India Business and Trade- October-November 2021 by Trade Promotion Council of India

SEP-OCT 2021 | Price: `150/-

INDIA

BUSINESS TRADE Indian enterprise. Global synergies.

INDIA-SAUDI ARABIA MUST COLLABORATE ON TOURISM HE Dr. Ausaf Sayeed Ambassador of India to Saudi Arabia

HAS IMPORT SUBSTITUTION WORKED FOR INDIA? Bipin Menon, Development Commissioner, Noida SEZ

INFLEXION POINT WILL THE PROPOSED INDIA-UK FTA BE A GAME CHANGER FOR INDIA’S POST-COVID TRADE INTEGRATION?

Trade Promotion Council of India

From the Editor’s desk In November last year, India made a much publicized withdrawal from the 15-member Regional Comprehensive Economic Partnership (RCEP), which is officially the world’s largest regional trade grouping – its constituent nations account for 30% of the global economy and population and a consumer base of 2.2 billion people. India’s most critical concerns on RCEP were the high current trade deficit with member countries (US$ 101.5 billion in 2019), presence of China in the group and the experience of past FTAs. Besides, India’s demands on Mode 4 access for services were not acceded to by RCEP members. Several experts have warned about the perils of this decision. While India’s concerns are quite justified in the case of RCEP, there are a number of benefits that make it a hard decision. Besides greater market access and lower trade & investment barriers, the RCEP would be a major opportunity for India to shape the dialogue on the future of trade, especially on issues like e-commerce, investment facilitation and an enabling environment for SMEs. Moreover, one cannot ignore the impact of a mega trade block in India’s backyard on investment attractiveness. A major benefit for RCEP members is the common certificate of origin for the entire bloc. This will encourage investments by MNCs in supply chains across the region. RCEP can come across as a relatively much more attractive investment destination for such companies to locate large parts of their value chains. Of course, the RCEP exit is by no means a withdrawal for India from the IndoPacific region. India continues to engage with key RCEP economies including Australia and New Zealand for bilateral trade agreements. Furthermore, it is pushing for a renegotiation of the trade pact with ASEAN countries. On the other hand, India has accelerated efforts over the past year to conclude trade deals (coupled with initiatives like PLI and Labour Code to improve Ease of Doing Business) with strategic export markets, predominantly the US, EU, UK and GCC countries. While the US is not interested in bilateral agreements as of now, expectations are high from ongoing talks with EU, UK and GCC. Out of these trade deals, the UK stands out, given that there is no past hangover of delayed and inconclusive negotiations (albeit there would be some issues that are part of its EU legacy). Fresh from Brexit, the UK is equally eager to secure trade engagements with strategic partners. It has a strong inclination towards the IndoPacific, where it considers India, China and Japan to be the most important powers. There are some remarkable exceptions that both India and the UK have made in these negotiations. The India-UK ETP envisions a comprehensive strategic partnership by 2030; the UK has signed similar arrangements with only four other partners – Australia, Canada, Japan and South Korea. Both sides have agreed to a step-wise process, which starts from conclusion of early market access deliverables based on immediate priorities. UK is among the few developed countries that have agreed to have an interim trade deal with India. The agreement will also look at a wide range of areas including services (critical as both countries have very strong services sectors), government procurement, investments, IP rights and data. India has also agreed to discuss sensitive issues on environment and labour. The WTO expects world trade to make a strong comeback, growing by 10.8% in 2021 compared to a decline by 5.3% in 2020. While growth is expected to remain uneven, the India-UK trade agreement can help India garner a greater share of manufacturing, particularly considering the limited window of opportunity presented by the ongoing relocation of supply chains from China. Moreover, it can provide the much needed momentum and template that India needs for its aggressive FTA push in the coming years.

INDIA

BUSINESS TRADE Indian enterprise. Global synergies.

Volume 3 | Issue 1

Sep-Oct 2021

TPCI CHAIRMAN Prashant Garg DEPUTY DIRECTOR GENERAL Sandip Das DIRECTOR - MEDIA & CORP COMM Sameer Pushp

EDITORIAL EDITOR Virat Bahri EDITORIAL & RESEARCH TEAM Nikhaar Gogna, Vaishali Bhardwaj

DESIGN SR. ART DIRECTOR Prakash Shetty DESIGNER Ajay Kumar Singh

India Business & Trade is a bimonthly magazine published by Trade Promotion Council of India, 9, Scindia House, Connaught Circus, New Delhi- 110001, India and printed at Red Print Services, B-249, Naraina Industrial Area Phase-1, New Delhi - 110028 Material in this publication may not be reproduced in any form without the written permission of TPCI. Editorial/external opinions expressed in this magazine are not necessarily those of TPCI, and TPCI does not take responsibility for the advertising content, content obtained from third parties and views expressed by any independent author/contributor. For editorial queries/feedback, contact: editorial@tpci.in For advertising queries, contact: advertise@tpci.in

VIRAT BAHRI Editor, India Business & Trade

TABLE OF

CONTENTS 8

TPCI NEWS BUZZ 4 Latest updates on trade and business from across the world.

CATR DATA CRUNCH

8 Understanding India’s export performance CATR analyses the key factors and drivers contributing to robust growth in India’s merchandise exports so far in the current year.

PERSPECTIVES India’s export growth has outperformed major economies.

10 Enhancing tourism through collaboration HE Dr Ausaf Sayeed, Ambassador of India to Saudi Arabia, emphasises that India and Saudi Arabia have a lot to gain from jointly boosting bilateral tourism.

12 Sustaining green shoots of Indian economy The Indian economy is showing green shoots again after the brutal 2nd wave. Exports are currently robust, giving India a critical window of opportunity.

EXPORT PERFORMANCE

14 Shipping Crisis: The US-China-COVID factor Dr Deepankar Sinha, Indian Institute of Foreign Trade, feels that the various angles of the current shipping crisis merit further probe.

HYDROGEN ECONOMY Driving towards a zero carbon development path.

2 | India Business & Trade • Sep-Oct, 2021

16 Key to unlock a zero-carbon economy To emerge as a leading hydrogen economy, India needs to overcome challenges related to hydrogen storage, cost and safety. 18 India must expand seafood export basket Vijay Kumar Yaragal, Executive Director, National Fisheries Development Board, discusses major challenges confronting Indian seafood exporters.

20 Green predicament of the evergreen fabric It is imperative for India to develop new technologies to make the denim manufacturing eco-friendly.

COVER STORY 22 Inflexion point - India-UK FTA Will the proposed trade deal with UK prove to be a game changer for India’s international trade engagement? 27 A question of quid pro quo Dr Arpita Mukherjee, Professor at ICRIER, opines that India needs to diversify its “ask lists” in trade negotiations with the UK. 28 Negotiations to realise full potential Rohit Singh, Director, UKIBC, shares his views on how India can be a more attractive destination for UK-based companies.

INDIA-UK FTA

IBT analyses the proposed FTA from the perspective of goods trade.

VIEWPOINT

29 India and Chile plan to expand PTA HE Juan Rolando Angulo Monsalve, Ambassador of Chile to India, discusses the planned PTA expansion and focus areas. 30 Import Substitution Strategy? Bipin Menon, Development Commissioner, Noida SEZ, believes that ‘import substitution’ is not an apt term for India’s policy thrust. 34 Strengthening India-Brazil ties Brazil and India can become key partners for a deeper and long-term relationship, considering the huge untapped potential.

SECTOR TREND

32 Vegan products: A sunrise segment India can go a step further to leverage its resource base and vegetarian-friendly image to tap the growing vegan market.

TRADE POLICY THRUST

How can India enhance its competitive position globally?

LATEST @TPCI 36 TPCI Happenings As the international economic scenario improves, TPCI is providing diverse platforms and avenues for trade promotion, capacity building and knowledge enhancement. LATEST @TPCI

TPCI’s initiatives for Indian industry during September-October 2021.

Sep-Oct, 2021 • India Business & Trade | 3

NEWS BRIEF

News Buzz

International

Leaders meet for 1st in-person Quad Summit

ommitting to free and open Indo-Pacific region, the four Quad countries i.e., the US, India, Japan, and Australia participated in the Quadrilateral Security Dialogue (Quad) summit in Washington DC on September 24, 2021. This was the first in-person Quad Leader’s Summit postpandemic. The member countries have pledged to donate more than 1.2 billion doses for COVID-19 vaccine globally in addition to the doses financed by Quad countries through COVAX. Till now, nearly 79 million safe and effective vaccine doses have been delivered to the IndoPacific region. The leaders discussed affirmative actions towards climate change, decarbonization efforts in shipping and port operations, deployment of clean hydrogen technology & the

need for responsible and resilient clean energy supply chains. PM also proposed a global green hydrogen coalition in this direction. The members have also announced Quad Fellowship. Under this, 100 students a year, i.e., 25 each from India, Japan, Australia and the US will be granted

fellowship to pursue master and doctoral degrees at leading STEM graduate universities of US. Quad countries have also committed to enhance their actions in order to meet the energy demand and decarbonise at scale and pace to keep the climate goals in reach of Indo-Pacific.

WTO lifts trade growth projection to 10.8%

ccording to the World Trade Organisation’s October forecast, global trade growth is expected to be 10.8% in 2021, up from its earlier forecast of 8%. Furthermore, the WTO forecast expects goods trade to grow by

4.7% in 2022. According to the international body, semiconductor scarcity, port backlogs, and other supply-side issues might strain the supply chain and impact global trade growth, but large impacts from these issues are unlikely.

4 | India Business & Trade • Sep-Oct, 2021

The trade body said in its release, “The current forecast is close to the upside scenario shown in the last trade forecast, but downside risks now predominate, including strained global supply chains and Covid-19 outbreaks.” Imports of Asia in 2021 are going to increase by 9.4% in 2021, in comparison to 2019. For Least-Developed Countries (LDCs), imports are expected to fall by 1.6%. Ngozi Okonjo-Iweala, WTO Director General, said that inequitable access to vaccines is fuelling economic divergence, and thus member countries should come together to deliver “a strong WTO response to the pandemic.” Due to a lower base, Y-o-Y growth in the second quarter of 2021 was 22%. The figure is projected to fall to 10.9% in the third quarter and 6.6% in the fourth quarter.

NEWS BUZZ

Airlines to be CO2 by 2050

ith increasing pressure from across quarters, the International Air Transport Association has committed to reduce emissions and reach net zero carbon emissions by 2050. CEO Willie Walsh admitted that it was a bold target, but necessary in the face of global warming. The aviation industry currently accounts for around 2% of the global emissions and is one of the most difficult industries to decarbonise. The target volume under the commitment is 450 billion litres. This is equivalent to around 7.8m barrels a day of demand. According to International Energy Agency, world jet fuel and kerosene demand stood at 7.9m b/d in 2019. The industry’s road map includes 65% of reduction in emission from sustainable aviation fuels (SAF), including

NUMBER GAME

biomass, waste oils and even from carbon capture - which can run on 50% blends of kerosene. The body, however, asserted that this does not mean a reduction in fleet operations. In fact, IATA projects that by 2050, over ten billion trips per annum will be made by air. Airbus and Boeing are confident that their fleets will be able to fly 100% on SAF by 2030, even though these fuels account for less than 0.1% of aviation fuel currently used.

OPEC+ retains output plan

rganization of the Petroleum Exporting Countries, Russia and their allies, known as OPEC+, has kept its output aligned with its existing pact, which implies a gradual increase in oil output. This has led to soaring crude prices, reaching a 3-year high and further adding to inflationary pressures around the globe. OPEC+ has received calls from some of its big consumers, including India and the United States for extra supplies, as oil prices increased by

With

97% of its

population vaccinated with at least 1 dose as of October 5, UAE is leading in terms of vaccinating its people against COVID-19. IN QUOTES

more than 50% this year. However, according to the preset plan, 400,000 barrels per day (bpd) will be added by the month of November 2021. Commenting on the group’s decision despite pressure to raise output, an OPEC+ source commented, “We are scared of the fourth wave of corona; no one wants to make any big moves.” In July, OPEC+ agreed to raise its output by 400,000 bpd until at least April 2022 in order to slowly put back the production from current cuts of 5.8 million bpd. Rystad Energy commented, “The outcome of the OPEC+ meeting was no surprise, but when prices are at above US$ 80 per barrel Brent, this is a level that makes customers uncomfortable and producers happy, but cautious.”

Kristalina Georgieva Managing Director, IMF

“Before the pandemic, remember we used to say, the future is digital? With the pandemic, the future has arrived and very prominently in the world of money.”

Sep-Oct, 2021 • India Business & Trade | 5

NEWS BRIEF

News buzz

National

Methanol: An affordable & clean fuel

he NITI Aayog is advocating the possibility of India moving towards a ‘Methanol Economy’. The body says that although methanol is slightly lower in energy content than petrol and diesel, it can replace both these fuels in transport (road, rail and marine), energy (DG sets, boilers, process heating modules, tractors & CVs) and retail cooking (replacing LPG [partially], kerosene and wood charcoal). “Cost of (petrol) gasoline including taxes is Rs 94.49 per litre and cost of ethanol, including taxes on an energy equivalent basis with gasoline is Rs 69.9... cost of methanol on an energy equivalent basis with gasoline is Rs 37.6.,” as per NITI Aayog’s working paper. Blending of 15% methanol in gasoline can result in significant reduction in imports of gasoline/crude

oil. In addition, this would bring down GHG emissions by 20% in terms of particulate matter, NOx, and SOx, thereby improving air quality. Coal reserves and municipal solid waste can be converted into methanol as

coal reserves are abundant in India and relatively cheaper compared to natural gas or crude oil. Furthermore, methanol production and distribution services could also create upto around 5 million jobs.

Govt announces PLI for drone manufacturing

he Union Government has announced a PLI scheme for the drone industry with an outlay of Rs 120 crores spread over three financial years. It offers an incentive of 20% of value addition made by a manufacturer of drones and drone components.

This is being done in recognition of the key role that drones play across sectors including agriculture, mining, infrastructure, surveillance, emergency response, transportation, geo-spatial mapping, defence, & law enforcement. Drones can be significant creators of employment &

6 | India Business & Trade • Sep-Oct, 2021

growth due to their reach, versatility, & ease of use, especially in remote & inaccessible areas. “Drones and drone components manufacturing industry may see an investment of over Rs 5,000 crore over the next 3 years. Annual sales turnover of the drone manufacturing industry may grow from Rs 60 crore in 2020-21 to over Rs 900 crore in FY 2023-24. The drone manufacturing industry is expected to generate over 10,000 direct jobs over the next three years,” the Ministry of Civil Aviation stated. Under the scheme, for a company – with a sales net of Rs 100 crore and purchase net of Rs 60 crore – PLI (rate of 20%) will be calculated on Rs 40 crore and it will be eligible for a PLI of Rs 8 crore. The PLI rate is constant at 20% for all three years.

NEWS BUZZ

UP to promote wine production

o promote fruit wine production, the state of Uttar Pradesh (UP) will organise an investor meet in November. The meet will invite the biggest wineries & traders, and states like Maharashtra and Goa may show interest. This has been done keeping in mind the fact that although UP has a wine policy, the state doesn’t have a single wine unit so far. The policy exempts wine prepared from fruits produced in the state from consideration fee and additional consideration fee for five years. The state is promoting the wine industry in a bid to incentivise investments and boost farm incomes. Additional Chief Secretary Excise Sanjay R. Bhoosreddy

NUMBER GAME

` 100 tn Estimated hopes that at the very least a dozen wine-making models ought to come up quickly within the main fruitproducing areas of the state (as commented to Financial Express). “If wineries are set up here, then the industry will get a boost through incentives, farmers will get the right price for their produce and the state will earn revenue through sale of wine. More importantly, most of the fruits will also be used,” he added.

investment under Gati Shakti for multi-modal connectivity to economic zones. IN QUOTES

India’s steel exports to rise

teel mills of India are expected to increase exports by more than one-third during the current year. This is due to surge in global prices and curb in production of major producers. According to V. R. Sharma, Managing Director at Jindal Steel & Power Ltd., exports of India, the world’s 2nd largest exporter, might increase to as much as 15 million tons in FY 2021-22, up from 10.8 million tons in FY 2020-21. China and Russia have

planned to cut down shipments of steel to be sent overseas, which provides an opportunity for India. Currently, Indian mills are exporting as much as 40% of their output compared to 20% a year earlier. International prices are higher than local prices and are therefore very lucrative, while local demand in the construction sector is still slow. “Now is the opportune moment for Indian steel exporters to widen their reach and seek out new markets by focusing on quality upgradation,” N.L. Vhatte, Chief Executive Officer of ESL Steel Ltd. observed. However, there are apprehensions that fewer vessels at Indian ports may slow down shipments for the next few months.

HE Pham Sanh Chau Ambassador of Vietnam to India

For the first time in several years, Vietnam is at a trade deficit visà-vis India. This means that we are moving towards a more balanced trade relationship between India and Vietnam.

Sep-Oct, 2021 • India Business & Trade | 7

CATR Data Mining

Global trade on rebound

The year 2021 has brought along with it a recovery in trade for countries, with major economies reporting positive growth in 2021. TRADE GROWTH IN MAJOR ECONOMIES

Country US China Japan Germany UK India

Jan-Jun 2021 (US$ billion)

YoY growth (%)

Export

840

22.2

Import

1,381.70

24.5

Export

1,518.40

38.6

Import

1,266.80

Export

369.7

23.7

Import

360.8

12.8

Export

811.1

27.6

Import

635.7

26.2

Export

226.9

16.9

Import

323.1

Export

186

46.9

Import

257.7

Source: ITC Trade Map and Ministry of Commerce and Industry

Transcending pre-pandemic levels

Exports and imports of India have even surpassed their 2019 levels. Growth for India’s exports and imports in Jan-Aug 2021 stood at 47% and 51.4% YoY respectively.

400 350 300 250 200 150 100 50 0 Jan-Aug 2019

Jan-Aug 2020

Export

Source: Ministry of Commerce and Industry; figures in US$ billion

8 | India Business & Trade • Sep-Oct, 2021

Import

Jan-Aug 2021

India is a standout performer among major economies in terms of rebound in exports. Growth in exports of goods during Jan-Jun 2021 stood at 46.9% yoy, while import growth equalled 50%. CATR analyses the key drivers behind India’s recent trade performance.

Major drivers of exports Exports are driven by engineering goods, petroleum products, gems & jewellery, chemicals and drugs & pharmaceuticals.

Plastic & Linoleum

12.6

Cotton Yarn/Fabs./ made-ups, Handloom Products etc.

-13.8

49.26

14.2

-20

Growth over 2019 (%)

100

-1.7

Growth over 2020 (%)

223

44.2

40.9

-500

Growth over 2019 (%)

Source: Ministry of Commerce and Industry

11.3

Petroleum, Crude & products

50.5

34.6 72

Electronic goods

79.81 22.9

Engineering Goods

-3

129

Gold

81.21

Petroleum Products

50.5

21.2

Machinery, electrical & nonelectrical

-6.2

Gems & Jewellery

37.9 16.7

Pearls, precious & Semi-precious stones

27.2

66.4

-12

Plastic & Linoleum

18.6 11.31

Organic & Inorganic Chemicals

51.2 20.1

Coal, Coke & Briquettes, etc.

32.25

Drugs & Pharmaceuticals

-12.6

Artificial resins, plastic materials, etc.

61.5

23.7

RMG of all Textiles

55.6 57.3

Iron & Steel

28.2

Electronic Goods

Products accounting for 80% of India’s imports have witnessed at least double digit YoY growth so far in 2021.

Vegetable Oil

27.17 27.2 24.63

Rice

Major drivers of imports

100

150

200

Growth over 2020 (%)

Source: Ministry of Commerce and Industry

Market-wise trade patterns

Exports to top destinations have grown at double digits in Jan-July 2021. India’s largest export destinations i.e., US and China witnessed a growth in imports above pre-pandemic levels. INDIA’S EXPORT GROWTH COUNTRY WISE

Country

Jan-July 2020 (US$ billion)

INDIA’S IMPORT GROWTH COUNTRY WISE

Jan-July YoY 2021 (US$ growth billion) (%)

Country

Jan-July 2020 (US$ billion)

Jan-July 2021(US$ billion)

YoY growth (%)

25.38

38.75

52.69

China P RP

29.95

47.52

58.64

China P RP

10.98

14.82

34.97

15.49

23.22

49.87

UAE

10.70

14.09

31.71

UAE

12.06

22.82

89.22

Bangladesh PR

4.06

7.86

93.6

4.13

16.32

295.6

Hong Kong

4.98

6.97

39.79

Iraq

10.13

13.75

35.71

Singapore

4.92

6.86

39.28

Saudi Arabia

10.34

13.14

27.08

3.99

5.82

46.03

Singapore

6.61

10.14

53.29

Germany

4.08

5.40

32.36

Hong Kong

7.33

9.61

31.05

Nepal

2.97

5.18093

74.58

Korea RP

6.80

9.37

37.79

Switzerland

Source: Ministry of Commerce and Industry

Sep-Oct, 2021 • India Business & Trade | 9

250

PERSPECTIVES

Tourism collaboration between India & Saudi Arabia As strategic partners, India and Saudi Arabia have a lot to gain from boosting their respective tourism sectors through mutual collaboration post-pandemic. BY HE DR. AUSAF SAYEED

he spread of the COVID-19 pandemic across the world has caused widespread distress to practically every nation across the globe, and arguably the most affected sectors were travel, tourism and hospitality. In fact, the UN World Tourism Organization, UNWTO described 2020 as ‘the worst year on record in the history of tourism’. Being critical partners on the global stage, India and Saudi Arabia had already begun to develop mechanisms to boost bilateral tourism numbers before the pandemic. Saudi Arabia and India became strategic partners in October 2019 by forming the Strategic Partnership Council during the visit of PM Shri Narendra Modi to Riyadh. The two countries also entered into an MoU in the field of tourism in February 2019, on the sidelines of the visit of the Crown Prince to India. This is a significant MoU because inter alia, it ensures development of sustainable tourism infrastructure through sharing of technology and best practices, organising tourism events, promoting various forms of tourism and encouraging mutual investments in tourism sectors of both the countries. DAWN OF A NEW ERA As we all are aware, the Kingdom of Saudi Arabia has been handling religious tourism since centuries, while mainstream tourism was relatively less prominent. Earlier, tourism was handled by the Saudi Commission for Tourism and National Heritage, and the Ministry of Tourism actually came into existence only in February 2020. Significantly, a few months after the agreement was signed with India in February 2019, the Kingdom introduced the E-visa or visa-on-

The Edge of the World (Jebel Fihrayn), one of Saudi Arabia’s most popular tourist destinations

arrival system in September 2019, where people from 49 different countries can apply for visa ahead of time or get it on arrival at the airport. With this scheme, over 500,000 visas had been issued, and the Kingdom was gearing up for a big leap before the pandemic hit. Vision 2030 or the National Transformation Program seeks to market the Kingdom as a regional and global tourist hub. Saudi Arabia is seeking to increase tourist footfalls to around 100 million by 2030 from the current figure of around 20 million. Even today, footfalls are the second highest in the MENA region after the UAE. This, of course, also hinges on religious tourism, wherein the Kingdom plans to attract around 30 million religious travelers annually by 2030, including 5 million Hajj pilgrims from 2 million currently. The tourism sector currently accounts for 3.4% of Saudi Arabia’s GDP, but is projected to increase to around 10% by 2030 and create around 1 million new jobs. This initiative is part of the overall strategy of the Kingdom to diversify its economy away from oil. As the second largest revenue generator after oil,

10 | India Business & Trade • Sep-Oct, 2021

tourism assumes great significance. For this, the Kingdom is taking a slew of initiatives like the creation of a Tourism Development Fund with a capital of US$ 4 billion and US$ 100 million contribution for the tourism community initiative with World Bank. As far as tourism attractiveness is concerned, there are thousands of historical sites in the Kingdom, with as many as five UNESCO recognized areas. The country has diverse climatic zones from coastal areas bordering the Red Sea, to the huge span of the Rub’ al Khali desert to hill stations like Abha. The Kingdom has also come up with several mega projects like the NEOM City, which is a US$ 500 billion project. It will have The Line, a futuristic city of 1 million people, 170 kilometers long, which will have no cars and zero carbon emissions. Saudi Arabia is also becoming an important destination for sporting events. There is considerable interest to also expand collaboration in entertainment between the two sides. The Kingdom is also keen to have movie shootings including Bollywood movies. At the same time, the Kingdom is expanding

INDIA-SAUDI ARABIA TOURISM

its transportation infrastructure. In September 2019, the King Abdulaziz International Airport in Jeddah Terminal 1 was inaugurated, which is a huge span of 810,000 square meters and can handle around 30 million passengers. Now the Kingdom is aiming to attract new tourism investments worth around US$ 58 billion by 2023, which could increase to US$ 133 billion by the end of the decade. This promises several opportunities for investment in tourism infrastructure, joint development of tourist projects and formation of companies or alliances that can cater to both inward and outward tourism of both countries. The Oberoi Group operates the Medina Oberoi. It is also building luxury resorts in the Diriyah heritage complex, besides a five star hotel in Makkah. The Taj group is also planning to open a seven star hotel in Makkah, while Oyo Hotels has also established its presence in the Kingdom. Haj and Umrah pilgrims, with the new regulations, can now combine their religious pilgrimage with regular tourism during their stay. India sent around 800,000 Umrah pilgrims and 200,000 Hajj pilgrims in 2019, forming a critical market for the Saudi tourism sector. The Indian Embassy in Saudi Arabia has raised the issue of including potential Indian tourists in the visa on arrival scheme with the Saudi Government. Indian outbound tourists accounted for 22.5 million worldwide tourists in 2018, according to UNWTO, and this figure is expected

to reach around 50 million by 2022. Also, Indian tourists are considered among the world’s highest spenders per visit made abroad. An average Indian spends around US$ 1,200 per visit, as compared to around US$ 700 by an American or US$ 500 by a British tourist. Indian visitor spending globally is expected to increase from the current level of US$ 23 billion to around US$ 45 billion by 2024. GCC alone is expected to receive around 10 million Indian tourists by 2024. CUSTOMISE PACKAGES The number of Saudi tourists to India is at around 50,000, way below the potential. Post-COVID, we are certainly looking forward to increasing the number. Around 50% of the Kingdom’s population is young and below 30 years of age. Saudi citizens are discerning tourists, who prefer family oriented tourist places with high quality of accommodation, food and retail services. So, India should ensure that culture and entertainment go hand in hand with tourism, because these aspects attract the young population. We need to capitalize on the popularity of Indian cuisine and Bollywood, as well as the rich Islamic heritage in India. Generally, we market destinations or the country as Incredible India. But it is more important to have tailor-made tourist packages focused on the Middle East, centering around medical tourism, ecotourism, nature tourism and heritage tourism. The popularity of yoga in the

Kingdom can also be one of the factors to consider. Many Saudis also explore alternate forms of medicines, especially in Kerala. I am aware that there are many hospitals in India, which have employed Arabic speaking staff and are offering value added services like assistance in shopping and other tourism, post medical treatment. Such innovative methods could also be explored in the future. A large number of Saudi tourists go to Southeast Asian destinations, but with its increased connectivity to this region, India can become a transit hub. So it is important to have customized packages and suitable facilities centered around Middle East tourist arrivals. The Indian government has eased the visa process. Generally, within 72 hours, any Saudi family can, without visiting the Embassy or the Consulate, obtain multiple entry visas, or tourist visas to India. In a recent MoU between India and Saudi Arabia in the civil aviation sector, bilateral air capacity has also been increased to about 50,000 seats. So there is ample scope to increase direct flights. Now issue of visas to Saudi nationals has been considerably liberalized and we are issuing five-year tourist and business visas very easily. As various countries are taking measures to ease restrictions and open up their economies, there is hope that travel and tourism industry would gradually revive. In just about every aspect of economy and trade, the pandemic has served to highlight the criticality of mutual cooperation among nations, and the tourism sector is no different. Therefore, India and Saudi Arabia need to synergise their efforts to revive the sector, with involvement of all stakeholders like ministries, airlines, tour operators and hotels. By deepening their ongoing collaboration, there is a lot that the two countries can achieve to regain the momentum and precipitate a new growth trajectory post-pandemic.

The author is currently the Ambassador of India to Saudi Arabia.

Foreign tourist facing the iconic Taj Mahal in Agra

Sep-Oct, 2021 • India Business & Trade | 11

PERSPECTIVES

Sustaining green shoots of India’s export performance The Indian economy is showing green shoots again after the brutal second wave of COVID-19. Exports are currently robust, and India has a critical window of opportunity to build on this momentum. BY SAMEER PUSHP

ood news dawns as the Indian economy is showing green shoots again after the brutal second wave of COVID-19. Data on GDP growing by over 20% in Q1, driven primarily by exports followed by construction & manufacturing growth, is sign of an economic revival. India’s exports have been doing quite well since the last six months, registering an average growth of more than 40%. It is now becoming a key player in the global economy, partly reflecting reduction in tariffs and relatively low non-tariff barriers over the past decade. Furthermore, India has improved significantly on trade facilitation since the mid-2010s by reducing the number of documents and level of fees, and thus trade costs. The government announced new measures to reduce processing

time at ports and airports. Adoption and testing of standards has been encouraged, while export clearances are gradually getting digitised. Introduction of GST has greatly benefitted the manufacturing sector. To make India a hub for global value chains; it must focus on efforts to boost foreign investment inflows by modernizing regulations and attracting more savings from Indians living abroad. The imposition of US tariffs on Chinese products could accelerate relocation of value chains. India could perform better in some areas for export competitiveness. These include labor-intensive manufacturing exports, where India has a clear competitive advantage. Low wage demand of Indian workers is an opportunity, as more dynamic manufacturing exports could be envisaged. Rising Chinese workers’ incomes create a window of

12 | India Business & Trade • Sep-Oct, 2021

opportunity for Indian exports. The need is to focus upon few relatively untapped sectors like furniture and chemicals and ceramics to make the export basket more robust. This would help India adjust to new demands emanating from different geographies. It also reduces exposure to risks such as lower demand in one country or for one specific product. PLI will further provide a thrust to investment and exports in time to come. However, to realise this opportunity, India needs to address a few critical areas. SEZ benefits to operating companies have ended, thereby impacting investments. India has more than 230 operational SEZs, which have accounted for more than 30% of exports of goods and services and employed more than two million people. The share of FDI flows going to SEZs witnessed

EXPORT-DRIVEN RESURGENCE

four-fold increase from FY 2006 to FY 2020. At present, an exporter in an SEZ and a foreign exporter are at par when it comes to selling goods to a domestic tariff area (DTA). Therefore, an exporter within the SEZ should be incentivized on the degree of value addition he brings to a product. He should be allowed to import raw material at zero duty and avail duty rebate proportionate to value addition. It’s important to improve the export competitiveness of states, which will also mitigate regional disparities through export-led growth and enable the consequent rise in the standard of living. State governments now are coming with export policies and focusing on specific clusters with their inherent strengths; which is a very encouraging sign. India needs to work on stringent labour regulations. Since these regulations become binding as firms grow, they create incentives to stay small. Firms cannot exploit economies of scale and productivity suffers. Employment protection legislation, which requires firms with 100 or more employees to obtain prior government permission to dismiss one or more workers, acts as a hindrance. India is a prominent exporter of agricultural products and its trade surplus has grown. However, value chains in the food sector remain relatively under-developed. A more open and stable trade policy regime is essential for India to develop a sophisticated domestic processing framework and integration with technology will help India fully exploit its comparative advantage. The percentage of products and share of imports covered by non-tariff measures (NTMs) are both relatively low in India. NTMs are related to measures that pursue regulatory objectives. SPS/TBT measures are mostly implemented in the food sector, often to overcome or reduce the impact of perceived market imperfections, such as those related to health risks. Non-tariff measures may raise trade costs and penalize more small companies with less access to legal

GROWTH TREND IN INDIA’S TRADE 250

200

150

100

April-August 2021A Merchandise exports

pril-August 2020A Merchandise imports

Services exports

pril-August 2019 Services imports

Source: Department of Commerce, Government of India; all figures in US$ billion; *Note: The latest data for services sector released by RBI is for July 2021. The data for August 2021 is an estimation, to be revised based on RBI’s subsequent release. (ii ) Data for 2019 and 2020 are revised on pro-rata basis using quarterly balance of payments data.

A MORE OPEN AND STABLE TRADE POLICY REGIME IS ESSENTIAL TO DEVELOP A WORLD CLASS FOOD PROCESSING ECOSYSTEM and regulatory information. On the other hand, India relies on local content requirements, requiring firms to use domestically-produced goods and services, in particular in electrical machinery and equipment. By restraining competition from imports, local content requirements reduce the choice of inputs or providers and raise production costs. Although India faces restrictions on its exports in several key markets, OECD simulations point out that if India cuts tariffs and non-tariff measures, restricting trade by 20% and improves trade facilitation, domestic production would rise by about 3% and exports by 14%. Quality of infrastructure is a key determinant of participation in global value chains. As exports of goods tend to be more intensive in energy and transport, they suffer more from infrastructure bottlenecks. Further, transport infrastructure bottlenecks, including seaport infrastructure, increases costs for exporting goods

and importing intermediate inputs. Around 90% of India’s external trade (by volume) and 70% (by value) is handled by ports. Most container handling ports lack the capabilities to handle large container vessels due to inadequate depth. India has only one trans-shipment port in Kochi. A large share of containers is thus transshipped through other ports, such as Colombo and Dubai, leading to additional costs and delays. It takes 46 hours to move shipments between a warehouse in Delhi and a port, at least 3 times more than other large emerging economies. Of late, there has been a severe container shortage, which has pushed ocean freight by more than 300%. If this situation persists, there can be a 5-8% increase in the cost of goods from India. A digital container exchange forum to connect all the ports, shipping lines and container manufacturing and rental companies & logistics service providers, could solve the crisis momentarily. Finally, the government is already negotiating trade deals with the EU, UAE, Australia, etc. Due to natural complementarities, these are important partners where India must make an aggressive push, while addressing genuine concerns of the domestic industry. Besides these, intensification of trade agreements with CIS countries and Africa could help boost exports and investments.

Sep-Oct, 2021 • India Business & Trade | 13

PERSPECTIVES

Shipping Crisis: The US, China & COVID imbroglio Industry feedback on the shipping crisis reveals that empty containers are being shipped to China instead of making them available to Indian exporters. This aspect needs confirmation and further probe and shipping lines need to show transparency. BY DR DEEPANKAR SINHA

OVID-19 pandemic initiated a slowdown across the world’s logistic systems, owing to the quarantine of ships during the early part of 2020. In India, the vessels had a mandatory quarantine of 14 days since they sailed from the last port of call. The quarantine was withdrawn in December 2020, but caused a delay in the unloading of import containers. This cascaded into a paucity of containers for exports, as the turnaround time of vessels went up, leading to a drop in logistics capacity across shipping routes. Delay in the whole cycle eventually led to a decrease in sailings over time. The loss of revenue was compensated with freight increase and surcharges. These events served as a prelude to the current shipping crisis. The matter got aggravated by the

blockage of the Suez Canal with the grounding of the container vessel – the Evergreen. Shipping stopped for around seven days or so, leading to a collective delay of about 1,000 shipping days. Containers got held up in Africa, Latin America, Australia, the US, and different parts of the world, causing a further dearth of container availability across the ports. Globally, there are about 180 million containers – but they are in the wrong places. The shipping lines repositioned empty boxes at the cost of exporters and levied increased freight with surcharges. Industry experts estimate Asia to be the most affected region by this pandemic, followed by Europe. SIMMERING SHIPPING SOUP Following these events, the

14 | India Business & Trade • Sep-Oct, 2021

pandemic led to the closure of specific ports in China, one of the world’s leading exporters. The Yantian and Guangzhou terminals were under lockdown, causing blank sailings and stocking of containers. This lasted for a month or so. The availability of containers across ports further tightened, leading to container freight increase. COVID-19 also slowed down productivity of the ports of Los Angeles and Long Beach in the US. To add to this situation, the flow of containers between China and the US became the key driving factor, with COVID-19 acting as the catalyst to this crisis. Shipping lines levied an additional surcharge referred to as value-added surcharge (VAD). For example, in mid-July, the German shipping line

SHIPPING CRISIS SPOT FREIGHT RATES BY MAJOR ROUTE Route Composite World Container index

02-09-2021

09-09-2021

16-09-2021

Weekly change (%)

Annual change (%)

US$ 9,987

US$ 10,084

US$ 10,375

323

Shanghai-Rotterdam

US$ 14,074

US$ 14,287

US$ 14,294

570

Rotterdam-Shanghai

US$ 1,647

US$ 1,626

US$ 1,628

Shanghai-Genoa

US$ 13,473

US$ 13,543

US$ 13,502

509

Shanghai-Los Angeles

US$ 11,509

US$ 11,569

US$ 12,424

222

Los Angeles- Shanghai

US$ 1,433

US$ 1,448

180

Shanghai-New York

US$ 15,035

US$ 15,124

US$ 16,138

252

New York-Rotterdam

US$ 1,168

US$ 1,180

US$ 1,198

117

Rotterdam-New York

US$ 5,776

US$ 6,160

US$ 6,162

155

Source: Drewry Supply Chain Advisors

Hapag-Lloyd announced VAD of US$ 5,000 per Forty Feet Equivalent (FEU) and US$ 4,000 per TEU for cargo shipments from China to the US and Canada. In addition, other surcharges, namely congestion surcharge was also introduced in ports where waiting times increased. US imports surged by 20% till early 2021, causing a significant inflow of containers. For every 10 containers shipped to the US ports from Asia, only 4 were moving out. And for every four containers moving out of US ports to China, 3 were empty. China accounted for around 40% of exports to the US (as of January 2021). The increase in income levels of US citizens during the pandemic led to greater consumer spending in merchandise, as coronavirus highly impacted the service sector. Exports from China to the World went up by 28% or so. Since economic recoveries are uneven, countries which have recovered are willing to spend, like US and Europe. They did not have significant opportunities to spend in the services sector. So, their expenses got diverted to goods, which are in two categories - daily essentials & discretionary consumption. The former contributes more to the imbroglio. Since supply chains are disrupted, people have the tendency to overstock, as well. Meanwhile, container waiting time in India, as understood by some exporters, is 40 days or more. On average, the freight rates jumped by 200%, and Asia – Rotterdam freight went up by 600%. The short

supply created an import frenzy with retailers restocking items. Is this a sign of the Bullwhip Effect? The term implies that excess inventory in the pipeline may cause a sudden drop in goods and containers. Freight rates varied across different trade lanes; for example the freight for movement of containers (per TEU) from west coast ports (JNPT, Mundra, or Pipavav) of India to the other ports in the Indian subcontinent ranged between US$ 700 to US$ 3,000, whereas movement to the US West coast costs between US$ 3,600-8,300, exclusive of surcharges. The Freight Baltic Daily Index indicating the trend of container spot rates for 40’ containers (FEU ) breached US$ 10,000 in June 2021. A CHRISTMAS GIFT? The question is how long this crisis would continue and whether the shipping lines are really in a dire financial state for which the freight rates increase is justified. If the restocking continues, the inventory across the echelons is likely to increase, causing a drop in demand, and post-Christmas, consumer spending is also expected to reduce. Furthermore, with increase in vaccination, the pandemic is expected to mellow down, causing a rise in spending on services like tourism, hotels, and flights. Shipping lines expect this frenzy to continue till Christmas. With Christmas in the offing, more containers are expected to flow. The orders for new containers, which were canceled in the early part of 2020, are now getting executed.

The economic recovery across the globe is uneven, adding fuel to the fire. Some countries like China, are exporting more than importing, and the reverse is valid for the US. However, in India, imports have consistently exceeded exports. Hence Indian exporters may experience a delay in getting containers depending on arrivals but not starve for the same, losing business and competitiveness. The average earnings before interest and tax (EBIT) for container shipping lines is expected to touch US$ 100 billion in 2021, as average EBIT in the first quarter of the year was US$ 27.1 billion. This result is more than US$ 25 billion for 2020 as a whole (Seatrade). So where are the empty containers? A preliminary discussion with freight forwarders and exporters indicates that empty ones are being shipped to China instead of making them available to Indian exporters. This aspect needs confirmation and further probe. Hence, the shipping lines and their agents in India should exhibit transparency, indicating the availability of containers in different dry ports and shipping of loaded export versus empty containers. If not, they should refrain from shipping empty containers out of India.

Dr Deepankar Sinha is Professor at Indian Institute of Foreign Trade.

Sep-Oct, 2021 • India Business & Trade | 15

PERSPECTIVES

Single-lane or Expressway? India’s pathway to a hydrogen economy Hydrogen is a game-changer to decarbonize development. However, to emerge as a leader in the global hydrogen landscape, India needs strong government-industry coordination to lower costs, improve performance, and develop advanced materials. BY NIKHAAR GOGNA

and exports of green hydrogen. The limate change is one of the government has also announced most critical challenges in the PLI incentives for hydrogen fuel cell 21st century. Countries across vehicles and is mulling a proposal to the globe are undertaking a series make it mandatory for user industries of initiatives and collaborative efforts to produce or procure green to combat this man-made crisis. hydrogen. These include the landmark Paris Hydrogen is the lightest and most Agreement, the EU’s proposed carbon abundant element in the universe. border tax and probable polluter This zero-carbon emission fuel import fees introduced by the US. has multiple applications – space India, the planet’s third-largest exploration, mobility, fertilizer emitter of carbon dioxide, has also production, steel, aluminium, mining, taken a number of steps towards electricity and electronics. reduction of emissions and adoption Produced from renewable energy, of clean energy. The most recent ‘green hydrogen’ can be obtained such initiative is the National from numerous sources at Hydrogen Mission (NHM ), any time. Similarly, ‘blue launched on the occasion Transition hydrogen’ can be of Independence Day to a hydrogen sourced from fossil this year. It aspires to economy would fuels with carbon make India the global be a great financial capture and storage. leader in production

decision for India. Potentially, hydrogen can save over US$ 160 billion worth of imports for India.

16 | India Business & Trade • Sep-Oct, 2021

A transition to the hydrogen economy would also be a great financial decision for India. Potentially, hydrogen can save over US$ 160 billion worth of imports for India. While the benefits of green/blue hydrogen are plenty, there are also major roadblocks. These pertain to lack of adequate technology, storage, transportation, development of new materials, electrolysis, safety standards and regulatory regime. This article focuses on the storage challenge. BUMPS ON THE WAY Hydrogen can be stored in two forms, chemical and physical. At present, there are a few problems associated with storing hydrogen. For example, if we consider the use of hydrogen for transportation, the overarching technical challenge is how to store the amount of

HYDROGEN STORAGE

hydrogen required for a conventional driving range (>300 miles) within the vehicular constraints of weight, volume, efficiency, safety, and cost. The weight and volume of hydrogen storage systems are presently too high, leading to inadequate vehicle range. Further, life-cycle energy efficiency may not be optimum in chemical hydride storage, in which the byproduct is regenerated off-board. Materials and components used have a lifetime of 1,500 cycles and refueling times are too long. Also, hydrogen is highly inflammable, making the vehicle prone to explosions. Lastly, hydrogen technology is very expensive, although governments are working to bring down the cost. Obtaining hydrogen through renewable energy will be cost-effective as the cost of RE in India is coming down. The Ministry of New and Renewable Energy, further proposes that solid state storage of hydrogen is safer and more efficient than pressurized or cryogenic storage. Liquid organic hydrides consisting of various cycloalkanes can conveniently be transported and have a higher storage capacity of 60 kg/m3. Lastly, hydrogen storage in hollow glass microspheres presents advantages like a higher gravimetric energy density, safety, low energy consumption and cost effectiveness. INDIA: A KEY GLOBAL PLAYER? Driven by the rising industrial applications of hydrogen, the global hydrogen storage market is projected to grow from US$ 467.2 million in 2016 to US$ 1,011.2 million by 2026. This, coupled with measures adopted by the Indian government to give a fillip to this sector, has led to a number of major Indian companies announcing investments in this area. Reliance Industries Ltd, Adani Group, Hydrogenium Resources Pvt. Ltd, Indian Oil Corporation and NTPC are among the players willing to lead the push towards this new economy fuel. Foreign companies such as Kreston International & Greenstat Asia have also started exploring investments. However, while most of these companies are making headlines

THE ‘NO-BRAINER’ SOLUTION? Dr. J. P. Gupta Chairman, Environmental Impact Assessment, Ministry of Environment, Forests & Climate Change, Govt of India

“The rapidly declining cost of renewable has been a motivation for the growing interest in green hydrogen. Hydrogen is a new and viable alternative to fossil fuels, with a well-established market and a full value chain in place.” Umesh Sahdev Executive Chairman, Hydrogenium Resources Pvt. Ltd

“India has a high potential for large investments in hydrogen infrastructure, supply chain & entire spectrum of mobile & static applications. Thus, the Indian Government announced the ambitious Hydrogen Mission & has shown its real intents to support hydrogen as a key driver to its net zero transition.” Knut Linnerud CEO, Greenstat Asia

“The key challenges to build a viable business proposition for hydrogen in India include establishing R&D test centers; developing standards for safety; creating financial instruments to attract commercialization in combination of CO2 taxes; chalking out an international collaboration; and replacing grey hydrogen.” Prof. C. P. Kaushik Co-Chairman, Environment Committee, PHDCCI

“National Hydrogen Energy Mission is a landmark decision. India can be the global hub for export of green hydrogen by 2030 with a competitive cost of US$ 1.5 per kg. PPP can help in establishing a hydrogen ecosystem in the first instance.” Mahendra Rustagi CEO, Kreston SNR

“As the cost of energy used to produce Green hydrogen is over 60% of the total cost, India (due to its cheapest solar energy cost) is uniquely placed for hydrogen production. Therefore India is expected to be a key investment destination for hydrogen players and could emerge as its leading exporter.”

in terms of hydrogen production, the sector lacks key players in the domain of storage. This is an important field that the industry must not neglect. For example, in terms of mobility application, currently there are no cars in India with multiple storage units up to 700 bars. Only three brands in the world offer hydrogen-powered fuel cell vehicles — Toyota Mirai, Honda Clarity and Hyundai Nexo. This presents an opportunity to fill this void. Globally, there are a few companies that have taken a lead in hydrogen storage & India could look up to them. For example, Enapter is a German startup that provides an energy management system to predict energy generation, storage,

& transmission. Another company that offers customized & innovative hydrogen storage solutions is Hexagon Agility. Similarly, HYON offers bespoke solutions ranging from producing hydrogen to storing and distributing it. A good starting point would be for India to collaborate with international companies to get the sector up and running, before it can have solely indigenous players. At the same time, the government must initiate targeted support measures for the sector through schemes such as Viability Gap Funding (VGF ) & Production Linked Incentives (PLI). Incentivizing the use of this fuel will motivate these companies to invest in the sector.

Sep-Oct, 2021 • India Business & Trade | 17

PERSPECTIVES

India must expand its seafood export basket Indian seafood exporters face logistical issues like shortage of containers, expensive flight connectivity, and sluggish demand in overseas markets, stiff international competition, and lack of diversification of export markets. VIJAY KUMAR YARAGAL

ver the last few decades, India has managed to catapult itself as the secondlargest producer of inland fish in the world and accounts for about 14% of the global fish diversity. It stands third in the total production of fish and fourth in terms of exports. This can be attributed to the country having a coastline of about 8,118 kilometers, from the pristine waters of the Himalayas to the sprawling Indian Ocean, which is the quintessential breeding ground for a rich variety of marine life. Regarded as an affordable and rich source of animal protein, fish protein is being increasingly demanded nowadays. The sector is particularly significant to India, & not merely from the prism of nutritional value and food security. It creates gainful employment for 25 million people and contributes around 1.27% to India’s GDP. Fish and fishery products from India constitute only 10% of total global exports. Inland fish production is mainly dominated by IMC (Indian major carps). Traditionally, around 2 to 3

THE MARINE SECTOR CREATES GAINFUL EMPLOYMENT FOR 25 MILLION PEOPLE AND CONTRIBUTES AROUND 1.27% TO INDIA’S GDP.

tonnes per hectare of inland fish are produced. Frozen fillets and chilled fish or live fish export in the inland fish variety enjoy great demand overseas. In addition, there are other varieties of inland fish such as Pangasius fish, Seabass, and Tilapia fish produced. These are mainly diverted for the domestic market, as the export market is not attractive for fish cultivators. One reason for this is that in

FIVE YEAR TREND OF INDIA’S MARINE EXPORTS

8000 7000 6000 5000 4000 3000 2000 1000 0

2017-18

2018-19

Frozen shrimp

Source: MPEDA; all units are in US$ mn

18 | India Business & Trade • Sep-Oct, 2021

2019-20

Frozen squid

Dried items

2019-20

Live items

Chilled items

2020-21

Others

Total

MARINE EXPORTS

markets like the US, Tilapia fish is only accepted in filleted form. India, however, does not have ample infrastructure to process as per these requirements. Further, in the case of Tilapia fish, 3 kg of fish are required for filleting 1 kg. So, the waste needs to be efficiently managed by diverting it to things like fish meal, poultry, and animal husbandry feed. Additionally, there are two major constraints in chilled fish exports. Domestic air carriers are charging hefty rates for internal domestic movements and exports of inland fish, which are low in value. In the last decade, apart from black tiger, India jumped into Pangasius fish culture (Basa) for 1-2 years and then Vannamei in 2010-2011. From 2010-11, there has been a continuous increase in the production of Vannamei shrimps. This is the only variety of shrimps that has made our farmers survive and we are mainly depending on the US and China (50% of export volume). India needs to broaden its export markets. The importance of this became apparent last year when in the midst of the pandemic, there was a dearth of containers in these 2 markets. Further, the pandemic has affected transportation arteries of feed transport and farm material required for the culture. Employee strength was reduced by 50% in processing units. Furthermore, the nation’s shrimp farmers got worried that these two markets will not buy their products. Around 30% of them didn’t go for the second crop, while exporters saw products piling up in their inventories. Thus, in 2020-21, India’s

TOP DESTINATIONS FOR INDIA’S SEAFOOD EXPORTS

Source: MPEDA; All units are in US$ mn

INDIA’S INLAND FISHERIES HOUSE AROUND 504 MILLION HECTARES IN RESOURCE POTENTIAL, WHICH NEEDS TO BE TAPPED INTO. seafood exports dipped by 10.88% to 11,49,341 MT worth US$ 5.96 billion. Apart from this, China also brought up the existence of white spot disease and coronavirus nuclei on packed cartons in imported shrimps from India, thereby banning 20 processing units from exporting to China. This, however, does not take away from the huge potential that the sector offers. India’s inland fisheries house around 504 million hectares in resource potential. The nation needs to broaden its export basket by approving the packing of chilled fish

at factory vessels and bigger farms, so that their quality is maintained and a health certificate is obtained. Health certificates issued to exporters are valid for just 72 hours to reach the final destination. A lot of time gets lost in transport and repackaging by the time fish reaches the exporter’s plant and quality might deteriorate. Additionally, Indian exporters must be offered incentives so that they don’t lose out to competitors from Vietnam, Thailand, Japan, and Malaysia. Lastly, the availability of key infrastructure in fish production, processing, and reefer containers needs to be taken care of in order to fully utilize the potential of India’s blue economy. The author is the Executive Director of the National Fisheries Development Board.

Sep-Oct, 2021 • India Business & Trade | 19

PERSPECTIVES

Resolving the green predicament of the evergreen fabric For a fabric expected to remain ‘evergreen’ in the fashion industry, the ecological impact of denim is cause for concern. It is imperative for India to develop new technologies to balance its growth in denim manufacturing with the need for a positive environmental footprint. BY VINOD SINANDI

erge de Nimes or denim, made of 100% twill cotton fabric, originated from the world’s fashion capital, France, is one of the world’s oldest fabrics. A robust yet natural and highly breathable piece of attire, it is extremely resistant to abrasions and tears, making denim the first choice for the utility uniform, workwear, and dungarees. Today, denim has become a wardrobe staple, as it provides comfort and has a longer life span compared to other apparel. FROM NECESSITY TO FASHION From ‘work-wear to ‘casual-wear and then a ‘fashion icon’, the journey of this twirled fabric is quite fascinating. In the late 19th century, the wife of a labourer in the US approached a tailor, Jacob, to make a pair of pants for her husband that would not fall apart. It was in this historic moment that a category of clothing made with denim, with the alliance of Jacob, the tailor and Levi Strauss, the fabrics merchant, started one of the most significant global trends. Today, over 15 billion meters of denim are produced globally every year, and about 10 billion different clothing items viz. jeans, hats, jackets, shorts, skirts, dresses, sneakers, shoes, belts, handbags, wallets, face masks etc. are manufactured all over the world. With technological advancement and innovations, denim and markets of its finished products have constantly been growing steadily. The global denim fabric market was valued at US$ 21.8 billion in 2020. It is expected to rise to about US$ 26 billion by 2026, while the forecast for global retail sales of

denim is expected to be US$ 71.8 billion by 2027. It is interesting to note that the denim fabric and one of its finished products – ‘pair of jeans’ – was invented, produced and modernized in France, Italy and the USA. However, during the last few decades, the production of denim and its products has shifted from developed countries to developing countries. Currently, China, India, Mexico, Bangladesh, Turkey, Pakistan, and Brazil are the major countries producing the largest volumes of denim every year. DRAINING RESOURCES Denim is expected to remain the first choice for generations to come. Then why the shift in production from developed countries?

20 | India Business & Trade • Sep-Oct, 2021

Developed countries are well aware of the harmful effects of denim manufacturing on the environment, and this is a key reason for outsourcing of their production. From cultivation to production, a pair of jeans uses about 7,600 liters of water, making the denim industry one of the most water-intensive industries in the world. Further, the indiscriminate use of chemical pesticides to grow bumper crops in the farmland contaminates the soil and water sources. More so, the process completes only when denim goes through several harmful chemical washing processes and ‘acid-wash’ is sprayed over the fabric. This leads to dumping of toxic waste into water resources. The other method that is injurious to workers and damaging to the

DENIM INDUSTRY

environment is ‘sandblasting’ , which involves spraying fine sand through an air gun with high pressure to design the ‘old worn out look’. Another reason is that it is highly unlikely that despite having the largest consumer market for denim, producers and manufacturers in developed countries could use unethical strategies to compete with developing or third world countries. On the other hand, they show a lot of concern for the environment in their countries, but simultaneously do not empathize with environmental and climate pollution in other countries, particularly the third world countries. Therefore, it is a better option for them to outsource denim production to developing countries. The developing countries, on the other hand, need their industries to grow in order to improve the standard of living of their citizens and accelerate GDP growth. Painfully, though, the high cost of the branded denim is not at all helpful to the conditions of local farmers and workers in developing countries, as they do not get even a small percentage of the high retail prices of branded products. REACHING INDIAN SHORES Denim entered the Indian market in

the early 1980s, and was immensely popularized in the next decades. The fabric is a very important product of the Indian textile export basket today and with the help of the government; the industry is making efforts to increase production capacity. The denim industry in India, the third-largest exporter after China & Pakistan, is thriving, with exports of US$ 341.7 million in 2020. It has huge potential in terms of both consumer market as well as a manufacturing hub. India also enjoys a competitive edge over other countries because of skilled labour, low cost of labour, mass production capacity, etc. However, exporters of denim are facing stiff competition from the domestic market. Around 65% of the total production is used in India alone. This itself is a challenge for the expansion of the denim industry. Lack of innovation in the country as compared to other competitors also makes the Indian industry vulnerable. The future of the Denim industry in India seems bright, but it largely depends on how the huge potential is tapped in smaller cities/towns, where fashion awareness is on the rise because of digital marketing

THE FUTURE OF INDIAN DENIM DEPENDS ON HOW WELL MANUFACTURERS EMBRACE SUSTAINABLE PRODUCTION. and publicity. In these cities, players from the unorganized sector have captured a major market share by launching cheap imitations of new fashion designs of branded products. However, the liking of new generations for branded products, their interest, and increased purchasing power are helping luxury brands to penetrate the markets of smaller cities. Ever since environmental issues

TOP EXPORTERS OF DENIM Exporters

Exported value in 2020

China

1,443.8

Pakistan

476.4

India

341.7

Turkey

253.4

Hong Kong, China

187.3

Italy

97.4

Egypt

90.5

Japan

68.2

Mexico

56.3

United States of America

53.5

Source: ITC Trade Map, figures in US$ million

have been raised, luxury brands and consumers in developed countries are developing a growing preference for eco-friendly products. Italy, known for quality premium denim and its products, regularly strives to produce eco-friendly sustainable fibres and eco dyes for ‘green Denim’ products. A number of brands in the country have therefore started upcycling denim fabric to reduce its ecological footprint. While refraining from using coloured and bleached denim fabric, some of them use natural dyes and smaller vats, while others use yarn spun out of the denim waste leftover during jeans manufacturing and using the technique of foam dying to impart colour. Other eco-friendly steps are the use of cold dyeing; and e-flow technology, where nanobubbles and ozone are used to soften the material and lasers are used to add streaks and fading lines to the denim fabric, instead of harmful bleaches. To help the Indian denim industry, regulators need to modify policies to offer well-directed benefits to the sector. The industry needs massive investments for technological upgradation towards R&D to produce high quality, sustainable, eco-friendly or ‘green denim’. This will help the industry maintain the environmental footprint as well as increase production of denim products.

Sep-Oct, 2021 • India Business & Trade | 21

COVER STORY

INDIA-UK FTA INFLEXION POINT? Among all the partner countries with whom India is aggressively pursuing trade deals, the UK stands out. Fresh from Brexit, it is viewing its global trade engagements from a fresh lens and has a definitive Indo-Pacific tilt in its policy outlook. But despite both sides showing significant openness, will the India-UK FTA negotiations be as straightforward as they appear? BY VAISHALI BHARDWAJ

INDIA-UK TRADE AGREEMENT

fter a long hiatus (India signed the last major trade agreement with Malaysia in 2011 ), a relatively uninspiring record of past agreements, a much publicised exit from the RCEP and the dreaded COVID-19 pandemic, India has suddenly stepped on the gas on its bilateral trade agreements. This can be attributed to a firm conviction that India needs to finally ramp up its economic engagement with these economies, bring its industry on a more level footing, tackle critical market access issues and expand share of global value chains given the limited window of opportunity post-pandemic. Some experts also see this as an important ‘signal of intent’ on India’s openness to FTAs, especially with trade witnessing a strong post-pandemic rebound. India itself is looking at achieving a target of US$ 400 billion in exports during the current fiscal year. On India’s radar are some of its top trade partners (more importantly, key export markets) - the UK, Australia, Canada, Bangladesh, the EU and Gulf Cooperation Council nations. While the US was also among the priority partners, it is not looking to enter into trade agreements in general. In all these negotiations, most of which have been on the table for protracted periods of time, the UK stands out as an exception. Post-Brexit, the UK is viewing its international engagements from a fresh lens. It is equally eager to conclude trade agreements with strategic markets. The country has indicated a pivot towards the IndoPacific for its future foreign policy, defence and trade outlook. There is a general consensus that India looks better placed to clinch a deal with the UK earlier than some of the others, particularly the EU. But will the agreement actually prove as straightforward as it appears? In this article, we analyse this moot point from the perspective of India-UK merchandise trade. ECONOMIC & TRADE MAPPING India and the UK launched

GROWTH IN UNITED KINGDOM’S TRADE WITH INDIA

Trade in goods

26.1

Trade in services

134.4

100

150

Source: ITC Trade Map and Office for National Statistics; 2019 vs 2016

‘Enhanced Trade Partnership (ETP )’ with a vision to double bilateral trade by 2030. Under the ETP, both economies committed to negotiate a comprehensive FTA, which also includes an interim trade pact by 2022. According to 2020 statistics, India and the UK are the world’s 5th and 6th largest economies in terms of nominal GDP, respectively. In 2020, total trade stood at US$ 12.5 billion, a drop from US$ 15.7 billion in 2019 due to pandemic restrictions. Broader trends show that goods trade increased by 26.1% in 2019 over 2016. Top exported products from India to the UK include medicaments, medium oil and preparations, vessels for transport, telephones for wireless networks and jewellery articles. India

primarily imports gold, inorganic and organic compounds, light vessels, silver and waste of aluminium. As the UK is looking for an opportunity to reduce its dependence on China, the deal may provide India an opportunity to scale up its manufacturing for products such as fashion, homeware and furniture, electrical machinery and general industrial machinery, according to a report by Deloitte. The consulting firm further notes that the UK may offer access to India on automobiles, textiles, pharmaceuticals, F&B, machinery, chemicals, and agriculture; as it has done in recent agreements with partners like Singapore and Japan. However, the UK will seek similar concessions from India.

POST-BREXIT, THE UK IS EQUALLY EAGER TO CONCLUDE TRADE AGREEMENTS WITH KEY PARTNERS.

NEGOTIATION FRAMEWORK An analysis on India-UK trade dynamics done by Centre for Advance Trade Research (CATR ) concludes that India and the UK have trade complementarity of 0.79, implying a great level of similarity between India’s exports and UK’s imports of goods. The report notes that automobiles, chemicals and electronics are the main product categories overlapping in India’s export and UK’s import basket. To analyse the major focus product categories for negotiations, the report uses the gravity model. The results show that India’s pharma machinery, plastics, primary products, textile-related products, metals, and automobiles, despite being competitive globally, are not penetrating the UK

Sep-Oct, 2021 • India Business & Trade | 23

COVER STORY

UK IS THE 3RD LARGEST MARKET FOR INDIAN PASSENGER VEHICLE EXPORTS AND THE LARGEST MARKET IN EUROPE FOR ELECTRIC VEHICLES

TOP TRADED PRODUCTS BETWEEN INDIA AND UK Product

India’s import Product from UK (2020, US$ million)

India’s export to UK (2020, US$ million)

Gold, incl. gold plated with platinum

411.6

Medicaments

461.5

Inorganic or organic compounds of precious metals

204.2

Medium oils and preparations

256.5

Light-vessels, fire-floats, floating cranes and other vessels

198.4

Vessels for the transport of goods and vessels

192.8

Silver, incl. silver plated with gold or platinum

180.9

Telephones for wireless networks

185.0

Waste and scrap, of aluminium

171.3

Articles of jewellery and parts thereof

176.5

Source: Office for National Statistics

market. This trend, despite India’s competitiveness and strong trade complementarity with the UK, is due to two reasons. The first is the mismatch in the kind of products demanded and supplied. For instance, India specialises in small and medium segment automobiles, and the UK, too, is a huge producer in this segment of cars. Secondly, India is catering to markets other than the UK for these product categories. CATR proposes an impetus on the remaining products via a trade agreement in order to increase their market presence, as well as a special

emphasis on plastics, primary products, pharma machinery and textile-related items. The FTA could prove a shot in the arm for a number of Indian products. For instance, in the jewellery sector, India contributes 29% to global jewellery consumption. It caters to 15.6% market share in the UK’s diamond market, with Belgium, Israel and US being close competitors. India is among the top three exporters to the UK for gold (5.3%), silver (12.9%) and cut & polished diamonds (9.1%), while for imitation jewellery, gemstones and other precious stones, India is among the top 10 exporters.

24 | India Business & Trade • Sep-Oct, 2021

Till 2016, the UK has been the third largest destination (6%) for India’s exports of passenger vehicles. Furthermore, the UK is also the largest European market for electric vehicles. According to data from Statista, sales of plug-in electric vehicles increased by 140% yoy in the UK, while for hybrid vehicles, sales were up by 12%. Himanshu Tiwari, Partner (Trade & Customs) at KPMG, opines, “India has been an exporter of small cars. (But ) whether the leverage that India enjoys as a small car exporter can be migrated to the expanding entry-level EV space is a development to look forward to.” Apparel is another critical sector for India-UK trade. The UK is the 3rd largest destination for export of apparel. However, India faces a tariff of 9.6% against the LDC countries such as Bangladesh, which face 0% tariff on such products. Apparel exporters thus expect to benefit from the FTA. Another industry that has highlighted market access issues is fruits and vegetables (F&V ). They point out that duties on Indian F&V are at 3-8% compared to 0% for competing countries. Also, they stress on the need for a mechanism wherein the benefit of this duty cut goes to Indian exporters and farmers, rather than retailers and importers in the UK. BEYOND TARIFFS While reducing tariffs under trade negotiations will enable India to capture a bigger share in the UK market, further steps are needed. Chemicals, primary products, processed products and electronics are the most protected sectors in the UK, and hence Indian exports in these categories suffer. During

INDIA-UK TRADE AGREEMENT

TRADE OF SERVICES BETWEEN INDIA AND UK Services

UK’s export to India in 2019 (in US$ million)

UK’s import from India in 2019 (in US$ million)

Professional, management consulting & R&D services

749.4

3,229

Technical, trade-related, operational leasing & other business services

252.1

93.2

Merchanting, Other Traderelated and Services

147.9

2,228

Film Industry

49.3

Television Industry (excluding other services)

12.3

30.14

Source: Office for National Statistics

2020, India faced around 24 border rejections on food products such as fish and fish products, fruits and vegetables and dried chillies with reasons for rejections including poor temperature, residue of pesticides, and presence of alfatoxins, respectively. Ministry of Agriculture has alerted authorities to monitor use of pesticides by farmers to restrict excessive pesticides entering the food supply chain. Around 73% of NTMs on primary and 57% NTMs on processed agricultural products are Sanitary and Phytosanitary measures, the biggest challenge being MRLs. Similarly, 92% of total NTMs in electronics, 90% of total NTMs in pharma, 80% of total NTMs in electronics and 73% of total NTMs in plastics are in the form

of Technical Barriers to Trade. The Indian industry claims that residue norms are different for different products, and at times unreasonable. Documentation requirements for ethics, environment, etc are also quite stringent and complex. Dr. Arpita Mukherjee, Professor at ICRIER, suggests, “If an Indian product is being rejected, whereas products from developing countries in Africa and ASEAN are meeting quality standards, we need to see

“As UK’s tariff reductions may not lead to significant increase of exports, higher market access opportunities can be realized only if NTBs are addressed.”

whether something can be done at home to make them acceptable.” For India, therefore, negotiations on barriers other than tariffs are required to gain higher market share. Sunitha Raju, Professor at IIFT, affirms, “As UK’s tariff reductions may not lead to significant increase of exports for India, higher market access opportunities can be realized only if NTBs are addressed. India should work towards drawing up Mutual Recognition Agreements (MRAs).” For instance, leaders of the Indian food industry have urged to resolve market access issues on instant premix products such as turmeric latte, coffee and tea as they contain milk solids, which are banned by the EU and the UK. The industry insists that market access can lead to higher export earnings, as the UK is traditionally a tea consumer. Some players in the dairy industry have also expressed reservations about the FTA. GCMMF insists that allowing subsidised dairy products from the UK will create huge problems for the domestic industry which is smallholder-led. Moreover, the UK does not allow imports of Indian dairy products on the grounds of sanitary and phytosanitary issues, including lack of traceability, while India allows imports of all dairy products from UK at duties of 15-40%. Jayen Mehta, Senior General Manager, GCMMF argues, “Cooperatives are a proven model of traceability in India. Amul procures milk from 36 lakh farmers across 18,500 villages and every cow and buffalo is tagged. Also, Indian plants are approved by the US FDA and Amul is exporting to over 50 countries including Japan, Australia and New Zealand.” Given this strong opposition, negotiations on dairy products would be definitely an area to focus in these discussions. However, any negotiation is two way, so India needs to look at what key demands of the UK it is willing to accommodate. One of the major asks is concession on tariffs imposed on alcoholic beverages. India imposes a 150% ad valorem duty on imports of alcoholic beverages such as whiskey

Sep-Oct, 2021 • India Business & Trade | 25

COVER STORY TOP POTENTIAL PRODUCTS OF EXPORTS FOR INDIA TO THE UK HS CODE

Product Category

300490

Medicaments and Pharmaceuticals

851712

Telephones for cellular networks “mobile telephones”

870322

Motor cars and other motor vehicles

870323

Motor cars and other motor vehicles

841112

Turbojets of a thrust > 25 kN

870899

Parts and accessories, for tractors, motor vehicles for the transport of ten or more persons

870321

Motor cars and other motor vehicles

880330

Parts of aeroplanes or helicopters, n.e.s. (excluding those for gliders)

711319

Articles of jewellery and parts thereof, of precious metal other than silver

610910

T-shirts, singlets and other vests of cotton, knitted or crocheted

711311

Articles of jewellery and parts thereof, of silver,

710239

Diamonds, worked, but not mounted or set (excluding industrial diamonds)

260111

Non-agglomerated iron ores and concentrates (excluding roasted iron pyrites)

030617

Frozen shrimps and prawns, even smoked,

380893

Herbicides, anti-sprouting products and plant-growth regulators

100630

Semi-milled or wholly milled rice, whether or not polished or glazed

020230

Frozen, boneless meat of bovine animals

300420

Medicaments containing antibiotics

760110

Aluminium, not alloyed, unwrought

630260

Toilet linen and kitchen linen, of terry towelling or similar terry fabrics of cotton

260112

Agglomerated iron ores and concentrates (excluding roasted iron pyrites)

170199

Cane or beet sugar and chemically pure sucrose, in solid form

871120

Motorcycles, incl. mopeds, with reciprocating internal combustion piston engine

Source: ITC Trade Map, CATR Analysis

and brandy. In Budget 2021-22, the tariff on alcoholic beverages has been reduced to 50% from 150%. But at the same time, India has imposed 100% agriculture cess to replace the loss from the custom duty cut. Another demand of the UK involves tariff concessions on automobile export. Currently, India imposes a 150% tariff on import of motor cars and other motor vehicles such as station wagons and racing cars, with only diesel engines. On an average, the effective tariff duty faced by Indian products in the UK market is 4.9%, whereas India imposes around 14% effective duty on UK products i.e., nearly 3 times that of the UK. Such demands have to be met, obviously, in consultation with the industry. Dr Mukherjee proposes, “In order to protect the domestic industry, there is a requirement to set up thresholds below which the tariff may not be liberalised. This

“INDIA CAN OPEN UP ITS IMPORTS ABOVE SPECIFIC THRESHOLD LEVELS, SO THAT DOMESTIC MASS PRODUCTS DO NOT SUFFER.” can be set after discussion with industries. India can open up its imports above this level of threshold, so that domestic mass products do not suffer.” It is evident that there will be losers and gainers in every trade agreement. But the opportunity cost of not having an FTA in the current era is significant, and India needs to have a big picture perspective. A study by the World Bank stated that a preferential trade agreement boosts GVC integration, especially if the

26 | India Business & Trade • Sep-Oct, 2021

provisions are WTO plus. The UK is home to 22 Fortune 500 companies, standing at 6th rank globally; thus a trade deal can bring in companies which are a deeper part of GVCs, in particular for critical sectors from a futuristic trade perspective. The interim trade deal is a big positive for the two partners, as it aims to cut tariffs on a broad range of items, facilitate investments and enhance market access for a number of goods and services. It is notable that the two partners have agreed to be more aggressive in services trade liberalisation, given that the sector accounts for 71% of the UK’s and 54% of India’s GDP. In addition, the deal is expected to incorporate contemporary issues like sustainable trade and development, data security, public procurement, digital trade, etc, which are important for India’s trade agreements going forward, especially with other developed countries.

COVER STORY

A question of quid pro quo While negotiating trade agreement talks with the UK, India needs to carefully consider what it is willing to offer in return for greater market access to its industry.

he UK was one of key markets for India within the EU, especially for the services sector. After the US, the UK is the 2nd largest market for Indian IT companies. Before Brexit, the UK was an important link to the EU market. Hence, the importance of UK as a trading partner cannot be undermined post-Brexit. However, there is a difference in strategy in how India can negotiate with the UK and the EU postBrexit. There will be some variation in the “ask list” between the UK and the EU. Within services, the UK would ask for liberalisation of retail and easier market access for professional service providers like legal and accountancy services, according to its interests. One-third of global firms and all Indian companies operating in the UK are General Data Protection Regulation (GDPR ) compliant. However, there is no agreement between India and the UK for safe transfer of data. India may request for “sharing of data with a trust.” Furthermore, India does not have a social security agreement with the UK, a key ask of the IT sector. In many areas, including IT, healthcare and financial services, India and the UK have trade complementarities. Focus should be on enhancing trade and collaborations, especially for SMEs. Indian exporters are facing market acces issues for many products in UK like gold jewellery, diamonds, apparel, etc. But some key questions arise for India as it seeks greater market access. Surely Indian industry will benefit from the agreement, but what is it willing to give in return? In dairy products, the UK has imposed a restriction on Indian products and vice versa. In the UK, there is a preference for cow milk and traceability of the entire supply

Dr Arpita Mukherjee Professor at ICRIER

chain. On the other hand, Indians consume both cow and buffalo milk. Similarly, in the Northeast of India, black pig meat is consumed, while in the UK, it is pink pig meat. Thus, consumer tastes & choices can vary. Market share is also affected due to inability to meet standards and food safety requirements of UK. For instance, in the case of milk production in cooperative mode, it is difficult to put in traceability to cattle, mechanised milking systems, isolating a sick and a healthy animal, etc., which are needed in the UK market. But new private players are able to meet requirements. Can market access in India, therefore, be given to products that don’t compete with domestic dairy products? Moreover, India’s and UK’s strengths lie in different food products. How can they be leveraged through greater market access and B2B collaborations? WAY FORWARD Any deal has to balance out give and take. One of the major demands of the UK has been to reduce tariffs on whiskey. It may be noted that

alcohol bottled in country of origin only accounts for 1% of imports; the rest is intermediate products and alcohol bottled in India. For the latter, the tariff can be zero. In addition, if the company is sourcing grains from farmers, they should not have to pay agriculture infrastructure development cess (AIDC ) and are already investing in agri-supply chain infrastructure. Custom revenue from alcoholic beverages is not that large and tariff reduction will not have significant revenue impact. To protect the domestic industry, there is a need to set up the thresholds below which the tariff may not be liberalised. India can open up above this level of threshold, so that domestic mass production products do not suffer. The threshold can be set after discussing with domestic industry. India must also diversify its “ask lists” to include wider issues of mutual interest. For example, services negotiations should go beyond labour mobility like data sharing. Similarly exports of organic products, where farmer’s income can be higher, should be discussed. Under organic products, the EU has earlier given India unilateral recognition for fresh produce and processed food. But now unilateral recognition for processed organic food has been withdrawn. Both sides can give access to processed organic food products via this deal. They need to recognise each other’s laboratory testing procedures, standards & certification. There is need for the industry to face some changes on one hand, and on the other, different regulatory bodies under the government must work together. It needs to be decided which body will sit for negotiations. It would be ideal to sit with industries and other concerned parties to discuss issues and seek suggestions to be better prepared.

Sep-Oct, 2021 • India Business & Trade | 27

COVER STORY

India-UK deal to realise potential UK businesses’ willingness to embrace the Aatmanirbhar Bharat initiative demonstrates a strong commitment to India.

s the world’s geopolitical and economic centre of gravity is moving east, the UK Government has, in its own words, given its foreign policy an “IndoPacific tilt” in this post Brexit era. PM Johnson and PM Modi set out key details of the Enhanced Trade Partnership (ETP ) at a virtual summit on 4th May 2021, alongside a 2030 roadmap and intent to negotiate an UK-India Free Trade Agreement (FTA ). The ETP aims to double annual trade between the UK and India by 2030, by removing barriers for businesses across sectors. The trade and investment relationship also forms one of five pillars of the 2030 roadmap, which covers climate action, defence and security, healthcare, and people-to-people ties. India and the UK are already the 5th and 6th largest economies in the world. Both are leading democracies, and their industrial strengths are complimentary. Together, they can be even stronger. India is, overall, an attractive market for UK companies. Around 600 UK businesses are already present in India, employing almost 800,000 people, representing 1 in 20 jobs in India’s organised private sector. Investments from the UK are expected to grow, particularly in techand IP-rich sectors. In India, both central and states governments have important roles to play in enacting strategic policy reforms. Land is a state subject and labour is a shared topic. Investors look for a close cooperation & alignment of Centre & states towards policy implementation. International manufacturers are also increasingly making location decisions based on quality over cost. Thus, supply chain trade is becoming more knowledge-intensive, with increasing value in IP, R&D, and brands. With future investments likely

businesses. India should have tax rate parity as per global norms.

Rohit Singh Director, UK-India Business Council to be tech-rich and, indeed, digitally driven, India can gain a competitive advantage through an innovatorfriendly IP policy and enforcement regime. UKIBC recommends that India should expand trade and investment collaboration in Asia, so that it can benefit from increasingly friction-free trade, particularly with ASEAN. The current Data regulation framework (Personal Data Protection Bill, 2019 ), requires localisation and restriction on cross-border data flow. This does not necessarily advance data protection goals. Rather, it may negatively affect company operations and increase the costs of providing services in India. Multinational businesses ultimately need the ability to move non-personal and personal data cross-border to promote technological advancements, investment, and innovation. UK businesses tell us they want greater clarity around data regulation requirements and guidelines that balance national security, privacy and innovation. Another major challenge is around tax parity. Particularly in the banking and insurance industry, differential tax treatment serves as a major disincentive for UK

28 | India Business & Trade • Sep-Oct, 2021

PRE FTA-CONSULTATIONS UK businesses would also like to see India adopt (and co-develop) international standards. Mutual recognition of qualifications within higher education is also an area of interest, such as UK master’s degrees are not recognised in India due to UK 1-year versus Indian 2-year courses. Another long-standing issue is high duties of 150% on alcoholic beverage products imported into India. This deters investment in Indian manufacturing and bottling facilities and limits the choice available to Indian consumers. Numerous studies have found that enabling tariff reduction is in the mutual economic interest of both countries. Businesses advocate for interim reduction of duties (50% over next 1-2 years then 30%). This would be a winwin for both the sides as many domestic companies in India use imported bulk spirits to make India-made liquor. According to the findings of the UKIBC’s 6th Annual Survey on Doing Business in India, 77% of UK companies surveyed believe that the Aatmanirbhar Bharat campaign is an “opportunity” rather than a challenge to doing business in India. The willingness of UK businesses to embrace the Aatmanirbhar Bharat initiative demonstrates a strong commitment to India. UK companies are already deeply integrated in the Indian economy and support India’s selfreliant mission. Rolls Royce, BAE Systems, GSK and JCB are just a few examples of UK businesses that have long been making in India. The UK and India share great economic complementarity, which can bring both economies to the next level and support both the ‘self-reliant India’ mission and the ‘build back better’ mission of the UK. This FTA could play a pivotal role.

VIEWPOINT

India and Chile plan to expand the PTA and include services and investment While discussing the planned PTA expansion and focus areas of renewable energy and agriculture, HE Juan Rolando Angulo Monsalve, Ambassador of Chile to India, assures that the two countries are constantly on the lookout for new areas of cooperation.

he India-Chile relationship is in a very good shape. We are celebrating 72 years of diplomatic relations this year. India and Chile have a huge framework of relationship, mutual understanding, cooperation, development of political affinities and we are constantly looking for new areas of cooperation. When it comes to trade, Chile has the privilege of being the only country to have a bilateral PTA with India from the Latin American region. It was signed in 2006 and expanded in 2017. We have finished the second round of negotiations for the new expansion of the PTA, where we expect to go from around 2,000 tariff lines in goods to 5,000 tariff lines. The agreement has fostered our trade, which has averaged around US$ 2.2 billion. Minerals such as copper and molybdenum account for nearly a half of total exports to India. But we are seeing more of other products like fresh fruits, dried fruits, chemical goods, pork meat, poultry and kiwis. We are also working to include investments and services. The two countries signed an agreement to avoid double taxation in March 2020 and we think that this instrument will facilitate increased flow of cross border investments and technology. We have recently launched the Chile-India Business Council to create confidence & knowledge, foster business and explore possibilities of JVs or mutual understanding in the entrepreneurial communities. We are also absolutely encouraging investment and physical presence in our country. Chile offers, among other things, stability, effective rule of law, highly friendly business and commercial ecosystem and access to new markets, thanks to its extensive network of free trade

HE Juan Rolando Angulo Monsalve Ambassador of Chile to India agreements. It also offers robust and reliable infrastructures, digital connectivity and a highly developed and business-oriented banking sector. Chile’s foreign investment regime secures equal treatment for foreign and national investments. There’s a free-flow of capital and profit and a business environment. Movement of people is something to improve. Two years ago, Chile allowed the entry of Indian nationals with a valid visa for the US. In the more expanded framework, we are trying also to do the same in the Pacific Alliance, which is a group of four countries – Columbia, Peru, Mexico and Chile. We would like to bilaterally advance the E-Visa system with India to facilitate movement of people. But that requires the establishment of migratory information exchange mechanisms. Energy is a key focus area of our cooperation with India. Chile aspires for decarbonisation of the economy by 2050. That necessitates the use of surface energy options, which are clean and renewable. Due to our geographical conditions, we

have one of the most powerful solar radiations in the world and have very consistent onshore winds as well. There is a huge possibility of green hydrogen, which is also very important in India as a renewable and green fuel. Our country is projected be one the cheapest producers of green hydrogen. In the field of agriculture, Chile is a world leader in exports in the southern hemisphere and we have a lot of complementarities with India. Our products arrive here off season so we are not in competition. This is also good for customers in both countries. We also have to deal with non-tariff barriers and have created a working group to accommodate all concerns related to sanitary issues, regulatory formalities, etc. Furthermore, India and Chile are trying to update our existing agreements in agriculture and cooperation for areas like biotech, seed preparation, fight against drought, adaptation to climate change, etc. We are in a permanent search of new areas of cooperation. In mining and geology, both countries have expressed an intention to co-operate in lithium extraction. With Argentina and Bolivia, we form what’s called the lithium triangle and we have a working group in this area. Everything related to exports of pharmaceutical drugs and generics from India to Chile is of utmost importance for us. Both countries have very successful Start Up programs, and we are eager to cooperate there. Antarctica is another area, where we would like to share our scientific experience. We want to deepen our economic relationship by taking advantage of India’s competitiveness in sectors like IT services, health & biotech, and are working on that on a continuous basis.

Sep-Oct, 2021 • India Business & Trade | 29

VIEWPOINT

How successful has been India’s ‘Import Substitution’ Strategy? Import substitution is an inappropriate nomenclature for India’s policy thrust, which is primarily enhancement of domestic manufacturing capacities, including through strategic collaborations and export orientation. BY BIPIN MENON

ith India’s large domestic market, moderate contribution of manufacturing to GDP and significant trade deficit; it was natural for the country to look at options for ensuring a policy, which provided a fillip to employmentintensive manufacturing and create an equitable external trade balance. However, Aatmanirbharta is also fulcrumed around boosting exports, being part of credible & resilient supply chains, integrating with the global trade order and encouraging entrepreneurship & innovation. “Import substitution” would not be the apt term for how India has been trying to leverage competencies, resuscitate and kickstart manufacturing in key sectors. This policy has tried to address certain aspects like inclusive development, dependency on monopolistic

suppliers, obviating predatory pricing and using fiscal tools compatible with international trade obligations to incentivize investment-led manufacturing growth. Moreover, one cannot look at the entire manufacturing policy in isolation. The slew of reform measures undertaken over the years such as GST, low corporate tax, Insolvency and Bankruptcy Code, consolidation of labour laws, liberal FDI policy, schemes such as Make In India, Digital India, Startup India, etc, public procurement policy for domestic value addition, Direct Benefit Transfer (DBT ), infrastructure development and strategic disinvestments have played a complementary role to the Aatmanirbhar Bharat Policy. Import specific initiatives, both tariff and non-tariff, have been taken to ensure fair terms of competition

and appropriate quality of imports. These include raising of import duties, trade defence measures, regulatory tweaking such as quality control orders, technical regulations and compulsory registration. India’s policy on Special Economic Zones (SEZs) was conceived in April, 2000, to create islands of excellence & provide focused one-stop-shop facilities to these zones. Policy makers realised that given the length and breadth of India, it was not possible to make huge investments across exportoriented sectors. Hence a focus on specific geographically contiguous zones would be more financially and logistically pragmatic, to attract major players who would focus on exports. SEZs provide a reasonable window for interested parties to operate in a geographically bonded hassle free environment. In the

IMPORT SUBSTITUTION

absence of the need for repeated approvals for procurement of capital goods, raw materials and construction material, there is adequate flexibility to function in an economic environment, which is less burdensome. Moreover, for units with reasonable level of imports or domestic procurement and substantial output being exported, either physically or under the permissible deemed categories; the SEZ scheme makes perfect business sense. During the last financial year, global imports went down by 17% from the previous year. However, when one analyses the product profile of imports, the share of intermediate goods has risen from around 3035%, while share of raw materials has decreased by around the same percentage. Moreover, the share of consumer goods in these imports remains low at around 12%. One could thus infer that imports largely go into value added manufacturing. PLI: THE NEXT PHASE PLI would thus have to be seen from the prism of ensuring a level playing field for domestic manufacturers. While it is too early to evaluate the results of the PLI initiative, the sentiment has been reflected in the decrease in imports on a year-onyear basis of some of the products covered like medical devices, white goods, automotive components, automotive, textiles and clothing and solar cells. In the current pandemic scenario, our focus goes to key starting materials (KSM )/API /formulations. Firstly, manufacturing in this sector, including for a vaccine, involves a number of KSMs and APIs, which cannot be found in any one geographical domain. Hence, it is an uphill task to create the entire input space within one country. Therefore, it requires trying to have agreements with global suppliers of these inputs. Secondly, it is imperative to adequately fund research and development for new molecules and for this, focus has to be on incentivizing larger players. Thirdly, India’s experience with how one supplying geography literally

killed its KSM/bulk drug industry by its unfair penetrative pricing strategy and subsequently jacking up prices, thereby squeezing the margins of its formulation players, calls for a more holistic strategy. We must develop some parts of the entire value chain of this sector, so as reduce our vulnerability to such practices. India needs to look at a more strategic and collaborative approach to ramping up its production, as the sector becomes more cut throat and hi-tech. On the other hand, India along with South Africa, who have been co-sponsors of the TRIPS waiver on vaccines in the WTO, must keep up their pressure to ensure that it gets necessary support to sail through in the Ministerial. On medical devices, while imports have decreased by around 10%, the sector is hi-tech and requires a large quantum of investment. There

REFORM MEASURES UNDERTAKEN OVER THE YEARS HAVE PLAYED A COMPLEMENTARY ROLE TO THE AATMANIRBHAR BHARAT POLICY. is tremendous scope in this sector for ensuring a sizeable domestic production. The electric vehicle sector, including the key component; namely lithium ion batteries, is a sunrise area that could be tapped. Many enterprises have shown interest, while there is a demand to remove some stringent conditions of investment. Mobile phone imports remain robust, especially with the growing domestic market and penetration of internet deep into rural India. India remains an assembler, but it’s slowly indigenising the component space. However, it is heartening to see that exports of mobile phones is significant with a US$ 860 million trade surplus in 2020-21. Therefore,

this story is about slowly transiting from an assembler to value added manufacturing, while maintaining momentum on exports. As far as consumer goods like TVs & ACs go, it’s about focusing on manufacturing of key components such as compressors for ACs, which form a sizeable cost of the final product. For solar cells, the manufacturing is a hi-tech process involving purification of silicon and has to be undertaken under conditions that obviate impurities. The assembly of these into solar panels is probably a lesser hi-tech process. Therefore, this would also require transition from being an assembler of solar cells to an actual manufacturer of these cells. The apparel sector, on the other hand, is one where many of the competitors saw significant push to their exports. Two key issues that one may have to look at are the tapping of the synthetic textiles market and need for market access into some of the key importing markets. On the multilateral front, WTO Agreements, namely the GATT, TRIMS and ASCM have provisions which bar certain practices and could be a matter of dispute. These include the sourcing of domestic inputs, having a domestic value addition criteria and encouraging exports, even if the link is not direct. One has to take care that PLI schemes don’t run afoul of this. But overall, India’s policy to increase domestic manufacturing while ensuring a level playing field by regulating imports in a WTO consistent manner is a step in the right direction. Import substitution is an inappropriate nomenclature for this policy thrust, which is primarily enhancement of domestic manufacturing capacities, including through strategic collaborations & export orientation. ____________________________

The author is Development Commissioner, Noida SEZ.

Sep-Oct, 2021 • India Business & Trade | 31

MARKET INSIGHT

Vegan products: A sunrise segment for India’s F&B industry With a number of plant-based products becoming popular, veganism is spreading in India like wildfire. India can go a step further to leverage its agricultural resource base and vegetarian-friendly economy to master the supply chain for packaged vegan food items. BY VIRAJ

eto diets, Paleo-inspired whole foods diets, immunity boosters, super foods... people all over the world have started becoming conscious about what they eat. The COVID-19 pandemic has further thrown back the spotlight on healthcare like never before. The State of Snacking: 2020 Global Consumer Snacking Trends Study states that over half of global adults have relied on snacks for nourishment during the pandemic (54%) & have more control over the portions they eat, as they are snacking at home more often (66%). One such health trend in vogue is the rise of plant-based diets in the country. From vegan cafés and restaurants mushrooming panIndia to vegan cooking classes, tours, conferences and e-tailers – the trend is spreading in India

like wildfire. Around 38% of India’s population is vegetarian and 63% of people are open to replace meat with plant-based options. As per the Food and Agricultural Organisation of the UN, the livestock sector contributes to 18% of the total greenhouse emissions globally, while also contributing to 37% of all human-induced methane emissions. In India, livestock contributed 63.4% of total greenhouse gas emissions from agriculture & methane emissions from livestock are the highest in the world. According to the WHO, over 40% of all cancer cases are preventable

32 | India Business & Trade • Sep-Oct, 2021

and the organisation advises people to consume plant-based foods to reduce risks of developing cancer. A 2015 WHO report found that bacon, hot dogs, and other processed meats cause cancer. Therefore, a lot of recent studies are recommending more plant-based options. Animal welfare concerns are also key factors for the advocacy of alternative dairy products. Consumers are hence gravitating towards the ‘clean’ label and ethically produced food products. According to a survey by Rakuten Insights in 2019, veganism has been on the rise in India due to various reasons like following a vegetarian diet (52%), health (50%), concerns about animal welfare (43%), environment (30%), taste (25%) and other reasons (8%). The pandemic has also exposed

VEGANISM

GLOBAL VEGAN MARKET Size by 2025

CAGR (2019-25 )

US$ 24.1 billion

9.6% Fastest growing market (2019-25 )

Leading markets U.S.

Australia

U.K.

New Zealand

Sweden

Canada

Israel

Ireland

Austria

Germany

Asia Pacific (CAGR of 12.1% )

Leading product category

Dairy alternatives (50% of market in 2018 )

SOURCE: GrandView Research

the vulnerability of the dairy and meat industry. As per a UN report, Preventing the Next Pandemic, 60% of known infectious diseases in humans, as well as 75% of the new infectious diseases endangering humans, are through animals. Most reports suggest that COVID-19 was transmitted from animals to humans and zoonotic diseases are likely to become more frequent as demand for such protein increases. Industrial animal farms are breeding grounds for pathogens mutating into novel strains capable of a pandemic spread. As per medical experts, over 10 million deaths from antimicrobial resistance globally are estimated by 2050, an increase of 14 times over current deaths. VEGANISM ON THE RISE IN INDIA The global plant-based food market was valued at US$ 12.1 billion in 2019 and is expected to reach US$ 74.2 billion, or over six times by 2027. Another report by UBS and Jefferies has suggested that plantbased meats can be a US$ 100 to US$ 370 billion global industry over the next 15 years. India, being home to a large vegetarian population, can be an important beneficiary of this stellar growth. Meat substitutes produced directly from plants and meat cultivation through cells can ensure land use reduction by 35-99%

as compared to the conventional manner of meat production. The mock meat industry is set to reach US$ 1 billion in the coming five years. This will be critical for India, which continues to expand its food production, to ensure food security for its huge population. It will also enable India to adhere to its Sustainable Development Goals. The ‘Insights on plant-based milk category in India’ states: Plant-based milks such as soy milk, almond milk and oat milk have made promising inroads with Indian consumers. Estimated at US$ 21 million vs the animal-derived dairy industry at US$ 140 billion, plantbased dairy in India is projected to grow at a CAGR of 20.7% to reach US$ 63.9 million by 2024. Global organisation Veganuary, which encourages people from all over the world to take a pledge to turn Vegan, also releases a survey each year highlighting countries topping the number of signups. In 2021, India made it to the top for the first time, placing Germany at fourth spot, while UK and US continue to hold dominant positions. While young and conscious Indians adopting cleaner and greener healthcare practices is a key reason, the challenge surrounding zoonotic diseases is also an important cause. The country has seen a number of plant-based food

product companies springing up including Vezlay, Good Dot, United and Ahimsa Foods, Evo Foods, PlantMade, MilkinOats, Epigamia, Hershey’s Sofit, So Good, Katharos, Bombay Cheese Company, Evolved Foods, Blue Tribe Foods, Emkay Food Products, and Piperleaf, amongst others. A number of sports and film celebrities in India have also adopted veganism, hence influencing fans to do the same. In 2019, India hosted the Vegan India Conference, which aims at providing a support system to food technologists, vegan innovators, investors, exporters and retailers. The conference saw over 450 delegates from 18 countries. Further, it is interesting to note that in 2019, PETA India awarded Hyderabad, the most meatconsuming city in Asia, the title of Most Vegan-Friendly City in India! To sum up, the pandemic has flipped a switch in the minds of many in favour of veganism. India can leverage its vegetarian-friendly image and strong agri resource base to master the supply chain for vegan packaged food items. At the same time, the industry must improve competence in agricultural practices and knowledge, R&D of food supplychain, quality of supply chains, and abide by global standards and labelling of vegan products.

Sep-Oct, 2021 • India Business & Trade | 33

VIEWPOINT

India-Brazil relations can become even stronger across spheres Brazil and India can become key partners for a deeper and long-term relationship, especially considering the still underexplored opportunities. Post-COVID, there is necessity to reinvent, adapt and find new forms of cooperation in sectors like agribusiness and renewable energy. BY LEONARDO ANANDA GOMES

ince 1948, after India’s Independence, India and Brazil have been developing their bilateral relationship as two independent countries and big players in the respective regional scenarios. These relations have been growing stronger ever since. However, it seems they can become even more relevant in the near future. From 2004 to 2014, commercial trade between the two countries increased and diversified significantly. After the peak in 2014, bilateral trade has been admittedly at lower levels, which is also as a result of international and national crises. However, the strong recent interactions at the governmental and institutional levels, lead to an expectation of growth in commercial trade of up to US$ 15 billion in 2022,

according to H.E. Ambassador of Brazil in India, André Corrêa do Lago. Taking a closer look at some of the latest interactions between the two countries, bilateral relations have gained relevance, with both governments showing political interest in coming closer together. This became evident after the invitation of the Indian Prime Minister, Narendra Modi, to have Brazil as a guest country in the celebration of the Independence of India in January 2020. This visit of the Brazilian Federal Government to India led to the signing of 15 agreements, in many different sectors, to facilitate business engagement and cooperation between the two countries. The agreements go from technological and scientific cooperation to

34 | India Business & Trade • Sep-Oct, 2021

childcare and cultural exchange matters. STRONG COMPLEMENTARITIES Nowadays, amidst the COVID -19 pandemic, the importance of Indo-Brazilian bilateral relations has been highlighted, especially in the pharmaceutical sector. According to data from the Ministry of Economy of Brazil for 2020, pharmaceutical products correspond to almost 30% of India’s exports to Brazil. Furthermore, some of the largest investments by Indian companies in Brazil are in this sector: ACG, Zydus, Lupin and Dr. Reddy’s Laboratories, just to mention a few. Moreover, when talking about the India-Brazil relations, another sector that deserves great attention is information technology (IT ). India

INDIA-BRAZIL RELATIONS

is recognized around the globe for its strong technology market, as the birthplace of relevant companies in the sector. It is an international reference for software development and programming, being a world leader in the sale of outsourcing services and retaining an average of 75% of global talents in the digital age, according to the India Brand Equity Foundation. On the other hand, Brazil is not in the spotlight for IT services and has a lot to improve in its national industry and supply capacity. Considering high demand and untapped potential in the Brazilian market, companies like Tata Consultancy Services, Infosys, Wipro, HCL Technologies, Tech Mahindra and others set up operations in Brazil, turning IT into one of the most relevant sectors for bilateral relations. Moreover, even though Brazil is not a key player in the international scenario for IT, the vision of a creative economy is stimulating the development of several start-ups in many sectors, willing to fill market gaps with innovative products. According to the Global Innovation Index 2019, Brazil is the 10th biggest developer of mobile apps and appears in the top 10 of metrics for quality of innovation. This implies that besides the lower quantity of internationally recognized companies and overall products/services offered in the technology sector, Brazil has a potential for quality creation. In that sense, besides the market complementarity, Brazil and India show great potential for technology cooperation. This is so especially in areas that have international scope and in which India is already ahead in its development, while Brazil has a lot to explore vis-a-vis its creativity and market capacity. Some such segments, which can be interesting for cooperation in the scope of the bilateral relations are artificial intelligence, cybersecurity and safety technologies. Undoubtedly, IT & pharmaceutical sectors play protagonist roles when we talk about business between Brazil and India. Also, if we look at the commercial trade balance of

EVEN THOUGH BRAZIL IS NOT A KEY PLAYER IN THE GLOBAL SCENARIO FOR IT, THE VISION OF A CREATIVE ECONOMY IS STIMULATING THE DEVELOPMENT OF SEVERAL START-UPS IN MANY SECTORS products exchanged between the two countries, we notice the crucial role of the oil and gas sector, including crude materials and fuel oils. Around 48% of Brazilian exports to India, in 2020, were represented by crude petroleum oil and 20% of Brazilian imports from India were represented by petroleum fuels, in the same year. However, there are other areas that must be considered for deeper cooperation, since COVID-19 is leaving an important lesson in what concerns the necessity to reinvent, adapt and find new forms of cooperation in sectors like agribusiness and renewable energy. Brazil is internationally recognized for its contribution to agribusiness, as the country is the largest producer and exporter of products like soybean, corn, sugar, meat and others that are part of basic consumption globally. It is also blessed with large stretches of land and hydric resources that can be used to grow pulses, which are largely consumed in India. In this panorama, it is pertinent to mention that India, although being a large producer of pulses, has a huge internal demand that necessitates imports. Recent data shows that India isn’t still included in the top 10 destinations for Brazilian pulses exports. Therefore, it is clear that there is wide potential for growth of bilateral relations in the agricultural sector, specifically in the pulses segment. At last, let’s bring to the discussion the renewable energy topic that has become a trend worldwide. India is the fourth most attractive market for this sector. On the other hand, Brazil has been using

ethanol for 40 years as a source of renewable energy and is willing and open to sharing its experiences with India, as the country has already shown interest. Therefore, technological cooperation in order to produce ethanol, relying on the vast Brazilian experience, in addition to increasing Indian production of this biofuel, will also help balance the world sugar supply and provide greater price stability for this commodity, according to Brazilian Minister Tereza Cristina. SHARED VALUES & VISION Bilateral relations between India and Brazil celebrated 70 years in 2018, a very significant mark and the result of efforts and mutual interest from both sides in coming closer together. However, these relations can become stronger, in many spheres, bringing benefits for both the countries. Brazil and India are both relevant regional and international players and even though they have outstanding cultural differences, the similarities between those countries can also be seen, especially when looking into social problems faced by both, the need for economic development, the shared democratic values and the usually common alignment in the global scenario. Nowadays, in this context of “new normality”, even though there is an intensification in protectionist and international transit restrictions, the importance of international cooperation with strategic partners, has been highlighted. Brazil and India can become key partners for a deeper and long-term relationship, especially considering the still underexplored opportunities in this interaction. Therefore, it seems there is a tendency for India and Brazil to explore their synergies further and make this alliance stronger for mutual growth.

The article is co-authored by Leonardo Ananda Gomes, President, India-Brazil Chamber of Commerce; Ms. Giovanna Menezes, Ms. Letícia Gomes & Ms. Nathalia Rodrigues.

Sep-Oct, 2021 • India Business & Trade | 35

What’s the latest

@ TPCI

Agri Import/Export Management

Sept-Oct 2021

Focus area Agri trade management Duration 6 months Audience Agricultural exporters, export/import managers

The Trade Promotion Council of India in collaboration with the Indian Institute of Foreign Trade has introduced the Certificate Program in Agri Import/Export Management. It has been designed to benefit current and budding agri entrepreneurs and managers, in the spirit of visionary government initiatives like the Agri Export Policy and Aatmanirbhar Bharat. The primary objective of the program is to build knowledge and understanding on the key aspects of export/import management. At the heart of the course is the intention to help Indian agri and processed food exporters to enhance their global footprint, boost India’s exports and raise farmer incomes. It will equip participants with comprehensive knowledge and skills on various aspects of international agri business.

3. INDIA’S AGRI POLICIES & EXPORT INCENTIVES Agricultural policies (Centre & State) for key exportable crops, export incentives, duty neutralization, & capacity building schemes offered under the Foreign Trade Policy. 4. TRADE OPERATIONS & DOCUMENTATION Step-by-step process of starting an export/import business, understanding of export documentation, export sales contract, INCO Terms, operational issues faced in international business, export-import cargo and duty assessment. 5. INTERNATIONAL TRADE FINANCE Pre-shipment and post shipment finance, payment methods (L/C, UCP), instruments of trade finance, currency risk management and understanding of FEMA Guidelines.

The course offers the following modules: 1. PRODUCT & MARKET IDENTIFICATION Identification of the best products for exports based on changing consumer behaviours and preferences, filtering of most potential export markets.

6. LOGISTICS & CUSTOMS REGULATIONS Logistics of agricultural products - containerization, palletization, unitization, packing, labelling, marking, choice of modal transport, multimodal transport, risks involved and role of logistics intermediaries.

2. INTERNATIONAL MARKETING MANAGEMENT International product decision and adaptation, entry mode in foreign markets, channel selection, export pricing methods, digital marketing and branding.

7. INDUSTRY INTERFACE Hands-on exposure to how successful Indian agri exporters are building international brands by identifying opportunities, interfacing with relevant buyers, overcoming market volatilities, etc.

36 | India Business & Trade • Sep-Oct, 2021

WHAT’S THE LATEST @TPCI

India-Egypt Food Processing & Packaging Technology BSM

India-Egypt Food Processing & Packaging Technology Buyer Seller Meet was orchestrated by TPCI to promote two-way commerce in the sector between the countries. This was the first such delegation visit & BuyerSeller meeting after the pandemic. H.E. Ajit Gupte, Ambassador of

India to the Arab Republic of Egypt addressed the participants, encouraging them to utilise the platform to have a fruitful business engagement. After inaugurating the session, Gupte said that Egypt is a growing market for food and beverages, dairy and edible oil processing. “With the

India-Russia Ceramic BSM

TPCI successfully organised the IndiaRussia Ceramic BSM on October 5 in collaboration with Embassy of India in Moscow. Thirty prominent ceramics and tiles exporters from India participated in this programme and engaged with over 50 Russian buyers, importers and distributors. This was the first visit of ceramic & tiles exporters to Russia after the pandemic. Gina Uika, Deputy Chief of Mission, Embassy

of India in Moscow inaugurated the event. She said, “Russia imports a substantial quantity of ceramics products, which Indian exporters should see as a strong potential market.” Asim Vohra, First Secretary, Embassy of India, Moscow; Naveen Chaudhary, Second Secretary, EoI Moscow and Faraz Khan, Asst Director, TPCI were also present.

Date: October 5 Location: Moscow, Russia

increasing market demand for processed food, there will be increased demand for technologies for food, beverages, dairy, edible oil, processing and packaging solutions. Indian OEMs will have great market opportunities in Egypt,” he added. The session included 15 leading Indian companies and 20 delegates comprising of food & beverages, dairy, edible oil, packaging technology providers and food ingredient suppliers. The TPCI delegation was led by Vikas Bhatia, MD of RIECO Industries and Executive Committee Member of the Food Processing Technology

Sectoral Committee of TPCI. Anik Roy, Deputy Director, TPCI was also present at the session. Some of the participating companies were Rieco Industries, Spectec Techno Projects Pvt Ltd, Vibfast Pigments Pvt Ltd, Nichrome India, Goma Process Technologies Pvt Ltd, DVC Process Technologists, and Kumar Metal Industries Pvt Ltd. They engaged in discussions with around 40 leading food & edible oil processors from Egypt to discuss long-term business partnerships.

Date: September 19-20 Location: Cairo, Egypt

India-Europe F&B BSM India-Europe Food & Beverage Buyer Seller Meet was organised by TPCI at Koln on 10th October 2021. Ram Kumar, Consul (Coordination), CGI Frankfurt, inaugurated the event. Abhishek Poddar, Vice Chairman, Food & Beverage Sectoral Committee, TPCI and MD, Nani Agro Products Pvt Ltd led the delegation. Nippon Global SL was the lead sponsor for the event. Deepak Vohra, Director, TPCI & Bhanu Vashishtha, Deputy Director, TPCI were also present at the event. The BSM generated several potential business enquiries for the participants and

also witnessed spot order bookings. Twenty five prominent exporters of food & beverages from India engaged with 80+ European buyers/importers. Prominent segments such as consumer food, Indian ethnic food, tea, spices, dry fruits, rice, pulses, agro commodities, honey, organic food etc. were represented at the event.

Date: October 9-12 Location: Cologne, Germany

Sep-Oct, 2021 • India Business & Trade | 37

HAPPENINGS

International Conference on Moringa Trade Trade Promotion Council of India participated in the International Conference on Moringa, The Super Food – Research Status, Scope & Way Forward in Periyakulam, Tamil Nadu. The three day conference hosted eminent luminaries, who shared their thoughts on moringa, which has seen a surge in demand owing to its nutritional and industrial value globally, especially post-pandemic. The panel of speakers included government officials, academicians, researchers, Vice Chancellors, research organisations like ICAR, scientists, representatives

from NABARD, and industry promotion bodies. Prominent names included Dr T. Arumugam, Dean, Horticulture, Tamil Nadu Agriculture University (Horticulture College & Research institute), Periyakulam, Abu Becker, Nrich Group, Canada, Dr M Natchimuthu, Chairman, IMRO, etc. Ashok Sethi, Director, Trade Promotion Council of India represented the council and chaired a session on the second day of the event. He spoke on the ‘Present scenario of Moringa in global trade & role of national and international

agencies in promotion of Moringa trade’. He opined that the Middle East & Saudi Arabia are potential markets to be targeted immediately, as this region is giving huge importance to health products and has also been a traditionally strong market for India. He also invited the participants to visit and participate in the upcoming

edition of Indusfood, which is being organised by TPCI under the auspices of Ministry of Commerce and Industry, GOI, since 2018. Organised annually, Indusfood is the most comprehensive F&B trade show in South Asia.

Date: October 6-8 Location: Periyakulam, Tamil Nadu

Exporter directories for Foodtech and Ceramics & Tiles

TPCI launched two exporter directories - Food Processing & Packaging Technology Suppliers Directory 2021-22 and Ceramics & Tiles Exporter’s Directory. The former is a hand book for procurement decision makers across the globe, who are looking for sourcing plant & machineries, turnkey projects pertaining to food processing and packaging industry from India. The Directory includes a list of screened and prominent suppliers of

India with their contact detail, company profile, product list, description of new innovative technologies, interviews, company catalogue & company video QR codes, thus providing a user friendly interface for understanding, identifying, and shortlisting appropriate plant and machinery suppliers. The directory covers Indian exporters from key segments such as dairy technology, F&B technology, snacks & bakery, edible oil technology, etc.

38 | India Business & Trade • Sep-Oct, 2021

The Ceramics & Tiles Exporter’s Directory is a first of its kind sourcing handbook of the Indian ceramics & tiles industry to connect with global ceramic and tile importers, distributors, building & construction industry consultants. The directory includes details about featured companies including corporate profiles, key contact person, product details and so forth. It makes it easier for buyers to review, shortlist

and connect with suppliers. Available in physical booklet, downloadable PDF as well as searchable web-based format, the directory is a cost effective medium for Indian exporters to target markets across North America, Latin America, Europe, CIS and ASEAN countries.

Product: Exporter Directory Focus sectors: Ceramic and Foodtech

WHAT’S THE LATEST @TPCI

Master Class with Choithrams

Of late, manufacturers and traders are increasingly inclined towards expanding their global footprints through trade and exports. However, inadequate knowledge of various country-specific

compliances, market potential, dynamics and challenges can be quite daunting for several companies. To bridge this gap amongst industry stakeholders, TPCI has launched a “Master

Class” series for Indian exporters to interact with and learn from global flag bearers of the F&B industry. The first Master Class in this series with Choithrams, organised on September 24, discussed challenges faced by Indian F&B exporters while exploring GCC countries, and the potential offered by the region. Given that the GCC is the most important export destination in the Middle East with high proximity to India, it is a go-to place

for Indian exporters with phenomenal untapped trade potential. The eminent panel included Kirti Meghnani, Head-Procurement, Choithrams, UAE & Narendra Shah, MD, Selmax Exports Pvt Ltd. Through this interactive session, the participants were inspired by success mantras followed by one of the leading distributors and hypermarkets of the Middle East region. The session was moderated by Sneha Varma, Executive Officer, TPCI.

Date: September 24 Topic: Winning in the GCC market

WEBINARS India & Bahrain: Trade & Investment in Foodtech & Engineering TPCI organised a webinar on India-Bahrain relations in focus sectors of F&B technology and engineering in collaboration with the Embassy of India in Bahrain on September 29. Panelists: - H.E. Piyush Srivastava, Ambassador of India to Bahrain - Abdul Rahman Juma, Chairman of Bahrain India Society & Chairman of UNEECO Group - CA P S Balasubramanyam, VC, Bahrain India Society & MD, Assure Group - Ebrahim Mohamed Ali Zainal, Chairman, Trafco Group - Fareed Bader, Chairman & MD, Bader Group of Companies & Chairman of Industrial Committee at

the Bahrain Chamber of Commerce and Industry - Sanjay Grover, VP International Business Division, Kirloskar Pneumatic Company Ltd and VC, Sectoral Committee on Food Processing & Packaging Technology, TPCI - Deodutta Despandey, Strategic Business Unit

Head - Thermax and Hon. Member, Sectoral Committee on Food Processing and Packaging Technology, TPCI - Ashok Sethi, Director, TPCI The session was moderated by Virat Bahri, Dy Director, TPCI. Panelists from

Bahrain enlightened the audience on the business environment in the country, major focus sectors within manufacturing & F&B for Indian companies and also the changing orientation of Bahrain, which is more keen on attracting investments as opposed to just sourcing.

Sep-Oct, 2021 • India Business & Trade | 39

HAPPENINGS

India-Australia CECA

After being suspended in 2015, India-Australia CECA negotiations are back into focus. The

proposed trade agreement on trade and economic growth of both countries.

webinar on India-Australia CECA on September 28 discussed in depth the implications of the

India-CEE Trade relations

Panelists: - Amb Anil Wadhwa, Ex Secretary (East ), Ministry of External Affairs, IFS; - Manoj Pant, Vice Chancellor, IIFT - Dr. Pralok Gupta, Associate Professor, Centre for WTO Studies, IIFT - Surojit Gupta, Associate Editor, Times of India; -

TPCI organised a webinar on September 27 that focused on untapped trade

The session was moderated by Sameer Pushp, Director, TPCI.

India-Israel Agritech startups TPCI organised a webinar on the contemporary topic of India-Israel agritech collaboration for transformation of farming in association with Embassy of Israel on September 14.

India has enjoyed excellent political, economic and military ties with Eastern and Central Europe post the Cold War. The following three decades have also seen a consistent growth of the bond. Countries in Central and Eastern Europe offer access to EU’s markets at lower operational costs.

Anand Kumar Singh, Deputy Director General, ICAR - Ravneet Pawha, Deputy Vice President (Global) & CEO (South Asia), Deakin University - Ravi Mirchandani, Chairperson, IndoAustralian Chamber of Commerce.

opportunities in the region. Panelists - HE Milan Hovorka, Ambassador of Czech Republic - HE Daniela Mariana Tane, Ambassador of Romania - V. K. Gauba, Additional Director General, TPCI

Panelists: - Natasha Zangin, Counsellor, Head of Economic & Commercial Mission, Embassy of Israel to New Delhi - Dr Rca Godbole, CoFounder & CSO, SaliCrop - Dr Sangita Ladha,

Business Director, Rivulis; - R. Sabrinathan, Global Rice Agronomist, Netafim - Dr. Rakesh Sharda, Punjab Agricultural University - Kapel Malhotra, Founder & MD, Total Solutions Group - Kunal Prasad, Cofounder and COO, Cropin - Saurabh Job, Global Marketing Head, Intellolabs The session was moderated by Virat Bahri, Deputy Director, TPCI.

The session was moderated by Nikhaar Gogna, Executive Officer, TPCI.

Meeting with India-Brazil Chamber of Commerce TPCI, represented by Ashok Sethi, Director and Virat Bahri, Deputy Director, held a meeting with the India-Brazil Chamber of Commerce, represented by its President Leonardo Ananda Gomes to discuss avenues to boost

40 | India Business & Trade • Sep-Oct, 2021

bilateral trade and investment ties in focus sectors. Both sides recognised the need to accelerate efforts for integration between the two countries, which are emerging from the effects of the COVID-19 pandemic.

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