%]. Meanwhile, the apex trade body reported that the global growth rate is expected “to accelerate moderately” to 2.7% in CY2017, after having a rather dull growth of  2.3% in CY2016.

Continuing to keep the optimism alive, the World Bank expects domestic schemes like ‘Make in India’ to fuel industry recovery in the future. It forecasts that India will sustain a growth rate of 7.6% and 7.8% in CY2018 and CY2019, respectively. However, another turbulence in the offing in 2017 is the Goods and Services Tax (GST), which is projected to be implemented by September 2017 [so they say!]. GST, as per some experts, may have a magnitude of destabilisation much larger than demonetisation – we will wait and watch.


INDIA-CANADA

TRADE AGREEMENT

Looking East?

While the future of Canada’s most important trade agreement NAFTA faces uncertainty with US President Trump promising to renegotiate the same, Canada-India Comprehensive Economic Partnership Agreement (CEPA) seems to be taking shape. Speaking at the Vibrant Gujarat Summit, in January, Amarjeet Sohi, the Canadian Minister for Infrastructure and Commodities, commented that Canada was looking towards concluding a free trade agreement with India. He said that for Canada, “engaging with India was critical” because of its “growing economy” and “major economic player” status. India and Canada took their first steps towards developing a trade deal in 2010 and CEPA is currently in its 9th round of negotiations.
India Trade February 2017
Meanwhile, between FY2010 and FY2016, merchandise trade between the two countries saw an increase of 29.32% – from $4.97 billion in FY2010 to $ 6.43 billion in FY2016. In addition, foreign direct investment (FDI) inflow into India from Canada too witnessed an increase of 71.72% – from $61.64
million in FY2010 to $105.85 million in FY2015.

Another recent event that seems to be spreading optimism is the appointment of Chrystia Freeland to the position of Foreign Minister of Canada in the newly reshuffled cabinet. Media reports have dubbed her as being India-friendly, referring to her previous stint as Trade Secretary. It seems Canada is looking east when it comes to trade. Or, is it India looking West?

 


INDIA-URUGUAY

CUSTOMS agreement

Strengthening Bonds

India and Uruguay have taken a major step when it comes to improving bilateral trade relation, by signing a Customs agreement. The deal is expected to play an important role in improving bilateral trade between the countries by tackling concerns on Customs fraud that have plagued the industry. For India and Uruguay, this is an important step as they continue to work on developing stronger ties. Earlier, in 2004, Uruguay alongwith multiple Latin American countries – commonly referred to as the MERCOSUR bloc – had signed a preferential trade agreement (PTA) with India. The PTA became operational in 2009.
India Trade February 2017
Uruguay has been an important trade partner for India. India’s exports to Uruguay increased from $140.68 million in FY2012 to reach $208.32 million in FY2015. Exports, however, declined in FY2016 to $152.81, registering a fall of 26.64%. On the other hand, imports from Uruguay to India dropped slightly from $172.11 million in FY2012 to $170.52 million in FY2016. India is an important supplier of motor vehicles, pesticides and polyesters to Uruguay.

 

 


INDIA-PORTUGAL

BILATERAL TIES

A Firm Handshake

In a recent meeting, held in Delhi, Indian Prime Minister Narendra Modi and his Portuguese counterpart António Costa signed seven memorandum of understandings (MoUs). The MoUs signed between the two countries provide for cooperation in various areas including defence, IT and renewable energy as well as agriculture and allied sectors. As per a Ministry of External Affairs (GoI) release, these MoUs will facilitate scientific and technical information exchange across sectors, help organise training programmes, and promote agricultural trade between the two countries. Both nations have also agreed upon implementing some new mechanisms to increase the two-way trade and investment as the current level of bilateral trade and investment has failed to reach its full potential. Interestingly, India has always enjoyed a trade surplus with Portugal, which has only been increasing since FY2013.
India Trade February 2017
Modi and Costa also talked about the need to introduce direct flights between India and Portugal as a means to increase trade. A joint meeting will be held in Lisbon later in July this year to discuss issues hampering trade and investment.

 

 

 

 

 

 

 


STOCK EXCHANGE

INTERNATIONAL TRADE

A Hi-tech Makeover

India Trade February 2017Adding to his list of pet projects for this year, Indian Prime Minister Narendra Modi officially inaugurated India’s first International Exchange, India INX, on January 9, 2017. India INX, a subsidiary of Bombay Stock Exchange (BSE), was launched by Prime Minister at the newly-inaugurated Gujarat International Financial Tech City (GIFT) in Gandhinagar, Gujarat. The technologically-advanced India INX has a response time of only six micro seconds, the fastest in India. The stock exchange will be open for 22 hours. This is unlike BSE, which works between the standard working hours of 9 am and 3 pm. The step was taken to allow Indian and foreign investors from around the world to trade across time zones.

In its initial run, India INX will deal with commodities and interest derivatives, and would further expand its portfolio to add equity investments. It has been reported that around 250 traders have already applied to be a part of India INX.

V. Balasubramanian, the Chief Business Officer of BSE, has been appointed as the first Managing Director and Chief Operating Officer of India INX.