These are not the best of times to be a commerce and industry minister. Piyush Goyal — who took over as the new commerce and industry minister on Friday while retaining the railways portfolio — has his task cut out.

He comes at a time when an an escalating trade war between the US and China has threatened to drag down global trade growth while raising fears of Chinese dumping — especially of steel — in India. Foreign direct investment (FDI) in equities has dropped for the first time in six years in FY19. Merchandise exports grew at an average of just 3.2% over the past six months. The World Trade Organisation (WTO), which represents rule-based multilateral trading system, is facing an existential crisis. US President Donald Trump has branded India the “tariff king” and is seeking greater market excess from New Delhi, while promising little in return.

Handling Trump regime
Goyal’s biggest challenge will be to deal with an unpredictable Trump administration and prevent it from tightening the H-1B visa policy further. Washington’s proposed withdrawal of incentives of $190 million over annual Indian exports of $5.6 billion under the so-called Generalised Systems of Preference (GSP) could soon take effect. The US wants India to cut or scrap the up to 20% duties on the seven ICT products — including high-end cell phones and smart watches —which will cost New Delhi a massive $3.2 billion a year.

Washington also wants New Delhi to loosen its price control regime for medical devices and apply a trade margin on coronary stents and knee implants at the first point of sale (price to stockiest), instead of imposing it on the landed prices, as was planned earlier. The US has dragged India to the WTO, claiming New Delhi offers massive trade-distorting farm subsidies. In fact, the US has a long wish-list for India to comply with. It has also retained India in its priority watch list in IPR, despite India’s assertion that its IPR regime is fully WTO-compliant. India has been delaying retaliatory action against the US’ levy of extra duty on Indian steel and aluminium, hoping to hammer out a mutually-acceptable trade deal.

FDI in equities has fallen
FDI in equities dropped 1% year-on-year to $44.4 billion in FY19, a first in the Narendra Modi regime, with inflows into sectors like telecom and pharma having recorded a decline. However, gross FDI inflows — which include FDI in equities, reinvested earnings, equity capital of unincorporated bodies and other capital — rose 6% y-o-y to a record $64.4 billion last fiscal. Given that the BJP-led government has already liberalised most of the sectors and has been reluctant to open up multibrand retail to foreign investors, it will be difficult to improve FDI inflows, unless the centre changes its course.

Exports growth slowing
While a protracted phase of export contraction is behind us, subdued growth in recent months stokes concern. The rupee is still over-valued (according to the real effective exchange rate based on a basket of currencies of 36 export partners, tracked by RBI, the rupee was over-valued by almost 18% in April) and logistics costs are very high, substantially eroding India’s export competitiveness. Trade deficit with China remains too large for comfort ($52 billion in FY19) and investments from the world’s second-largest economy, despite promises by Beijing, still remain too small to offset any damaging impact of trade imbalance.

WTO facing crisis
Unilateral traiff measures by countries like the US, imbalance in reforms agenda and an impasse in the appellate body of the WTO have threatened to jeopardise interests of poor and developing countries. The US recently slapped extra duties on Chinese goods worth $200 billion. Beijing, too, announced retaliation against American goods worth $60 billion, reinforcing concerns about damage to global trade growth. The delay in appointment of members to the WTO’s appellate body, blocked by the US, has hampered its functioning. The minimum quorum (3) for the functioning of this body will end on December 10, after which it will become unless appointments are made at the earliest.