The US has hinted that it no longer wants a “limited” trade deal with India that was negotiated for months under the Trump administration and was to cover products with annual bilateral trade of about $13 billion.
Addressing top representatives of over a dozen export promotion councils and others at a meeting in Mumbai on Thursday, commerce and industry minister Piyush Goyal said: “The US, as of now, has kind of indicated that they are not looking for a new trade agreement. But we look at working with them on market access issues on both sides. That will also be a big opportunity for our export sector.”
The talks on market access issues will likely cover non-tariff barriers, mutual recognition agreements and quality standards of imported products.
The US is India’s largest export market, having made up for outbound shipment of almost $52 billion in FY21.
However, Australia has shown interest in hammering out an early-harvest deal with India soon, which will possibly be followed by similar pacts with the UK and the UAE, the minister said, as he elaborated on the government’s efforts to expedite talks with key economies to forge fair and balanced trade ties. Broader free trade agreements (FTAs) involving a vast number of tariff lines can be taken up with these economies once the early-harvest deals are clinched.
Addressing concerns of exporters over the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme, the minister said certain sectors (steel, pharma and chemicals) had to be kept out of its ambit this fiscal due to funds constraint. However, going forward, if there is any issue, the government could have a relook at it.
Goyal said he had already urged the finance ministry to set up a panel, either under former commerce secretary GK Pillai who headed the RoDTEP panel or somebody else, to look at any issue that may arise out of the operationalisation of the RoDTEP scheme, including requests of special economic zones or export-oriented units that felt left out of the refund programme.
However, the minister made it clear that both RoDTEP and RoSCTL (for garments and made-up exporters) are fully WTO-compatible, and are not incentive programmes (like the MEIS).
As for trade deals, Goyal exuded confidence that once a deal with the UAE is signed, the stage will be set for similar pacts with other west Asian nations. India is looking at a trade pact with Israel as well. Trade negotiations with Canada could resume after elections are over there later this year.
However, the FTA negotiations with the EU, expected to resume later in 2021 after a gap of about eight years, could be a time-consuming process, he said, as the Bloc has 27 members with different interests. Though the EU has lost some sheen after Brexit, it still remains an important market for India. The EU, including the UK, was India’s largest destination (as a trade bloc) in FY20 (before the pandemic struck), with a 17% share in the country’s overall exports. Importantly, the UK accounted for 16% of India’s $53.7-billion exports to the EU in FY20.
Goyal was apprising exporters of the opportunities on the FTA front that they can reasonably expect over the short-to-medium term and manage their expectations accordingly and boost exports.
“Our effort is to ensure focus on countries where we have significant potential, where we can compete better and where market size is significant,” he said, as he asked exporters to strive hard to achieve the lofty FY22 merchandise export target of $400 billion.
The minister also told the exporters that the country has revamped its FTA strategy. These pacts are being formulated after a comprehensive interactive process with domestic industry to ensure that “FTAs are fairly and equitably crafted”. “At the same time, FTAs cannot be a one-way traffic, we also need to open our markets, if we want a larger share in foreign markets. So, we need to identify areas where we can withstand competition. We can sort out FTAs fairly quickly, if the areas where we have the ability to compete internationally can be identified, as part of a collective effort,” he said, according to an official statement.
The minister impressed on all export promotion councils (EPCs) to take immediate and effective steps to rise to the challenge of achieving the merchandise export target of $400 billion for FY22 from $291 billion in FY21. He has also set a lofty target of $2 trillion for both goods and services exports by FY30.
“We need to maintain the export momentum for the next 8 months, with $34 billion exports per month to achieve this target. The goal is ambitious, but possible if all including EPCs and their members work together,” he said.
To help ramp up exports, the commerce ministry will have two dedicated divisions for the services sector alone, Goyal said. Currently, one joint secretary looks after the services sector, in addition to his other responsibilities at the ministry.