“We are in dialogues with the US on a number of issues and as we firm up the specifics, we will inform you once the Prime Minister (Narendra Modi) and the US President sit down and finalise...We have an open mind and with an open mind, we are looking at several sectors,” Goyal said.
India is working with the US with an “open mind” to resolve various contentious issues, commerce minister Piyush Goyal said on Monday, amid mounting expectations that the two countries could either clinch a trade deal or finalise broad contours of it when Prime Minister Narendra Modi visits the US this month. “We are in dialogues with the US on a number of issues and as we firm up the specifics, we will inform you once the Prime Minister (Narendra Modi) and the US President sit down and finalise…We have an open mind and with an open mind, we are looking at several sectors,” Goyal said.
Pressed further if the two countries would sign the deal during the Modi-Trump meeting, Goyal said: “We are working towards an early resolution of many of those issues. Whether a deal will be announced or not that is up to the Prime Minister and the President to decide.” Modi is visiting the US between September 21 and 27, during which he will address the annual UN General Assembly session. He also has a series of bilateral and multilateral engagements in New York.
The Prime Minister will also attend the “Howdy Modi” event in Houston, Texas, on September 22, where US President Donald Trump will join him. The US wants India to scrap “not justified” tariff on ICT products (20%), motorcycles (50%) automobiles (60%) and alcoholic beverages (150%). It is seeking better trade balance with India through greater market access in agriculture and dairy products.
Similarly, Washington wants New Delhi to remove price caps on medical devices like stents, a move that will help American companies like Abbott. The US has also expressed concern over what it thinks India’s “frequent changes” to e-commerce FDI rules, and data localisation.
For its part, India is pitching for an exemption from the extra duty imposed by the US on steel and aluminium, resumption of duty-free export benefits for some Indian goods under the so-called Generalised System of Preferences (GSP) as well as greater market access for its products in sectors ranging from agriculture, automobile and auto components to engineering.
India’s exports to the US, its largest market, touched $52.4 billion in 2018-19, while imports were to the tune of $35.5 billion. Its trade surplus with the US has been shrinking in the past two years, as it has stated importing oil and gas from the largest economy.
Lower insurance premium for small exporters
Goyal said the commerce ministry would soon approach the Cabinet to trim insurance premium rates to 0.6% for small exporters having an outstanding credit of less than Rs 80 crore, against 0.72% now. This will cost the government roughly Rs 1,700 crore a year.
Premium rates for exporters with outstanding loans of over Rs 80 crore will remain the same at 0.72%. Such exporters will be divided into roughly two broad categories — gems, jewellery and diamond, and the rest. However, all the exporters will get the benefit from the fact that the Export Credit Guarantee Corporation (ECGC) will offer up to 90% insurance cover to banks on working capital loans (both principal and interest) to exporters, against 60% now. Similarly, to help exporters get credit at cheaper rates, Goyal said SBI will make available dollar credit to exporters at around 3.5% (LIBOR rate plus a premium) and rupee credit at roughly 7.6% (based on current repo rate and a premium). The higher insurance coverage would also enable banks to lend at cheaper rates, as exporters’ ratings would improve dramatically to AA or above for most, the minister stressed.
The ECGC has launched a new scheme NIRVIK (Niryat Rin Vikas Yojna) for this purpose. Goyal also said the Export Credit Insurance Scheme (ECIS) would provide as much as 50% of the settlement amount within just 30 days on production of proof of end-use of the advances in default by the insured bank. The ECIS support will be in effect for a period of five-years and on conclusion, the standard ECGC covers will be made available for banks.
Goyal said that under the scheme, inspection of bank documents and records by ECGC officials will be exempted for losses up to Rs 10 crore, against the current Rs 1 crore, to expedite settlements.
Goyal expected that with this measure, “as per our estimate by March this year, I think there would be an about 30% growth in export credit and (after that) about 20% growth every year”. Recently, the minister told the Rajya Sabha that banks’ outstanding export credit, which had risen from Rs 1,85,591 crore in March 2015 to Rs 2,43,890 crore in March 2018, dropped to Rs 2,26,363 crore at the end of March 2019. Exporters have often blamed the persistent slide in credit to them as one of the main reasons for the export contraction in two of the first five months of this fiscal.