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Henceforth, Trade Agreements to Cover Services, too : Khullar
India seems to be unhappy with the FTA partners, with whom India had entered into trade agreements, who have generally backtracked on promises to amplify the scope of these agreements with liberalization of trade in services. So, India has decided not to enter into such agreements unless talks on services and goods are concluded simultaneously. The new trade agreement policy has now been revised keeping in view the lessons drawn from previous agreements, to “everything-or-nothing” approach when it negotiates bilateral trade and investment treaties in future. Khullar says, “We have learned (from our previous trade agreements) that it is not advisable to separate services negotiations from the talks on goods. Everything should be a single undertaking. If you separate the deal, you will have to give away in goods first and then you could end up struggling to get your due in the area of services. If it is one composite package, then the trading partners have to give it.”
It will be recalled that under free trade agreement with ASEAN, though the two sides had dropped duties on a selected list of goods from January 1, 2010, negotiations on services are yet to begin, which were in fact scheduled to be concluded by December 2009. Khullar said that the Ministry was no more willing to compromise on India's advantageous position in services. “If there is no services (in the agreement), then there is no deal.” he clarified. He added, “Not too many deals have been concluded so far. The rest are in the pipeline….these is taking time because of this reason. Why does it take so many rounds for us to conclude a deal ? Because we have our own priorities.” Presently, discussions are on with European Union, Japan and Australia for FTAs. These could come within the ambit of new policy.
Khullar clarified that India is not going to enter into any early harvesting agreement with other countries. “I think we have learnt that early harvest agreements do not work i.e. doing some tariff lines at one particular time and some later. If you are going to move to a zero-tariff regime, there has to be one cut-off date for that rather than three different dates. Perhaps what Khullar had on the back of his mind was our experience with Thailand, with which we had entered into an early harvest agreement in 2005. The two countries decided to cut duties across only 82 products with the commitment that more products would be added to the list. But there has been no progress on this front since then.
States Refuse to Give up Their GST Demands
The Central Goods and Services Tax (GST) has bumped into another hurdle. The State governments continue to stick to their demands of higher threshold for Central GST and keeping local body taxes and electricity duty out of it. The States are demanding dual rate of State-GST to safeguard their interest, but opposed by the Central Government which favours a single rate structure for ease. These demands have been reiterated in the reply sent to the Empowered Committee of the State Finance Ministers in response to a discussion paper.
This stand on the part of the State Governments has cast a shadow over the implementation of GST, which FM, as per his last year's Budget speech, want to implement from April 2011, now just a few months away. According to Thomas Isaac, Kerala Finance Minister, “A uniform threshold will not be acceptable to small scale industries, that are tax exempt currently and small traders. The small traders have apprehensions about dealing with two administrations and filing returns. These are practical problems and a solution will have to be found through discussions. But it is not an issue that will break the discussions.
Acceptance of dual rate structure nullifies the very reason and philosophy behind the GST as it not only complicates the tax structure, but also pushes up the taxation rate. The Centre, on its part, has promised to compensate the States in full for any revenue loss that they may incur due to new tax.
Fast Track Growth May Take India-UAE Trade To $ 96 Bn.
India has replaced China as the UAE's largest trade partner in 2008-09 and is now poised to further bolster its bilateral trade with UAE to $ 96 billion over the next five years, says A Sakthivel, President, Federation of Indian Export Organisations. India's exports reached $ 24 billion in 2009, which works out to a growth of 56% on a year-on-year basis. “The pace at which the trade with UAE is growing, we expect it to double in next five years. Dubai is the gateway to West Asia and North African countries and its importance has to be tapped in showcasing our position.” Sakthivel said at the inauguration ceremony of India Show at Dubai. The three-day business bonanza was inaugurated by UAE's Trade and Commerce Minister Sheikha Lubna.
The over 250 representatives from small medium and large sector include those from sectors like garments, textiles, home products and fashion accessories. According to FIEO, the buyer profile included importers, distributors, retailers, manufacturers and suppliers.
Exports to Grow by 15% in 2010 : Anand Sharma
 According to Commerce and Industry Minister, Anand Sharma, India will achieve 15 percent growth in exports in the current financial year 2010-11. "We are confident to achieve the 15 percent growth target in exports this year," Sharma told. The country's merchandise exports grew by 36.3 percent to $16.9 billion in April as against $12.4 billion in the corresponding month a year ago, marking the sixth straight month of growth. India's exports contracted for 13 straight months starting October 2008, before turning positive in November'09 ; and since then shipments have followed the growth path.
"The long-term policy objective is to double the percentage share of this country in global trade by 2020," Sharma added. In the financial year 2009-10, exports dropped 4.7 percent to $176.5 billion mainly due to the global meltdown which had hurt demand. The Indian government has set a target of $200 billion-worth merchandise exports for 2010-11.
No Ban on Cotton Exports; But Increase in Duty Possible, Says Maran
 Rejecting the demand for ban on cotton exports, the Government has ruled out a blanket ban on cotton exports but hinted at a possibility of increasing export duty to check spike in prices of the natural fibre. Textile Minister, Dayanidhi Maran says, “No, we are not for a ban. But we need some kind of calibration in export of cotton.”
Recently, after much hue and cry, the Government had imposed some restrictions on cotton exports including levy of duty and compulsory registration of shipments in view of prices of different varieties having increased between 20-25% over the last one year. The Government is, however, aware that the global economy is not yet out of the woods and the textile exporters are cautious about prospects for the current year. There has been a decline in exports of textiles and garments to both the important markets like the US and the EU.
Referring to the recent economic crisis in EU, Maran said, “I have suggested our exporters to explore new emerging markets like Japan, South Asia, Australia, Latin America and South Africa. In a Look East Policy, new markets have been tapped to promote exports, besides consolidating markets like the EU and the US”.
India, Sri Lanks To Resolve CEPA Deadlock
 Comprehensive Economic Partnership Agreement (CEPA) between India and Sri Lanka, which seeks deeper economic ties between the two nations, moved one step forward with resolving of political deadlock in the course of visit of Sri Lankan President Mahinda Rajapaksa to India recently. Foreign Secretary, Nirupama Rao said, “During talks between Prime Minister Manmohan Singh the visiting Sri Lankan President, the two leaders noted the progress achieved under the India-Sri Lanka Free Trade Agreement (FTA) and agreed that it would be timely to build on this achievement through a more comprehensive framework of economic co-operation. They have directed officials to hold intensive consultations on such a framework.”
She added, “There is enormous scope for developing the economic relations and both sides understand that it is justified to have a closer partnership. In fact, the benefit of closer economic partnership with India needs to be advocated more in Sri Lanka.
It may be pointed that as and when the CEPA is finally inked, India would reduce its negative lists by another 114 items while Sri Lanka would be reducing only 32 items. This is despite the fact that under the Indo-Sri Lanka FTYAS, Sri Lanka was allowed to have a larger negative list (1,180 tariff lines) than India (429 tariff lines).
India has also offered additional concessions on garment quota of a million pieces that was granted under the FTA. Besides the three million pieces granted a zero duty earlier, India has agreed to allow another three million pieces more at zero duty and the remaining two million at 75% margin of preferences. Port entry restrictions and conditions of sourcing fabrics from India have also been removed.
TEA Leads In Moderating Yarn Prices
 Tirupur Exporters Association has been in discussions with the spinning mills for moderating yarn prices for quite some time and has now inked an agreement with spinning mils to supply yarn at reduced prices to apparel making units. As per the agreement, the price of 40s-count yarn has come down by Rs. 8 to Rs. 194 per kg, while prices of 20s, 24s, 30s and 34s count yarn have been reduced by Rs. 5 to Rs. 157, Rs. 165, Rs, 177 and Rs. 184 per kg. respectively. The agreement says the prices will be maintained at the agreed levels till the end of August 2010 and it would b applicable to all mills.
It is understood that TEA officials have sent a copy of the agreement to Dayanidhi Maran, Union Minister of Textiles with an understanding that these prices would be applicable throughout the country. It will be recalled that the prices of yarn have been ascending upwards over the last few months. Since July 2009, the spinning mills have been increasing the prices by at last Rs. 5-10 often.
Cotton yarn prices account or about 40% of the total production costs of the apparel making units. So any increase in cotton yarn prices has a great impact on the garment prices. While the spinning mils have been contending that the prices have been enhanced in line with increase in cotton prices, while knitwear exporters maintain that the increase is not proportionate to the increase in cotton prices. However, with the conclusion of an agreement, there is truce between the spinners and the knitwear manufacturers and exporters.
Sustained Recovery to take Time : Sharma
Anand Sharma, Union Commerce Minister has expressed his confidence that the world economy would improve, even if it takes some time. Raising the issue of continued uncertainty posed by the global economic crisis at the Conference on Interaction and Confidence Building Measures in Asia (CICA) in Istanbul, he said, “While we can take hope from the fact that the worst may b behind us, sustained recovery is likely to take some time. The recovery is reassuring, but it is not uniform as many economies continue to register weak growth. Much will depend on the ability of nations to act in concert to reform global architecture to make it more inclusive and representative in tune with contemporary global realities.”
On the question of crisis in Europe, Sharma warned of the fragility of the global economic architecture and the risks associated with unsustainable lending patterns. Expressing cautious optimism about the near term, Sharma urged more global co-operation beyond the already successful economic stimulus strategies. He added, “Much will depend on the ability of nations to act in concert to reform the global architecture to make it more inclusive and representative in tune with contemporary global realities.”
Handicraft Exporters Want Changes In Labour Laws
 Though the demand for Indian handicrafts in Western countries has picked up, the exporters are hamstrung to export the handicrafts due to shortage of labour. In fact, the exporters are finding it very difficult to get the labour for manufacture of handicrafts. Said an exporter “At this hour, we are facing crisis of labour. If today, we have orders, we do not have labour” said Export Promotion Council for Handicrafts Chairman, Raj Kumar Malhotra. “As a matter of fact, the demand for artisans has picked up in almost all the handicraft hubs like Moradabad, Jodhpur, Panipat and Aligarh. The Government should change the labour laws, allowing it work overtimes. As per the existing laws, a worker cannot be asked for work extra, even if he wants.
Apparel Exports Decline In 2009-10
 India's apparel exports declined marginally by 2.6%to $ 10.64 billion in 2009-10 as compared to the previous fiscal due to decline in demand from the US as well as European countries. The garment exports stood at $10.93 billion during 2008-09. The US and the EU, which are recovering from impact of global recession together account for 60% of India's total garment export. According to Premal Udani, Chairman, Apparel Export Promotion Council, “There has been a weak recovery in the Western markets like the US and the EU.”
However, the garment exporters have had another additional reason for slowdown of garment exports. They are unhappy as they have been affected due to the rising fabric prices, which have made them uncompetitive in the global market. High fabric prices have made Indian apparel export uncompetitive, as a result major buyers in the US and the Europe are sourcing garments from other countries like China, Vietnam and Bangladesh.
Indian Exports to EU Would be Adversely Affected, Says EICC
 Readers of The Stitch Times will recall that we had analysed the impact of European crisis on Indian exports in general and garment exports in particular. The current debt crisis in some European Union member states will have a negative impact on Indian exports and the Indian stock market, a top official of EICC said. At least 27 percent of India's trade is with Europe and the crisis will impact India's export to the region, Sunil Prasad, the Europe India Chamber of Commerce (EICC) Secretary General said.
The Chamber has become the "first port of call" for those doing or wanting to do business with India, Prasad said, adding that the EICC will help anyone "looking to build business in India or Indian companies in Europe", EuAsiaNews reported.
Recently, an analysis carried out by the Assocham had also warned that nearly 10-12 percent slump is foreseen in export proceeds of India in European markets particularly that of Greek, Portugal and even Spain in the first quarter of current fiscal. Global rating agency Moody's had downgraded the Greece's debt to junk status, resulting in a crisis of confidence in the European markets.
The European crisis comes at a time when Indian exports emerged out of the crisis following recession in leading world markets. Exports, which account for about 17 percent of the country's total economic activities, had contracted by over 39 percent in May 2009. Meanwhile, a news agency reported that the Board of Trade, headed by Commerce and Industry Minister Anand Sharma, will review the impact of European debt crisis on the Indian exports. The Board of Trade (BoT), which also comprises leading industrialists, business chambers and trade bodies, would discuss the changing rupee-euro equation, as the euro zone currency has been hit by the Greek crisis.
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