The 4th session of the India-Ghana Joint Trade Committee (JTC) was held in Accra recently, spotlighting significant opportunities in textiles, digital economy, renewable energy, and other sectors. The meeting, co-chaired by Amardeep Singh Bhatia, additional secretary, department of commerce, Ministry of Commerce and Industry of India, and Michael Okyere-Baafi, Deputy Minister for Trade and Industry of Ghana, took place from May 2nd to 3rd, 2024. During the discussions, both nations emphasised the potential for enhanced cooperation in textiles and garments, alongside the digital infrastructure, as critical areas for bilateral trade and investments. The delegation from India, led by Bhatia and including the High Commissioner of India to the Republic of Ghana, Manish Gupta, and Priya P Nair, economic adviser, department of commerce, engaged in comprehensive dialogues with their Ghanaian counterparts. Additionally, discussions on the possibilities of signing a memorandum of understanding (MoU) on digital transformation solutions and a local currency settlement system were explored, reflecting the commitment to deepening digital economic ties, the Ministry of Commerce and Industry said in a press release. The dialogue also covered the potential benefits of the African Continental Free Trade Agreement (AfCFTA), with both sides deliberating on enhancing engagement through the setting of standards, investments, and participation in trade events in India. A business delegation led by the Confederation of Indian Industry (CII) met with the Secretary General of AfCFTA to discuss further cooperation. India and Ghana have a robust trade relationship, with bilateral trade reaching $2.87 billion in fiscal 2023. India has emerged as a major investor in Ghana, ranking as the third-largest investor in the country, with investments spanning manufacturing, trade services, and various other sectors.
Source: Fibre2fashion
Synopsis The circular, issued in October by the Central Board of Indirect Taxes and Customs (CBIC), has been stayed via an interim order. The circular had held that a corporate guarantee provided by a holding company to a lender for the approval of credit to its subsidiary would be regarded a 'supply of service' liable to GST. In a substantial relief for many of the holding companies in India, the Punjab & Haryana high court has stayed a circular that brought corporate guarantees under the ambit of GST, ToI reported on May 7. Corporate guarantees are given by holding companies in favour of their subsidiaries. Under this mechanism, a company, known as the guarantor, promises to pay for a loan if the borrower (in this case, subsidiaries) doesn't fulfil their obligations. This system benefits the subsidiaries in the form of reduced risk levels. The High Court, through an interim order, has stayed the implementation of the circular issued in October by the Central Board of Indirect Taxes and Customs (CBIC), ToI's report (by Lubna Kably) said. The circular in question had said that a corporate guarantee provided by a holding company to a bank or financial institution for the approval of credit facilities to its subsidiary would be considered a 'supply of service' liable to GST. The circular had additionally stated that the tax liability would occur even in cases where no payment is involved. The issue before the High Court also encompasses a challenge regarding the assessment of the value of corporate guarantees. For the time being, the stay order provides relief to India Inc., currently grappling with showcause notices and GST demands amounting to hundreds of crores. Companies facing showcause notices due to this circular now have the option to petition the High Court to dismiss them. The demands have been issued to the Indian holding company. If the holding company is located overseas, the Indian subsidiary, on whose behalf the corporate guarantee is provided, is faced with GST demands. According to industry representatives interviewed by TOI, following the issuance of the circular, the frequency of showcause notices and subsequent demands escalated. Companies across various sectors, including FMCG and infrastructure, were served with such notices. ToI reported quoting Mannat Waraich, who represented Acme Cleantech Solutions in this matter before the HC, "The interim order, which has granted a stay, will apply pan-India. The circular, which stated that corporate guarantee was a supply of service, led to a foregone conclusion on part of tax officials, that every corporate guarantee transaction (other than personal guarantee by a director) was subject to GST, without the same being tested on merits." "If a company has received a showcause notice, which is based on the circular, it should immediately approach the jurisdictional high court for quashing the same. If an order raising a demand has been issued, the company should approach the appellate authority or the high court seeking to quash it. It would be up to the quasi-judicial authorities/courts to quash the demand or keep it in abeyance," Waraich further told the newspaper. According to Sujit Ghosh, senior advocate, Supreme Court, who led the arguments for the company, "This interim order essentially seeks to enforce that we have a fundamental separation of power (under our constitutional construct) between the executive and the judicial wing of governance. The executive wing being the tax administrator (i.e. CBIC) in this case cannot fetter with the adjudicatory and appellate powers of the quasi-judicial authorities.” “We have also challenged Rule 28(2) of the CGST Rules (amended) which provides that GST at 18% will be payable on 1% of the value of the guarantee or the actual consideration, whichever is higher. These rules have also been challenged as being arbitrary, discriminatory, and confiscatory in nature,” Waraich further told ToI.
Source: The Economic Times
New Delhi: Finance minister Nirmala Sitharaman on Monday said has helped improve the tax buoyancy from 0.72 (pre-GST) to 1.22 (2018-23), with the states' buoyancy estimated at 1.15, despite compensation ending two years ago. Tax buoyancy measures the change in tax revenue to change in nominal GDP. "Without GST, states' revenue from subsumed taxes from FY 2018-19 to 2023-24 would have been Rs 37.5 lakh crore. With GST, states' actual revenue amounted to Rs 46.6 lakh crore," she said in a social media post to coincide with monthly collections for the first time topping the Rs 2 lakhcrore-mark in April and the appointment of Justice (retd) Sanjaya Kumar Mishra as first president of GST Appellate Tribunal (GSTAT). Sitharaman said govt has adopted a pro-poor approach in fixing the rates, which have been lowered for several goods and services in seven years since the new regiment kicked in. While the suggested revenue neutral rate (RNR) was 15.3%, it came down to 11.6% in 2019, she said. "Despite GST rate being less than prescribed RNR and Covid affecting the revenues, GST collections (as % of GDP) have now reached the levels they were before GST (both net and gross). This demonstrates that Centre and states, collectively, through better tax administration, are able to collect the same revenue with a lower burden on our taxpayers," FM said. GST, launched in July 2017, had subsumed 17 taxes and 13 cesses into a five-tier structure.
Source: Times of India
Arvind Panagariya is known for his nearly unqualified allegiance to free trade, and constant “fight against protectionism.” In his latest book — India’s Trade Policy-The 1990s and Beyond —the chairman of the 16th Finance Commission renews the pitch for liberalised world trade, though it seems the multilateral route for this is closed, and even mature economies would routinely resort to protectionism. A highlight of the book, which compiles his newspaper articles over decades, is its lamentation of the episodes of reversal of India’s (1991-born) trade liberalisation process, the sharpest and most recent being in 2018-19 and thenceforth. Excerpts from an interview with KG Narendranath and Prasanta Sahu, ahead of the book release:
If you look at India’s own experience with liberalisation, we had 40 years of very protected trade regime since Independence till the 1991 watershed moment. Even after that start of liberalisation, there remained a high level of protection. Even in 2001, consumer goods imports were still subject to licensing. By 2007-08, the top tariff rate (peak Customs duty) came down to about 10%, and import licensing was gotten rid of. People who say we did not benefit from this (trade liberalisation), look at the imbalance, that is, the trade deficit in absolute terms. But in absolute terms, everything has grown (faster), including exports and imports, the GDP.
India’s initial FTAs didn’t produce net trade gains for the country vis-à-vis the partners…
There was a long period when FTAs were emerging, and bit of a challenge was faced by the multilateral trading system. I was very much on the multilateral side of the debate then. Many look at the bilateral trade imbalance in terms of absolute rupee or dollar but overlook the rapid growth in both exports and imports. Merchandise exports between 2002 and 2011 grew from $50 billion to $330 billion, a six-times jump.Bilateral trade deficit as a percentage of the total trade deficit of the country is a better measure (to gauge FTA impact). That way, the bilateral trade deficit (with FTA partners) may not be that high. In any case, trade balance is not a good yardstick to assess FTA. Wasn’t there the question of preparedness (for trade liberalisation)?
We had been protected for more than 50 years across the board. We have to look at the progress. How long has the duty been there and have we made some progress (in domestic capacity)? There ought to be some sort of time-bound assessment (of the result of protection). The (protective) duty has to be cut after 4-5 years gradually. The idea of infant industry protection shouldn’t allowed to stick.
What is your outlook on the level of protectionism in the world now?
In spite of all the rhetoric, the protective actions the US took, and the US-China trade war, the world market remains very open. Global trade has been continuously expanding. The recent contraction is small and is also because of rapid expansion earlier , after the Covid. Before the pandemic, the (world trade) peak was $18-19 trillion for merchandise and $6 trillion for services. By 2022, goods trade itself went up to $25 trillion, and services to $7 trillion. So, the total trade surged from $25 trillion to $32 trillion in the period. However, while in terms of outcomes markets remained open, there has clearly been a setback in the progress of liberalisation. Large-scale liberalisation happened as a result of the Uruguay Round (WTO), but the Doha Round did not succeed, and is pretty much dead now.
What is your forecast about further liberalisation of world trade?
Right now, we are in a difficult patch, and I’m not very optimistic that further liberalisation will happen. There is also problem at the WTO itself with the dispute settlement body (being largely dysfunctional). That also puts the implementation of the existing agreements under cloud. There are no major kind of violations, but certainly, we are in a bad patch right now.
You have written how “heavy” anti-dumping duties are a problem, citing such duties on man-made fibres (MMF), which hit downstream textile and clothing industry badly. These duties have over years been brought down, but we are still losing out to Bangladesh and Vietnam, and exports are falling…
The MMF fabric is still subject to high customs duty. In India textile exports, there is an overdependence on cotton, whereas other countries like China have become major players in MMF. The big revolution is happening in the MMF sector, which is more than half (of trade) already and growing faster than cotton. So, India needs to move in there. From the user industries’ point of view, there’s still a problem, as Customs duties are still high on viscose fibre, etc. Fabrics has to be freed up from (high customs duty).
India’s peak customs duty has come down to 10% in 2007-08 and remained there. Where should it settle?
Quite the reverse has happened. Tariff lines that are subject to duty of 15% or more have shot up to over half of the total after 2018-19. In fact, over 42% of all tariff lines went up in the year, with the average of all customs duties rising from 13.7% to 17.7%.
Have these duty hikes been because of revenue considerations or deliberate (protectionist)?
My hypothesis is that since the GST revenue had fallen, revenue became a consideration. Had it been for strategic planning, a few sectors would have been picked up (rather than a lot of them). Political economy of these things is that once a tariff is put in place, the revenue department would like to (retain it). It’s very hard to bring them down again. We should start liberalising now as GST revenues are lately showing good growth.
How do you see the unexpected return of import licensing (the moves on colour TV, laptop)?
It’s a blunt instrument. If you have indeed got to protect a certain industry for some reason, you should rather use Custom duties. The WTO explicitly discourages countries from using these non tariff measures including licensing. Luckily, for laptop, the plan wasn’t implemented.
How critical is the role of exchange rate in trade libetralisation?
We aren’t yet ready for free float of rupee. The managed-float policy we follow ought to allow the currency to depreciate over longer periods just enough so that our goods don’t become uncompetitive.
Do you think India should have joined RCEP (China-led Regional Comprehensive Economic Partnership)?
At the time it was signed, I was very much for it. However, after the Galwan incident, I changed my mind, as geopolitics trumped economics. The economics was clear : a large Asian market and you’ve got to be part of that. We also needed to open up our economy, and this (RCEP) was (seen as) a major avenue. It was felt if you could face China in competition, you could face anybody. After Galwan, it became clear that you can’t trust China, including in other economic areas. I endorse the government’s policy which is to try to move away from China.
A number of FTAs are being lined up…
These are fantastic times for us. Our own liberalisation is the most important thing. In addition, if we can complement that with FTAs with some major countries, (it would have wholesome benefits). FTAs with like-minded countries like Australia, UAE and EFTA matter. However, the two most important FTAs we are planning and must clinch are the ones with the UK and EU. Now that we wouldn’t want to join RCEP, within Asia, what is available other than FTA is the CP-TPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership). As part of the Asia strategy, we need much stronger ties with Asean because while we have “kind of an FTA” with them, there are still a lot of barriers. Once we have FTA with the EU, Asean and and (embrace) CP-TPP, then automatically India’s coastal (and port-led) development will get a boost.
Source: Financial Express
India has committed to provide a grant of $61.5 million for the comprehensive development of Sri Lanka’s Port of Kankesanthurai (KKS). The decision was ratified during a cabinet meeting, sanctioning acceptance of India’s financial assistance to revamp the KKS Port in Jaffna. This is as per media reports, which added initially intended to be funded through an Indian credit facility, the project encountered obstacles due to higher-than-anticipated costs assessed by consulting services. Minister Bandula Gunawardena, serving as cabinet co-spokesman, disclosed that India, recognising the project’s importance, generously consented to cover the entire estimated renovation expenses for the KKS port. Considering the project’s challenges, further talks were held with India to explore the potential of executing it through a public-private partnership (PPP) model. The decision follows a communication from Sri Lanka’s Ports, Shipping, and Aviation Ministry in March, announcing India’s commitment to provide a $61.5 million grant for the full-scale development of the KKS port. This pledge was conveyed during a meeting between Indian high commissioner Santosh Jha and Sri Lanka's Ports, Shipping, and Aviation minister Nimal Siripala De Silva. The development project entails the construction of a new breakwater and dredging the port up to a depth of 30 meters to accommodate deep-draft vessels. Originally approved on May 2, 2017, under Indian loan funds, the KKS port renovation project received subsequent approval for Project Management Consultant Services on December 18, 2019. In discussions between Nimal Siripala De Silva and Santosh Jha, it was revealed that India also aims to enhance regional cooperation between the two nations and extend full support to attract more Indian tourists to Sri Lanka.
Source: Fibre2fashion
Synopsis The Indian economy is projected to become the world's third-largest consumer market by 2026. In 2023, India experienced faster consumption growth compared to China, the US, and Germany. However, consumption growth has trailed behind investment growth since the mid-2022 postpandemic period, according to a UBS Securities report. Indian economy is expected to emerge as the world's third largest consumer market by 2026. In 2023, India’s consumption grew at a faster pace than that of China, US and Germany. But consumption growth lagged investment growth, post pandemic since mid-2022, said a report by UBS Securities. “India remains one of the fastest growing economies and the fifth largest consumer market in the world. India's household consumption nearly doubled in the past decade to $2.1trn in 2023, with an annual compound growth rate of 7.2%, higher than China, the US and Germany” said a report by UBS Securities titled “India’s consumption story- the big divide” by Tanvee Gupta Jain. "India's consumption story reflects a significant divide, driven by a resilient economy but characterized by a stark contrast in spending patterns” Jain said. “Despite India's trajectory to become the world's third largest consumer market by 2026, the divergence between affluent and broad-based household demand persists, accentuated by factors such as income inequality, increased consumer credit access, and declining household savings. Consequently, we anticipate household consumption growth in FY25/26E to remain subdued at 4-5% year-on year, below the trend observed in previous years," the report said. Although broad household consumption growth remained muted in the last two years, affluent Indian consumer demand significantly increased, the report said. India is expected to outpace Germany (in 2024) and Japan (in 2026) and become the third largest consumer market in the world. As of 2023, there were an estimated 40 mn people in India in the affluent category (annual income > $10,000) with four percent share in population of 15 years and above and these will likely more than double in the next five years. Moreover, India's sizeable domestic market that can absorb manufacturing output is one of the key advantages versus its Asian peers India is also expected to benefit from 'China+1' supply chain shifts besides policy initiatives and structural reforms. “However, we believe high-quality job creation would be required to sustain consumption growth in the medium-term,” the report said. India is on track to become the world's third largest consumer market by apparent dichotomy between household consumption and real GDP growth. The country’s economic growth recovered strongly from the pandemic, partly driven by robust domestic demand. However, since mid-2022 investments and real GDP growth have recovered much faster than consumption. This divergence matters for the Indian economy as household consumption accounts for a 60 percent share of nominal GDP, he reports said.
Source: The Economic Times
Industrial producer prices in the euro area and the European Union (EU) experienced a decline in March 2024, according to the latest data released by Eurostat, the statistical office of the EU. In the euro area, industrial producer prices fell by 0.4 per cent, while the EU experienced a slightly larger decline of 0.5 per cent from February to March 2024. This follows significant drops in February, where the euro area saw prices decrease by 1.1 per cent and the EU by 1 per cent. The year-over-year analysis paints a similar picture, with March 2024 witnessing a sharp 7.8 per cent decrease in the euro area and a 7.6 per cent fall in the EU compared to March 2023. The breakdown by industrial grouping shows mixed results. In the euro area, March saw a modest increase of 0.1 per cent in prices for intermediate goods and durable consumer goods, and a 0.4 per cent rise for non-durable consumer goods. However, energy prices plummeted by 1.8 per cent. When excluding energy, total industry prices saw a slight increase of 0.2 per cent, as per Eurostat. The EU mirrored this pattern, with intermediate goods, durable consumer goods, and non-durable consumer goods experiencing increases of 0.2 per cent, 0.2 per cent, and 0.4 per cent respectively, while energy prices dropped by 2 per cent. Excluding energy, the total industry also recorded a 0.2 per cent increase.
Source: Fibre2fashion
With its 200,000 workers it is an important component of the local industry, but it can no longer compete on international markets. The collapse of the rouble is weighing on it, but also the higher labour costs compared to Bangladesh or Vietnam, which requires a qualitative leap in the promotion of its products. Bishkek (AsiaNews) - The president of the Fashion and Textile Association in Kyrgyzstan, Zafarbek Sulaymanov, spoke in the press in recent days to complain about the unfavorable conditions of operators in the sector, which is experiencing a period of severe crisis. This is a very important reality in the Kyrgyz industry, with over 200 thousand operators, which is unable to be competitive on international markets, ceding many positions to neighboring Uzbekistan. One of the causes indicated by Sulaymanov in an interview with Azattyk is the collapse of the ruble, the Russian currency that conditions textile operations, which until two years ago made trade very profitable. Many necessary materials are purchased in dollars, salaries are paid in Kyrgyz som and sales are made in rubles, which today become an ephemeral terminal of the entire operation. At first the ruble had fallen very low, destroying the plans of the fashion industry and even those of traders in the bazaars. Kyrgyz entrepreneurs did not lose heart and reacted promptly, trying to convert all turnover into Kyrgyz som, starting from costs set in dollars. However, other problems have accumulated with production volumes, especially in comparison with Uzbekistan, where the knitwear sector is traditionally stronger than Kyrgyz textiles. A considerable part of the customers moved to China, where the pandemic period lasted longer, and as Sulaymanov explains "immediately afterwards they resumed activities by accepting greater compromises and distributing large subsidies". Last year, the Bishkek government proposed that entrepreneurs in the sector switch to a different commercial approach, uniting the major groups in clusters and attracting the best-known brands on a global level. In fact, a joint Kyrgyz-Uzbek activity was started in one of the most interested centers in Kara-Balte, and later also in Džalal-Abad, supported by the common development funds of the two countries, with a prevalence of the Uzbek part.The president, however, believes that those of the invitation to Kyrgyzstan by Zara or H&M are "imaginative thoughts", which reason on other parameters: "I myself invited a large company to work for us: they commissioned me for a million sports t-shirts at 1 dollar each, but under these conditions it is impossible for us to work, and if they went to Bangladesh". Kyrgyz textiles are not designed for mass and low-level markets, where it is not possible to compete with other countries with lower labor costs and wages. Furthermore, Kyrgyzstan is forced to import cotton, not having sufficient basic production, and has high labor costs, with salaries ranging from 400 to 800 dollars a month, compared to 150-200 in Bangladesh or Vietnam, or even Uzbekistan itself. According to Sulaymanov "it is necessary to focus on other market segments, the economy-plus ones where not millions of t-shirts can be placed, but hundreds of thousands of good products". The Kyrgyz work textiles essentially under contract, "or rather in sub-subcontracting"; a leap in quality would be needed, imitating countries like Turkey and China with its own production "made in Kyrgyzstan", explains the entrepreneur, saying that in recent times Kyrgyz textile operators have sought connections in London and Milan. “Our English and Italian colleagues were surprised by the fact that we work with the same techniques and the same machinery, but we don't have our own international brand”; a complete redevelopment of the sector is needed to gain authority in the markets. Global competition in the textile industry is very strong, and to resist, many Kyrgyz entrepreneurs have begun to bring in cheap workers from other countries, from Pakistan or from Bangladesh itself, leaving many locals without work. “We need greater commitment and discipline”, concludes Sulaymanov, “our sector has developed in a chaotic way and looking at the interests of the individual company”, while today's Kyrgyzstan is called to make a leap in quality to become a more modern and efficient country , starting from the crucial sectors of its economy.
Source: Asian News
Turkiye will continue to work with Germany to achieve the $60-billion bilateral trade target, the former’s ambassador to the latter Ahmet Basar Sen told the eighth Turkish-German Economy Day event in Dusseldorf recently. Bilateral trade volume between both sides exceeded $50 billion by the end of 2023, he noted. Foreign trade volume between Turkiye and Germany’s North Rhine-Westphalia state, the largest in economic size in the country, was worth $11.34 billion last year. Eight hundred and fifty Turkish companies have invested in the region, he said. The event was organised by the Association of Turkish Entrepreneurs and Industrialists in Europe (ATIAD). “We are proud of the economic vitality made possible by Turkish people in Germany ever since the 1960s, with the companies they established with large capital, as well as our young people and people with experience who created lives for themselves, working in many sectors of Europe and Germany,” Sen was quoted as saying by Turkish media reports. Turkish President Recep Tayyip Erdogan visited Germany in November last year and his German counterpart Frank-Walter Steinmeier visited Turkiye at the end of April, he noted. “Turkiye’s full EU membership and its participation in the single market is the ultimate goal,” he added.
Source: Fibre2fashion
