The Aakhya Weekly #31 | Cementing India-US trade ties
The Aakhya Weekly #31 | Cementing India-US trade ties
In Focus: Re-capping the India-US TPF meetings
The 13th ministerial-level meeting of the India-US Trade Policy Forum (TPF) was held in Washington DC on January 11th, co-chaired by Piyush Goyal (Minister of Commerce and Industry) and Katherine Tai, the US Trade Representative Ambassador.
This Trade Policy Forum meeting comes at a time when India’s economy is taking rapid strides, thanks to its post-pandemic retail boom. India is widely expected to be the world’s fastest-growing economy in 2023. On the flip side, the US has been experiencing a decline in its industrial and services activities, particularly due to tense US-China bilateral relations. This has set up the stage for the US to penetrate a market most beneficial to their expansion, and for India to be that formidable market.
Partnership in trade between the two countries first gained momentum in 2014, and has grown exponentially since then. The US remains India’s top trading partner through consistently high exports and FDI investment in terms of equity, surpassing China in 2021. With more than 50 bilateral dialogue mechanisms and multiple partnerships in place, trade has been a key priority for both countries.
Deemed to be an overall success, highlights from the meeting involved the resumption of inspections by the US Food and Drug Administration, the finalisation of the Turtle Excluder Device design, and a potential expedition of visa delays. However, the meeting saw two developments of particular relevance. After committing to resolving outstanding disputes at the World Trade Organization, the US hinted at the possibility of restoring of India’s beneficiary status under the U.S. Generalized System of Preferences, which was previously revoked in 2019 by the US Congress. Further, the two countries launched a new working group on “Resilient Trade” to enhance the resiliency and sustainability of their relationship. The immediate focus areas for the working group would be-
deepening engagement in trade facilitation to construct durable and sustainable supply chains;
promoting labor rights and workforce development through cooperative engagement;
encouraging good and mutually beneficial regulatory practices; and
mobilising sustainable financing by scaling up innovative clean technologies.
The working group would now reconvene at an inter-sessional meeting by mid-2023 and at the ministerial level before the end of 2023 to identify specific trade outcomes and ensure that the trade relationship begins to reach its full potential.
While a Free Trade Agreement seems to be completely off the table for now, both countries have affirmed a strong commitment to forge robust bilateral trade ties and enhance the bilateral economic relationship to benefit their working population. As the lack of tangible solutions is overshadowed by a repeated emphasis on the “big picture”, all eyes are set on how the canvas eventually unfolds.
Tracking the G20
The Indian presidency of the G20 is moving ahead at full steam. This week saw the conclusion of the first G20 Infrastructure Working Group meeting in Pune. While the core meeting revolved around the broader theme of “Financing Cities of Tomorrow- Inclusive, Resilient and Sustainable” and discussions on various facets of making cities economic centres of growth, the side event focused on how the cities of tomorrow must tie together their key administrative functions, planning, funding, and financing – to increase private sector participation.
Meanwhile, the first G20 Health Working Group meeting is currently underway at Thiruvananthapuram, Kerala. India’s presidency is focusing on three priorities for the health track, including health emergencies prevention, preparedness, and response, strengthening cooperation pharmaceutical sector, and digital health innovations to aid universal health coverage. India is pushing the idea that COVID-19 pandemic will not be the last one and therefore, emergency preparedness is an overarching priority that requires building of resilient health systems across the world to protect people in the face of similar crises. It is no longer an initiative in isolation, but rather "an overarching priority" which "requires efforts to build resilient health systems horizontally and vertically across the world.” “In an increasingly interconnected world we need to ensure that our communities are resilient and have equal opportunities to protect themselves in the face of a crisis”, commented the Minister of State for Health and Family Welfare, Bharati Pravin Pawar.
Top Stories of the Week
Major reforms to insolvency laws in the offing
The Ministry of Corporate Affairs has proposed a wide array of changes to the Insolvency and Bankruptcy Code, aiming to improve the efficiency of India’s bankruptcy resolution process. These changes, it is hoped, shall eliminate many loopholes and ambiguities in existing insolvency law, bringing greater efficiency and transparency to many parts of the existing insolvency process.
Reflecting the experience of insolvency process over the years, the proposals seek to codify legal nuances that reflect the realities of the insolvency practice. They seek to solve practical difficulties faced by various stakeholders in the process, including the Committee of Creditors, resolution professionals, liquidators and others. It also seeks to ease processes for special categories of debtors, such as the real estate industry. Further, it suggests many measures to bolster fast-track and pre-packaged insolvency resolution processes, which shall have a significant impact on small businesses.
The proposed measures also intend to improve efficiency through technological means, by creating an e-platform that brings together various stakeholders that currently function in different silos.
The proposed measures are available here. The Ministry has sought comments on its measures by 5:30 PM on February 7, 2023.
WEF talks crypto at Davos
Despite the battering it received in 2022, the crypto industry is presenting an undeterred (albeit subdued) front at the World Economic Forum (WEF) Summit which is underway in Davos, Switzerland this week.
The diminished presence at the WEF this year, when compared to last year, is likely attributable to the crypto market’s downturn. Further, the shadow of FTX (whose founder Sam Bankman-Fried had a huge presence at last year’s gathering) still looms over the crypto industry. Even so, several panels have been dedicated to discussions around cryptos and the future of the market, with enthused participation from policymakers and regulators.
Raghuram Rajan, renowned economist and former RBI Governor, has recommended that policymakers take a cautious approach. He opined that the focus should be on setting up regulatory safeguards to filter out bad actors rather than a wholesale ban, which would stifle innovation. “Allowing some freedom within constraints that might be aimed at getting the excess speculation as well as fraud out - that seems to me a better way to go than to just ban any technology”, he was quoted as saying.
This Week in Policy
Economy and Taxation
India’s retail inflation fell to 5.72% in December on a year-on-year basis, on the back of an easing in food prices. This marks the second consecutive month that it has remained below RBI’s tolerance limit of 6%, with inflation in November charting at 5.88%.
India’s factory output saw a robust growth of 7.1% year-on-year in the month of November, as per data by the National Statistics Office. This came on the back of substantial growth in mining output and power generation.
Amid fears of a global recession, India’s exports declined by 12.2% year-on-year in December, to $34.48 billion, as per data released by the Ministry of Commerce and Industry. However, because of falling commodity prices, imports have also declined by 3.42% year-on-year, to $332.76 billion.
Labour
India and the United Kingdom are launching a ‘Young Professionals Scheme’ on February 28, which shall allow 3000 degree-holding Indian nationals aged 18-30, every year, to work in the UK for up to two years.
The period between September-December 2022 saw a significant uptick in women’s labour participation, as per the CMIE’s Consumer Pyramids Household Survey. 0.28 million women entered the labour force over this period, with the labour force participation rate increasing to 11.58%, from 10.63% in May-August, 2022.
Agriculture and FMCG
Fodder inflation continues to soar - hits 28.66% in December 2022 compared year-on-year - resulting in higher prices for dairy products such as milk.
The share of term loans taken by farmers -- funds that go solely into agricultural investment -- to total agricultural credit increases from 24.95% in 2013-14 to 41.51% in 2021-22, reversing a disquieting declining trend.
Punjab framing new agricultural policy slated for release by 31 March, 2023.
Healthcare
The National Health Authority has introduced a new system to measure and grade hospital performance. This system, introduced under the aegis of the Ayushman Bharat PMJAY program, is primed to ensure ‘value-based care’, with payments linked to improvements in health, rather than the volume of services offered.
Rajasthan’s Vidhan Sabha has formed a 15-member select committee, headed by state Health Minister, Sri Parsadi Lal Meena, to finalise its much-awaited Right to Health Bill. The Rajasthan Government has also released a policy document for the prevention of blindness, with the stated objective of promoting a ‘Right of Sight’.
Foreign affairs
External Affairs Minister S Jaishankar is expected to be in Colombo, Sri Lanka this week to discuss issues related to debt restructuring.
India and the UK are set to launch the Young Professionals Scheme to allow Indian nationals holding a degree to live and work in the UK for up to 2 years.
Technology, Media and Telecommunications
TRAI has released two consultation papers for comments from the public - one on license fees and bank guarantees payable by direct-to-home (DTH) operators, and the other on telecom infrastructure sharing, spectrum sharing, and spectrum leasing.
The government is expected to start multi-city, multi-level stakeholder meetings (starting in Hyderabad) on the draft Digital India Bill before it is released for public consultation.
In a short affidavit submitted before the Supreme Court of India, the Government has submitted that consultations are underway for the draft Digital Personal Data Protection Bill and that the Government intends to introduce the bill in Parliament at the earliest.
International trade and commerce
India is expected to pitch for reduction of import quotas and tariffs for steel in the ongoing negotiations between India and the EU for a proposed free trade agreement.
The Directorate General of Foreign Trade has simplified the process of levying composition fee under export advance authorisation to ease export shipments.
Banking, Finance and Insurance
Sebi moots ASBA-like payment system for secondary market stock trade. The proposed framework aims to safeguard investors from potential misuse of their funds by brokers.
RBI tweaks norms related to acquisition and holding of shares in banks to ensure that their ultimate ownership and control remain well diversified and the major shareholders are 'fit and proper' on a continuing basis.
Manufacturing
Steel Authority of India (SAIL) acquires a Bureau of Indian Standards (BIS) license for rolling out specific standard steel used in manufacturing weather-resistant shipping containers.
Ongoing Production-linked Incentive (PLI) schemes are expected to see increased allocation by the government under the upcoming Union budget.
Retail and e-commerce
India plans to offer low-cost credit to small retailers and ease regulations to revive growth in the smaller physical retail sector.
The government notifies a scheme to incentivise banks for promoting point-of-sale and e-commerce transactions using RuPay debit cards and low-volume payments to merchants on the BHIM-UPI platform.
Logistics and Infrastructure
On 19th January, Prime Minister Modi inaugurates developmental projects related to irrigation, drinking water, and a National Highway development project worth over Rs. 10,800 crores in Kodekal, Karnataka.
The Ministry of Ports, Shipping and Waterways plans to convert ports at Kochi and Vizhinjam in Kerala as well as Galathea Bay in Andaman Nicobar Islands into transshipment hubs.
India extends a concessional $40 million Line of Credit for developing sporting infrastructure in the Maldives as a part of bringing campaigns, Khelo India and Fit India under the ambit of its Neighbourhood First Policy.
Sustainability
Maharashtra inks $2.5 billion partnership to build electric vehicle (EV) battery-swapping and charging stations in the state over the next eight years.
India and the UAE reach agreement on green hydrogen development and the laying of under sea cable connecting the two countries.
Upcoming Events
Managing Climate Change: A Strategy for India
January 23 | India Habitat Centre, New Delhi
The Centre for Social and Economic Progress (CSEP) is organising its flagship seminar on Managing Climate Change: A Strategy for India on 23 January 2023 at the India Habitat Centre, New Delhi. The seminar will see a discussion between Ram Madhav, Founding Member, Governing Council, India Foundation, and Montek Singh Ahluwalia, former Deputy Chairman of the Planning Commission, and moderated by Rakesh Mohan, Member, Economic Advisory Council to the PM. This discussion will deliberate on the challenges India will face in implementing its Net Zero commitment, and the need for multiple inter-related interventions are needed across several sectors to achieve this transition. More Information | Registration Link
Diplomacy Unplugged with H.E. Mr. Firat Sunel, Ambassador of Turkiye to India
January 25 | FICCI Federation House, New Delhi
FICCI is organising the Diplomacy Unplugged Series with H.E. Mr. Firat Sunel, Ambassador of Turkiye to India on 25 January 2023 at FICCI Federation House, New Delhi. A Ministry of External Affairs (MEA) initiative, under the series, MEA and FICCI virtually interact with Diplomats and High Commissioners to better understand challenges the Indian industry faces in investing abroad and also address problems that foreign companies face in India. More Information
UNCITRAL Working Group III: Investor-State Dispute Settlement Reform
23-27 January | Hybrid
The United Nations Commission on International Trade Law is organising the 44th session of Working Group III: Investor-State Dispute Settlement Reform on 23-27 January 2023 in a hybrid format. UNCITRAL Working Group III comprises UN Member States with inputs from intergovernmental and non-governmental organisations. It aims to contribute to the ongoing global efforts to reform the regime of investment treaties and investor-state arbitration, which is facing a legitimacy crisis. The current session is expected to focus on the code of conduct for adjudicators and an appellate mechanism to streamline the jurisprudence around the multi-million-dollar arbitral awards issued against States in these arbitrations. More Information
A Few Good Reads
The laws of economics are such that any runaway economic success makes it hard for others to grow. To restore balance, we should learn from Norway, writes Dror Poleg.
While every section of any Anticipating the Unintended newsletter is excellent, we are specifically keeping an eye on RSJ’s predictions on key trends for the year 2023.
Can lay-offs be a good thing? Bryan Lunduke offers an unorthodox view on the current layoffs season at Big Tech companies.
The GST has substantially upended the financial autonomy of states. To remedy our current imbalances, the GST should be assigned entirely to the states, argue R. Srinivasan and S. Raja Sethu Durai.
Does the history of Hyderabad belong to Andhra Pradesh or Telangana? Vandana Menon writes of a fascinating bureaucratic battle between the state archives of the two states.
Tweets of the Week
How do Indian households spend their money? Finshots explores:
A look at the Indian economy’s prospects, by Science is Strategic:
How are the priorities of India’s political parties evolving? Some data visualisation by Gurman Bhatia:
Key Notifications and Reports
International Financial Services Centres Authority releases framework on “Disclosures by Fund Management Entities for Environmental, Social or Governance (ESG) Schemes”.
RBI releases its annual study on state finances, taking an in depth look at state budgets of 2022-23.
The ASER Center sheds light on the state of rural India’s education, with its Annual Status of Education Report (Rural), 2022.