Modi govt establishes high-level advisory group to boost exports

A day after hiking import duties on 19 items, the government decided to set up a 12-member, high-level advisory group to look at ways of promoting export. Headed by economist Surjit Bhalla, part-time member of the Prime Minister’s Economic Advisory Council (PM-EAC), the group will work on exchange rate management and impacts of trade wars. 

The panel has been set up as a temporary measure and is set to meet for the next two months regularly, and then it will submit a report to the commerce ministry, a government official said. 
 

It will also examine the prevailing trade dynamics and suggest a framework for India for engaging in international trade. 

The other members include Principal Economic Adviser Sanjeev Sanyal, former commerce secretary Rajiv Kher and Quality Council of India Chairman Adil Zainulbhai. 
 

During 2017-18, exports grew by about 10 per cent to $303 billion. On Wednesday, in the fifth such instance on hiking tariffs, the government raised basic customs duties on 19 products, which cumulatively cost Rs 860 billion in 2017-18, according to the finance ministry. This, however, constituted just 2.8 per cent of India's import bill that year.

“At the margin some imports could come down but would not have a significant bearing on the quantum of imports. To the extent that these imports continue to flow in, there would be an inflationary impact, albeit marginal,” CARE Ratings said.

The highest number of items on the list is in the electronics category, which makes up the biggest chunk of the import bill after crude oil and gold. 

“While the rate hike was important in order to narrow the current account deficit and bring the domestic manufacturing industry at par with the international markets post GST, the timing of the hike will have a major impact on the durables industry with the festive season just around the corner,” CARE Ratings said. 

Companies might not be able to pass on the price rise on account of muted demand in the domestic market after the price drop in washing machines and refrigerators during June-August 2018 owing to GST-led rate corrections, it added. 

According to Icra, the current account deficit is expected to widen to $72-77 billion (2.8 per cent of GDP) in 2018-19 from $48.7 billion in 2017-18 (1.9 per cent of GDP). 
 

The 5 per cent duty announced on aviation turbine fuel (ATF) is not expected to affect airfares because there is no ATF shortage in India, a senior finance ministry official said on Thursday. 

The trade deficit, which is the biggest part of the CAD, reduced to $17.4 billion in August from $18.2 billion in July. In the two months of July and August, the trade deficit has risen to $35.6 billion after it stood at almost $45 billion in the first quarter of the current financial year.