The Union government is looking at revising the foreign direct investment (FDI) policy and is conducting stakeholder consultations regarding the same, commerce secretary Sunil Barthwal said on Wednesday.
On the trade front, China was India’s largest trading partner in FY24 and has been India’s largest import partner for the last 18 years. Trade deficit with the neighbouring country was also the highest in FY24.
Data released by the commerce department on Wednesday showed that India’s exports to China declined by 9.4 per cent to $1.05 billion. Imports rose by 13 per cent to $10.28 billion in July. China was also India’s largest import partner.
When asked about the reason for the increase in imports from China, Barthwal said that no country in the world is able to decouple with China, including the United States (US) and the European Union (EU). “If imports are increasing commensurately with exports or with domestic consumption, I think that is not something which we should worry about,” he said.
Last month, the Economic Survey suggested that increased FDI inflows from China could help increase India’s global supply chain participation along with a push to exports.
Currently, the share of FDI equity inflows is a mere 0.01 per cent of the total inflows. In June 2020, the government made prior approval mandatory for foreign investments from countries that share a land border with India—China, Pakistan, Nepal, Myanmar, Bhutan, Bangladesh, and Afghanistan—to curb opportunistic takeovers of domestic firms following the Covid-19 pandemic.
India-UAE
India is seeking a review of the trade deal with the United Arab Emirates (UAE) to address issues related to the implementation of the pact between both countries.
“Under trade agreements, when duty concessions are given, rules of origin conditions also need to be met. We will have a holistic view of whether the rules of origin (with respect to silver, as well as other products) are being met, and what is the future course of action,” Barthwal said.
While the trade deal kicked in from May 2022, silver imports from Dubai saw a massive jump in the last year due to concessional duties offered under the pact. In FY24, silver imports from the UAE jumped to $1.7 billion from only $11.18 million in FY23. In May, about 87 per cent of India’s silver imports came from Dubai.
However, the Budget announced a steep cut in customs duty on silver in FY25 to 6 per cent from 15 per cent, which may provide the government temporary relief by checking the spurt in silver imports from the UAE.
Bangladesh
Barthwal also said that India is monitoring the situation in Bangladesh and taking steps to improve cross-border trade between the two nations. “What we feel is that whatever disruptions were there, they have been largely addressed… We also believe that between India and Bangladesh, there should be improvement in trade. So we feel that whatever best efforts we can make for improving trade, we should do that and we are doing that,” he told reporters. Domestic exporters have been worried about the impact of the political crisis in Bangladesh on bilateral trade.
India-Russia trade
India and Russia are discussing holding trade in local currencies and reducing non-tariff barriers by Moscow to boost bilateral trade.
“We discussed a lot of issues to improve trade between India and Russia. We also discussed how to facilitate rupee-rouble trade, how non-tariff measures are impacting our trade, and how they should be reduced,” Barthwal said, adding that diversification of trade beyond petroleum products was also discussed between both countries.
Last month, the secretary met Russian Minister for Economic Development Maxim Reshetnikov, among other key officials.
“The rupee-rouble trade will also be affected only when there is more balance of trade,” he said. Currently, over 53 vostro accounts have been opened.
India is focusing on various sectors like electronics, besides taking up issues of non-trade barriers in areas like shrimp and pharma, to boost exports to sanction-hit Russia and move towards achieving a $100 billion bilateral trade target.
Other Issues
The commerce department has sought the approval of the Union Cabinet to extend the interest equalisation scheme. Since the export-boosting scheme RoDTEP is valid till September, the department has sought the finance ministry’s approval for the extension of the scheme.
First Published: Aug 14 2024 | 8:31 PM IST
