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Trade war opens export doors

India is keen to take advantage of the trade tensions between the US and China and increase its share in global trade. The government is taking one step at a time and is focussed on those items whose exports can be increased quickly.

By R. Suryamurthy
  • Published 5.08.18
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New Delhi: India is keen to take advantage of the trade tensions between the US and China and increase its share in global trade. The government is taking one step at a time and is focussed on those items whose exports can be increased quickly.

Some of the products identified for export to China are cotton and soya beans, which are largely imported from the US. India can also step up the export of textile and leather to the US, some of which China used to ship.

China has imposed an additional tariff of 25 per cent on soya beans, chemical products and medical equipment from the US but reduced tariffs on many agricultural products, including soya bean, from its Asia Pacific Trade Agreement partners, comprising India, Sri Lanka, Bangladesh, South Korea and Laos.

At present, India does not export any soya bean oil or flour but only a negligible amount of oilcake obtained from soya bean oil to China.

EEPC India chairman Ravi Sehgal said, "We must be very watchful of the unfolding tariff war between the US and China. Certainly, we should not be caught in the crossfire. Instead, India must devise its own strategy to deal with the fast changing global trade environment to maintain a smart growth in our exports."

With the US imposing an additional duty of 25 per cent on imports worth $34 billion from China, certain Indian products may become more competitive, according to a study by industry association CII.

The goods that India should focus on for the US market include machinery, electrical equipment, vehicles and transport parts, chemicals, plastics and rubber products.

Intermediate parts for the defence and aerospace sectors, vehicles and auto parts, and engineering goods have a high potential for exports.

Sectors such as apparel and textiles, footwear, toys and games and cell phone manufacturing are becoming competitive industries in India and need to be encouraged, it said.

Policy push

India's share in global exports is now a mere 2 per cent. There is scope to step it up to 5 per cent over the next 4-5 years if some reforms are carried out, analysts said.

As exports expanded 20 per cent in May and 18 per cent in June, the ministry of commerce is working on a strategy in consultation with the Federation of Indian Exporter Organisations (Fieo) to sustain a 20 per cent growth in exports to achieve $400 billion in two years.

After clocking near double-digit growth, exports touched $300 billion last fiscal, following negative growth in the previous year at $275 billion.

Analysts said the Merchandise Exports from India Scheme (MEIS) includes major products of interest to the US and should be used to build exports in the identified categories.

Indian companies require better access to credit to intensify their export effort.

Micro, small and medium enterprises (MSME) should be supported to export intermediate and high-technology products and trade facilitation must be a high priority to lower transaction costs and enhance competitiveness, analysts said.

Rewards under the scheme are payable as a percentage of realised free-on-board value and the MEIS duty credit scrip can be transferred or used for payment of a number of duties, including the basic customs duty. However, they warned that India cannot reap big gains unless it is able to improve its competitiveness. This would require tough reforms and investments in infrastructure.