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May 2016

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Executive Summary (TIF May 2016)

This is following the declining trend of last sixteen months, India’s exports have registered a negative exports growth during the April, 2016 which is highly disappointing for different segments of the country. India’s exports for the month of April 2016 stands at around USD 20.5 billion as compared to USD 22 billion in April 2015 registering a growth of around (-) 6.74%. Commodity-wise, several major export commodities viz. agriculture, gems and jewellerry , soymeal etc. have registered a negative growth rate. Soymeal exports registered a fall of 74%, Agri-product exports fell by (-)20% and Gems and jewellery exports declined by (-)5.30% in FY2016. Pertaining to bilateral relations our Hon’ble Prime Minister Shri Narendra Modi marked a two days’ visit at Iran to create synergy between the two countries. The two countries have signed several MOUs/Agreements including bilateral contract on Chabahar Port for port development and operations. India and Mauritius signed the Protocol for amendment of the Convention for the Avoidance of Double Taxation. The Protocol will tackle the long pending issues of treaty abuse and round tripping of funds among others. At the international forum India has formally ratified the World Trade Organization’s (WTO) trade facilitation agreement, which aims at easing customs procedures to boost trade and commerce. Furthermore, the Government has decided to set up a trade facilitation panel for implementing a WTO pact which aims at easing customs norms for faster clearance of goods to boost exports. Relating to policy developments Government has decided to remove the requirement of Landing Certificates under Merchandise Export from India Scheme (MEIS) with effect from 4th May, 2015. The central government has withdrawn the production–linked subsidy of Rs 4.50 a quintal that it transfers directly into the bank account of sugarcane farmers on the condition that the mills to which they sell have exported 80% of their prescribed quota of sugar. India has imposed anti-dumping duty on import of telecom gear from China to protect domestic industry from cheap shipments. Minister of State for Commerce and Industry Smt Nirmala Sitharaman launched EXIM Analytics Dashboard. This is simple to use Analytics Dashboards which would facilitate the general public to have an accurate perspective on the facts around the trade performance of India. A step forward to boost trade Indian has hosted an India-Myanmar Business Conclave at Yangon on 18-20 May 2016 as part of its Act East policy. A 25 member business delegation from India attended the Conclave led by Minister of State (Independent Charge) for Commerce & Industry Smt. Nirmala Sitharaman and more than 40 top CEOs from Myanmar attended the Conclave.

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Contents

S. No.

Topic

Page No.

1 Developments in India’s Foreign Trade 5

2 Developments in India’s Foreign Investments 6

3 Developments in Bilateral Trade and Investments 7

4. India and WTO 8

5. Policy Developments 8

6. Miscellaneous 9

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1. Developments in India’s foreign trade

1.1 Exports 1.1.1 Merchandise exports decline by (-) 6.74% in April 2016 - India’s exports for the month of April 2016 stands at around USD 20.5 billion as compared to USD 22 billion in April 2015 registering a growth of around (-) 6.74%. During April 2016, the imports are registered at around USD 25.4 billion as compared to USD 33 billion in April 2015, registering a growth of (-) 23 %. The balance of trade stands at around USD (-)4.8 billion during April 2016 as compared to USD(-)11 billion for April 2015.

Value of Foreign Trade (USD Billion) Period April 2016

Exports FY17 20.5 Growth (%) (-) 6.74% Imports FY17 25.4 Growth (%) (-) 23.1 Trade balance FY17 (-) 4.8

Source: PHD Research Bureau, compiled from Ministry of Commerce and Industry, Govt of India 1.1.2 March, 2016 Services Exports stood at USD 12.8 billion - India’s services exports for the month of March 2016 stand at around USD 12.8 billion and services imports stand at USD 7.9 billion in March 2016. The trade balance in services stands at USD 4.9 billion for the month of March 2016. 1.1.3 Agriculture exports fell 10% in 2015-16 - According to Agricultural and Processed Food Products and Export Development Authority (APEDA), the value of agri-product exports fell by 20% to Rs. 1.05 lakh crore in FY2016 against Rs. 1.31 lakh crore reported in FY2015. The fall in shipments is mainly because of lower global commodity prices and sluggish demand abroad. This has resulted in decline in shipments of major exportable items such as rice, buffalo meat and guargum in 2015-16. 1.1.4 India' soymeal exports fell 74% in 2015-16 – According to Soybean Processors Association of India (SOPA), soymeal exports in FY2016 fell 74% from a year ago to 387,297 tonnes. This is on account of rise in soybean prices in India resulting from lower production in the domestic market.

1.1.5 Cashew exports declined by 20% in 2015-16 - Cashew exports from the country declined by 20% in 2015-16. Total shipments of cashew stood at 94,150 tonnes, worth Rs.4,850.39 crore against 1,18,820tonnes, valued at Rs.5,431.30 crore during the previous year.

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High Raw Cashew Nut (RCN) prices and the closure of the factories in Kerala following a hike in wages, has contributed to this decline in exports of the commodity. 1.1.6 Gems, jewellery exports fell 5.30% in FY2016 – According to Gem Jewellery Export Promotion Council (GJEPC), Gems and jewellery exports have declined by 5.30% during 2015-16 financial year to Rs 2.09 lakh crore as compared to RS.2.21 lakh crores during the previous year. This is mainly due to weak international demand and high rough diamond prices. 1.1.7 Onion exports fell 6.75% in April-January of 2015-16 - According to National Horticultural Research and Development Foundation (NHRDF), onion exports fell by 6.75% to 8.28 lakh tonnes in the first ten months of 2015-16 fiscal due to restrictions on its overseas sale . However, in terms of value, exports rose over 35% to Rs 2,161.70 crore in April-January as against Rs 1,597.99 crore in the same period a year ago on higher realization. 1.1.8 Grape exports to Europe doubled – Exports of grapes from India touched an all-time high in 2015-16, with exports to Europe more than doubling compared to that in the previous financial year. India had exported 84,482 tonnes of grapes to Europe compared to 41,783 tonnes exported a year ago, a growth of around 102%. This is on account of Maharashtra, which accounted for nearly 98% of grapes shipped during the fiscal, exported grapes at a price cheaper than that charged by Chile. 1.1.9 Tea exports to Pakistan up 60% to Rs 161 crore–According to the Tea Board, India’s tea exports to Pakistan rose by 60% to Rs 160.82 crore in the first 10 months of the current fiscal. The overall outward shipments of tea, surged by just 11% to Rs 3,597.41 crore from Rs 3,240.90 crore in the April-January period of the 2014-15 fiscal. The total tea exported from India in the period under review rose to 186.63 million kg as against 164.88 million kg a year earlier. The increase in tea exports was seen in major tea-importing countries such as the CIS countries, the UK, Germany, Poland, the UAE, Bangladesh and Sri Lanka. 1.2 Imports 1.2.1 India’s April gold imports down 67.3% - Gold imports fell sharply by 67.33% to 19.6 tonnes in April 2016 as against 60 tonnes in the year ago period. This is majorly attributed to jewellers’ strike opposing one per cent excise duty on non-silver jewellery in the domestic market. 1.2.2 Import of pulses up 26% to 5.79 mt in FY2016 - Import of pulses rose 26% to 5.79 million tonnes (mt) last financial year to meet rising domestic demand. There has been a gap between the demand and supply of pulses in the country as the domestic demand for pulses is higher than the domestic production. The demand was estimated at 23.66 MT as against the total availability of 22.86 MT. 2. Developments in India’s Foreign Investments 2.1 Net FII investments stands at about USD 2234 million in April 2016 - The net FII investments in the month of April 2016 stands at USD 2234 million as against USD 2441 million in April 2015 representing a y-o-y growth of about (-) 8.5%. The net FII investments in March 2016 stands at USD 2938 million and registered a y-o-y growth of around (-) 12% in March 2016.

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3. Bilateral Trade and Investment Developments 3.1 Hon’ble Prime Minister Shri Narendra Modi visit to Iran – Hon’ble Prime Minister of India during his visit to Iran (22nd May-23nd May, 2016) expressed that there is a great synergy between India and Iran. In this light, the two countries have signed several MOUs/Agreements for different objectives including bilateral contract on Chabahar Port for port development and operations, establishing a framework of cooperation between ECGC and EGFI in supporting and encouraging foreign trade and foreign investment between India and Iran and enhancing cooperation between the two parties for training of diplomats and exchange of eminent speakers among others. 3.2 The Government approved signing of MoU on tech cooperation between India and Bhutan - The government approved signing of a Memorandum of Understanding (MoU) with Bhutan on technical cooperation in the field of capacity building, benchmarking and bilateral exchange in infrastructure engineering. The MoU aims at taking forward India-Bhutan friendship treaty and provide an umbrella for educational, scientific and technical research and environment protection. 3.3 Cabinet cleared expansion of India-Chile trade agreement - The Union Cabinet gave its approval for expansion of the India-Chile Preferential Trade Agreement (PTA).The expanded PTA is expected to help increase the country’s trade basket as well as open several opportunities for Indian businesses to explore various sectors. A PTA between India and Chile was signed in March, 2006. The said PTA came into force with effect from August, 2007. Since, trade dynamics changed after the PTA came into force from September 2007, therefore in 2009, it was agreed to start negotiations for widening the agreement, which would include new products, subject to tariff preferences, and deepening in matters related to Rules of Origin, Sanitary and Phytosanitary Measures (MSF) and Technical Barriers to Trade (TBT).

3.4 India, Canada reviewed progress of talks on free trade agreement - India and Canada undertook a “stock-taking” exercise on the proposed free trade agreement (FTA) between the two nations, raising hopes of an early resumption of negotiations, which last took place in March 2015.As many as nine rounds of negotiations for the FTA, known as the Comprehensive Economic Partnership Agreement, were held between the two countries since its beginning in November 2010. 3.5 India signed dairy products export protocol with Russia - India has signed protocol with the government of Russia for exports of dairy products to that country, after nearly 16 months of formal announcement. With this, Indian producers may start exports of dairy products largely hard cheese to Russia to which the first consignment is expected to leave Indian ports by June-end. 3.6 India and Mauritius signed the Protocol for amendment of the Convention for the Avoidance of Double Taxation -. The Protocol for amendment of the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains between India and Mauritius was signed by both countries at Port Louis, Mauritius. The

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Protocol will tackle the long pending issues of treaty abuse and round tripping of funds attributed to the India-Mauritius treaty, curb revenue loss, prevent double non-taxation, streamline the flow of investment and stimulate the flow of exchange of information between India and Mauritius. It will improve transparency in tax matters and will help curb tax evasion and tax avoidance. At the same time, existing investments, i.e. investments made before 1.4.2017 have been grand-fathered and will not be subject to capital gains taxation in India. 3.7 141 MoUs/Agreements signed at the first ever Maritime India Summit : 14-16 April , Mumbai - Two days of the first ever Maritime India Summit from 14-16 April in Mumbai has resulted in attracting investments worth Rs 82,905 crores. A total of 141 MoUs and Business Agreements were signed by various players in maritime sector including Major Ports, State Maritime Boards and PSUs like Shipping Corporation of India, Cochin Shipyard Limited, Inland Waterways Authority of India etc. Projects for which agreements have been signed cover a wide spectrum of activities including , Modernisation of existing ports and establishment of new ones, Development and extension of Inland Waterways, Enhancement of cargo handling capacity of Indian ports, Improving hinterland connectivity of ports through road and rail network, Upgradation of educational and training facilities for maritime sector. 4. India and WTO 4.1 India ratified WTO’s trade facilitation agreement – Ministry of Commerce and Industry reported that India has formally ratified the World Trade Organization’s (WTO) trade facilitation agreement, which aims at easing customs procedures to boost commerce. This is expected that the move would supplement India’s ongoing reforms to bring in simplification and enhanced transparency in cross-border trade in goods, reducing trade costs and supporting the country’s integration into the global economy. 4.2 Government to set up panel on trade facilitation - Government is planning to set up a trade facilitation panel for implementing a WTO pact which aims at easing customs norms for faster clearance of goods to boost exports. India formally ratified WTO's Trade Facilitation Agreement (TFA) last month, a move which would supplement the ongoing reforms to bring in simplification and enhanced transparency in cross border trade in goods. 5. Policy Developments 5.1 The Government ended sugar export subsidy - The central government has withdrawn the production–linked subsidy of Rs 4.50 a quintal that it transfers directly into the bank account of sugarcane farmers on the condition that the mills to which they sell have exported 80% of their prescribed quota of sugar. The mills also have to produce a certain level of ethanol. 5.2 The Government decided to remove the requirement of Landing Certificates under Merchandise Export from India Scheme (MEIS) with effect from 4th May, 2015 - The Government of India with the approval of the Minister of State (I/C), Ministry of Commerce and Industry Smt Nirmala Sitharaman has decided to extend the market coverage to all countries in respect of Merchandise Export from India Scheme (MEIS) 2787 lines. Henceforth, Landing Certificates shall not be required under MEIS w.e.f. 04.05.2016. Accordingly, revenue foregone under the scheme has been revised from Rs.21,000 crore per annum to Rs.22,000 crore per

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annum. This step has been taken as part of ease of doing business and reduction of Transaction Cost of the exporters. 5.3 The Government allowed bulk exports of rice bran oil - The government has allowed bulk export of rice bran oil without any restriction on pack size. Export of rice bran oil in bulk (irrespective of any pack size) has been exempted from the prohibition on export of edible oils. At present, the export of edible oils is allowed in branded consumer packs of upto 5 kg with a minimum export price of USD 900 per tonne .Although India is a major importer of edible oils, the Government has allowed bulk exports of rice bran oil to help small rice millers realise better price as demand of this cooking oil remains limited in the domestic market . 5.3 Anti-dumping duty imposed on import of telecom gear from Chinese firms - India has imposed anti-dumping duty on import of telecom gear from China to protect domestic industry from cheap shipments. The restrictive duty imposed on import of ‘Synchronous Digital Hierarchy Transmission Equipment (SDHTE)’ from China ranges between 9.42% and 86.59% of the landed (cost, insurance and freight or CIF) value. India had first imposed anti-dumping duty of up to 266% on import of telecom gear from China and Israel in December 2010 for five years. The Government has further extended anti-dumping duty for five years, up to April 25, 2021. 5.4 India banned import of milk products and mobile phones from China - India has banned import of milk and milk products, certain mobile phones and a few other items from China after finding them sub-standard or not following security codes. While, complete ban of import from any country is not possible now due to WTO rules. 5.5 Customs duty on mobile accessories rolled back - The government has rolled back customs duty imposed on battery, charter and headsets for mobile phones in the Budget due to lack of domestic supplies. The basic customs duty on the products, which was fixed at 10% in the budget, has been brought down to nil. Also, the special additional duty of 4% was brought down to pre-budget level of zero duty. However, the government maintained the counter-veiling duty (CVD) imposed in the Budget at 12.5%.In another measure, a 2% duty imposed on import of printed circuit boards (PCBs) critical in the manufacturing of mobile phones has also been withdrawn. 6. Miscellaneous 6.1 Minister of State for Commerce and Industry Smt Nirmala Sitharaman launched EXIM Analytics Dashboard - Minister of State for Commerce and Industry Smt Nirmala Sitharaman launched EXIM Analytics Dashboard. This is a simple to use Analytics Dashboards which would facilitate the general public to have an accurate perspective on the facts around the trade performance of India. This endeavor of the Ministry is also in tune with the principle of “Government at the doorstep”. Given the high priority accorded to Transparency in Governance by the new Government, the dashboard on export import will enable small and upcoming businessmen to foray into global trade based on reliable information directly accessible through Government sources. 6.2 India hosted India-Myanmar Business conclave at Yangon - A step forward to boost trade - An India Myanmar Business Conclave was hosted by India at Yangon on 18-20 May 2016 as part of its Act East policy. A 25 member business delegation from India attended the Conclave led

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by Minister of State (Independent Charge) for Commerce & Industry Smt. Nirmala Sitharaman. And more than 40 top CEOs from Myanmar attended the Conclave. This is the first visit of any Minister from India after the new government in Myanmar. Speaking in the Roundtable on the theme: ‘Forging Partnerships’, Smt. Nirmala Sitharaman conveyed that India had opened 96.4% of tariff lines at zero duty for Myanmar under its Duty Free Tariff Preference scheme besides ASEAN India FTA. The transition from barter trade to normal trade wef 1 Dec 2015 was a step forward to boost trade. Similarly, a liberal access was available for Services including a visa fee waiver for Myanmar applicants applying for Indian Business and Employment visas 6.3 Foreign Tourist Arrivals in April grew at 10.7% (y-o-y) - There was 10.7% growth in Foreign Tourist Arrivals (FTAs) in April 2016 over the same period in 2015. Bangladesh accounts for highest share of tourist arrivals followed by USA and UK in April 2016. Rs. 11, 637 crores Foreign Exchange earned through tourism in April 2016. 6.4 Foreign Tourist Arrivals on E-Tourist Visa grew at 266% (y-o-y) in April 2016 - Ministry of Tourism reported that a total of 70,045 tourists arrived in April 2016 on e-Tourist Visa as compared to 19,139 during the month of April 2015 registering a growth of 266%. During January- April 2016, a total of 3,91,094 tourist arrived on e-Tourist Visa as compared to 94,998 during January - April 2015, registering a growth of 311.7%. 6.5 Three rail connectivity projects awarded under Sagarmala - Three rail connectivity projects under the Ministry of Shipping’s flagship programe ‘Sagarmala’, worth Rs 38.71 crores have been awarded by Indian Port Rail Company Limited (IPRCL). These projects will help to increase connectivity and efficiency of ports.

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Study/Project Team

Dr. S P Sharma Chief Economist & Director of Research Ms. Rashmi Taneja Senior Research Officer

Disclaimer “Trade and Investment Facilitator” is prepared by PHD Chamber of Commerce and Industry to provide a broad view of India’s foreign trade and investments developments. This newsletter may not be reproduced, wholly or partly in any material form, or modified, without prior approval from the Chamber. It may be noted that this newsletter is for guidance and information purposes only. Though due care has been taken to ensure accuracy of information to the best of the PHD Chamber’s knowledge and belief, it is strongly recommended that readers should seek specific professional advice before taking any decisions. Please note that the PHD Chamber of Commerce and Industry does not take any responsibility for outcome of decisions taken as a result of relying on the content of this newsletter. PHD Chamber of Commerce and Industry shall in no way, be liable for any direct or indirect damages that may arise due to any act or omission on the part of the Reader or User due to any reliance placed or guidance taken from any portion of this publication. Copyright 2016 PHD Chamber of Commerce and Industry ALL RIGHTS RESERVED. No part of this publication including the cover, shall be reproduced, stored in a retrieval system, or transmitted by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of, and acknowledgement of the publisher (PHD Chamber of Commerce and Industry).

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PHD Research Bureau

PHD Research Bureau; the research arm of the PHD Chamber of Commerce and Industry was constituted in 2010 with the objective to review the economic situation and policy developments at sub-national, national and international levels and comment on them in order to update the members from time to time, to present suitable memoranda to the government as and when required, to prepare State Profiles and to conduct thematic research studies on various socio-economic and business developments. The Research Bureau has been instrumental in forecasting various lead economic indicators national and sub-national. Many of its research reports have been widely covered by media and leading newspapers.

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Team, PHD Research Bureau

Dr. S P Sharma Chief Economist & Director of Research

Email id: spsharma@phdcci.in

Economic Affairs

Ms. Megha Kaul Associate Economist

Global Economy

Ms. Rashmi Singh Associate Economist

Trade & Investments

Ms. Rashmi Taneja Sr. Research Officer

Forex Affairs

Ms. Surbhi Sharma Sr. Research Officer

Macro Economy

Ms. Apurva Munjal Research Associate

Ms. Sunita Gosain

Secretarial Assistant

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