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Union Commerce, Industry and Textiles Minister Piyush Goyal unveiled a new foreign trade policy that moves away from providing incentives to exporters, but lowers a few costs for smaller firms and promises swifter clearances, along with a one-time amnesty scheme for export obligation defaults.
Replacing the extant policy that had been in place since 2015, the new policy kicks in from 2023-24 and aims to almost triple India’s goods and services exports to $2 trillion by 2030, from an estimated $760 billion in 2022-23.
India’s exports were $435 billion in 2015-16 when the previous policy was introduced and have grown nearly 75% to an estimated $760 billion in 2022-23, Director General of Foreign Trade (DGFT).
The new policy will have no sunset date and will be tweaked based on the emerging world trade scenario and industry feedback. While the policy will be open-ended, the schemes sanctioned under it will be time bound.
There are no major new schemes, barring a one-time amnesty under the existing Advance Authorisation and Export Promotion Capital Goods (EPCG) schemes, that allow imports of capital goods subject to specified export obligations.
Editorial
India’s semiconductor mission might need a compass (Page no. 6)
(GS Paper 3, Economy)
The United States Department of Commerce and its Indian counterpart have recently concluded a memorandum of understanding in March 2023 to ensure that subsidies by each country do not come in the way of India’s semiconductor dreams, as espoused by the much publicised semiconductor policy launched in December 2021.
The U.S. Department of State has also engaged with India to beef up sector-specific export control laws in the semiconductor space — which India has agreed to, as in recent media reports.
While these seem pre-conditions in a long dance orchestrated by bureaucrats on both sides, will they lead to a global major such as Intel to invest in India in order to set up a greenfield 300mm wafer fabrication plant costing over $10 billion?
The premise of this question is based on the ongoing two-year dance between Intel and Indian government ministers who were seen courting the Intel CEO at Davos, and New Delhi hoping that Intel Foundry Services (a business unit within Intel formed after Intel’s takeover of the U.S.-Israel based Tower Jazz Speciality Foundry) will build a greenfield plant, most likely in Dholera, Gujarat.
The facts on the ground do not support such an eventuality in a world where Intel remains preoccupied with setting up fabs inside the U.S. So where does Indian semiconductor policy need to go from here?
The Semi-Conductor Laboratory (SCL) was set up in Mohali in 1983 by the then central government, with the vision of creating an electronics ecosystem in an era when Keltron, Uptron and Webel were fledgling entities in a pre-liberalised India aimed at consumer electronics.
However, shocks, of the opening up of markets for consumer goods in 1991 and a fire that broke out in 1989 at the SCL, dashed these hopes. Some funding from the central exchequer to revive the plant to a 180 nm node pilot line to meet the strategic needs of the country did come by but the facility has, by and large, remained an unfulfilled dream in its mission of creating a domestic semiconductor ecosystem.
SCL Mohali can be viewed as a technology stack similar to others such as Aadhaar, Aarogya Setu and the Unified Payments Interface (UPI) acting as a force multiplier effect, encouraging many integrated circuit design startups in India to consider designing for India.
News
NATO is open to stronger ties with India, says U.S. envoy (Page no. 8)
(GS Paper 2, International Relations)
A leading U.S. official has said the North Atlantic Treaty Organization (NATO) is “open” to deepening ties with India. Speaking at a virtual press briefing, Ambassador Julianne Smith, U.S. envoy to NATO, said Russia should withdraw from Ukraine and that NATO is watching China-Russia relation in the backdrop of Russia’s continued military operation in Ukraine.
NATO’s door is open to more cooperation if India seeks that. NATO is more than happy to sit down anytime with India,” said Ambassador Smith confirming that officials of NATO held “informal” exchanges with Indian counterparts on the sidelines of the recently held Raisina Dialogue in Delhi.
The Ministry of External Affairs (MEA) had last year confirmed that the two sides had maintained contact at various levels for some time. “India and NATO have kept in touch in Brussels at different levels for quite some time now.
This is part of our contacts with various stakeholders on various issues of mutual interest,” MEA spokesperson Arindam Bagchi had said in last August.
Ms. Smith announced that a NATO Ministerial will be held on April 4-5 but she also confirmed that NATO hasn’t invited India for the meeting. The U.S. official, however, informed that it will see participation from Japan and Australia.
Australia seeks a diversified market for lithium export (Page no. 10)
(GS Paper 1, Natural Resources)
Australia would rather have a diversified market for its lithium exports — and this includes India — than they all be cornered by the U.S., Don Farrell, Australia’s Minister for Trade and Tourism said in a media interaction. Lithium is a critical metal necessary to make batteries for electric vehicles.
Mr. Farrell was speaking in the context of the U.S.’ Inflation Reduction Act (IRA), passed in August 2022, that grants subsidies to electric vehicles produced in the U.S.
The European Union and South Korea have vehemently criticised the IRA on the grounds that it made electric vehicles imported into the U.S. from their regions uncompetitive.
Australia, Mr Farrell said, “hadn’t been critical of the IRA” because it stood to gain from it. One of the clauses of the Act required that at least 40% of all the ‘critical minerals’ (which includes lithium) that go into making electric batteries must come from countries with a Free Trade Agreement with the United States.
There are very few countries with both an FTA and the largest reserves and we are one of them. So we see great opportunity for Australia. What we don’t want to see is all of those critical minerals gathered up and headed to the United States.
Australia is the world’s biggest exporter of lithium with most of it going to China, which dominates the lithium-ion battery production market.
Mr. Farrell said just as the U.S. and Europe were looking to Australia (for minerals) because the only other source was China, Australia was looking to diversify away from a single market and this opened opportunities for India.
“We give you the opportunity of investing in our country. India is building an electric vehicles industry and Australia would like to be part of it,” he said. Access to critical minerals is increasingly an area of cooperation between the two countries.
Australia’s Minister for Resources, Madeleine King, and India’s Minister for Mines, Pralhad Joshi signed an agreement earlier this month to invest $3 million each to investigate the prospects of Indian investments into two lithium- and three cobalt- prospecting projects in Australia.
Both King and Farrell were part of an Australian delegation to India led by Prime Minister Anthony Albanese early March.
World
U.K. to join trans-Pacific partnership trade treaty (Page no. 11)
(GS Paper 2, International Relations)
The U.K. acceded to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), with Prime Minister Rishi Sunak describing the outcome as an example of “post-Brexit freedoms”. The agreement will now need to be ratified by Westminster and each of the CPTPP countries.
“We are at our heart an open and free trading nation, and this deal demonstrates the real economic benefits of our post-Brexit freedoms,” Mr. Sunak said about the U.K.’s move to join the 11-member Asia-Pacific trading bloc, which, without the U.K., accounts for some 13% of global GDP. Talks had been on-going for 21 months.
The British government said the deal would mean that more than 99% of British exports — including for key markets such as cheese, cars, chocolate, machinery, gin and whisky — would have zero tariffs.
It also claimed that the deal would add £1.8 billion ($2.2 billion) annually to the U.K. economy in the long run. This, however, translates to a modest boost of 0.08% to GDP.
The government said the deal was a “gateway” to the Indo-Pacific region which would account for a majority (54%) of global economic growth in the future.
The U.K. is currently also negotiating a “free trade” deal with India. It will also, as a CPTPP member, get a veto on whether China joins the treaty.
Beijing had applied to become a member of the bloc in September 2021. The U.S., in the Donald Trump presidency, had withdrawn from the CPTPP’s precursor, the TPP.
Downing Street highlighted some of the benefits of the CPTPP — such as a cut in whisky and car tariffs for British goods going to Malaysia. Services — which are a key U.K. export — accounted for 43% of exports to CPTPP countries last year.
Once Britain becomes a member of the bloc, U.K. firms will not need to establish a local office or be resident to provide services and will be able to operate on a par with firms in host countries.
Questioned by Times Radio on whether the impact of joining CPTPP would make up for the economic loss of leaving the EU, the U.K.’s international trade secretary Kemi Badenoch, suggested it was time to move the debate on from Brexit.
Business
FTP expands export promotion scheme to include PM MITRA (Page no. 12)
(GS Paper 3, Economy)
The new Foreign Trade Policy (FTP) has added the Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA) scheme as an additional scheme eligible for benefits as Common Service Providers (CSP) under the Export Promotion Capital Goods Scheme (EPCG).
Director General of Foreign Trade Santosh Kumar Sarangi said on Friday that between 2015 and 2020, the government introduced a special Advance Authorisation Scheme for export of articles of apparel and clothing accessories.
Under the scheme, it allowed duty-free import of input fabric, including inter-lining for shipping articles of apparel and clothing accessories.
Under the new FTP, this scheme will continue to cover the apparel and clothing sector in order to facilitate the prompt execution of export orders. Exporters will now also be allowed to self-declare.
Four more towns of export excellence are added to the list of 39 towns. These are Faridabad for apparel, Moradabad for handicrafts, Mirzapur for handmade carpets and dari, and Varanasi for handloom and handicrafts.
The aim is to give a thrust to cluster-based economic development. These towns get global recognition and brand credibility; financial assistance for marketing under the Market Access Initiative Scheme; visit to capacity building and technological services; and common service provider facility under EPCG scheme that helps increase competitiveness of entire cluster by enabling common use of capital goods for exports.
Naren Goenka, chairman Apparel Export Promotion Council, said the special Advance Authorisation Scheme’s extension for apparel will enable more exporters to use it.