A week of hopes, anxieties and expectations ahead for exporters

This week begins with hopes and anxieties on what the Trump administration in the United States will or will not do on the issue of punitive tariffs on import of Indian goods, what our own government will do to help the exporters and the effect of protectionist measures on downstream users.

 

President Donald Trump surprised India earlier this month by imposing 25 per cent tariffs on Indian goods entering the US, in addition to the 25 per cent reciprocal tariffs he imposed towards the end of last month. He had left open a 21-day window before the additional tariffs come into effect. During this period, he cancelled the scheduled visit of the US trade delegation to India for negotiations on a trade deal. He appointed his close aide Sergio Gor as the ambassador to India rather than a seasoned professional, who can build better relations with India. Despite indications to the contrary, exporters hope that the punitive tariffs will be lifted before they kick in for shipments made after this Tuesday. 

Anxieties persist that if the US goes ahead with the 25 per cent punitive tariffs, about US$33 billion of Indian exports to the US may be affected, with exporters of textiles, engineering, gem and jewellery and marine products suffering the most. The government has already taken some steps for reviving domestic consumption by initiating necessary moves to rationalise and reduce the Goods and Services Tax (GST) on articles of mass consumption by next month. Some immediate steps, however, will be required from the Central and state governments to give relief to the workmen, if they lose their jobs due to loss of export business caused by higher US tariffs. 

In her budget speech this year, finance minister Nirmala Sitharaman said that the government will embark on an export promotion mission, with sectoral and ministerial targets, driven jointly by the ministries of commerce, micro, small and medium enterprises (MSME) and finance. It will facilitate easy access to export credit, cross-border factoring support, and support to MSMEs to tackle non-tariff measures in overseas markets, she said. Exporters expect the government to announce the details of such facilitations this week. 

Last week, the government held talks with the leaders of Russia and China to keep the supply chains, especially of rare earth magnets and crude oil, going on without disruptions. Hopefully, any contentious issues will be relegated to the background in the interests of more trade in goods and services and also investments and broader economic co-operation. 

A worry for a large number of industries is the recommendations of the Directorate General of Trade Remedies (DGTR) last week to impose safeguard duties of 12 per cent, 11.5 per cent and 11 per cent in the first, second and third year on imports of certain steel products and to impose anti-dumping duty on imports of PVC suspension resins from certain countries. In April, the government had imposed a provisional safeguard duty of 12 per cent on certain steel items for 200 days. The government should consider the possible adverse impact of such protective duties on the downstream industries before giving effect to the latest recommendations of the DGTR. On Friday, the government imposed minimum import prices on imports of certain types of paper. Such higher protection to a few producers at the expense of a large number of downstream user industries and consumers can be counterproductive.

 

Email:tncrajagopalan@gmail.com