India FDI policy: Govt looking at revising FDI policy, says commerce secretary Barthwal | Economy & Policy News

Last month, the Economic Survey suggested that increased FDI inflows from China can help in increasing India’s global supply chain participation along with a push to exports.

On the trade front, China was India’s largest trading partner in FY24 and has been New Delhi’s largest import partner for the last 18 years. Trade deficit with the neighbouring country was also the highest in FY24.

Data released by the commerce department on Wednesday showed that India’s exports to China declined by 9.4 per cent to $1.05 billion and imports from the neighbouring country rose by 13 per cent to $10.28 billion in July.

When asked about the reason for the increase in imports from China, Barthwal said that no country in the world is able to decouple with China, including the US and the EU. “If imports are increasing commensurately with exports, or with domestic consumption, I think that is not something which we should worry about,” he said.

Currently, the share of FDI equity inflows is a mere 0.01 per cent of the total inflows.

In June 2020, the government made prior approval mandatory for foreign investments from countries that share a land border with India —China, Pakistan, Nepal, Myanmar, Bhutan, Bangladesh and Afghanistan — to curb opportunistic takeovers of domestic firms following the Covid-19 pandemic.

India-UAE

India is seeking a review of the trade deal with the United Arab Emirates (UAE) to tackle issues related to the implementation of the pact between both the countries.

“Under trade agreements, when duty concession is given, rules of origin conditions also need to be met. We will have a holistic view, whether the rules of origin (with respect to silver as well as other products) are being met, and what is the future course of action,” Barthwal said.

While the trade deal kicked in from May 2022, silver imports from Dubai saw a massive jump in the last one year due to concessional duties offered under the pact. In FY24, silver imports from the UAE jumped to $1.7 billion from only $11.18 million in FY23. In May, about 87 per cent of India’s silver imports came from Dubai.

However, the July Budget announced a steep cut in customs duty on silver to 6 per cent from 15 per cent, which may provide the government temporary relief by checking the spurt in silver imports from UAE.

Barthwal also said that India is monitoring the situation in Bangladesh and taking steps to improve cross-border trade between the two nations.

“What we feel is that whatever disruptions were there, they have been largely addressed… We also believe that between India and Bangladesh, there should be improvement in trade. So, we feel whatever best efforts we can make for improving the trade, we should do that and we are doing that,” he said.

Domestic exporters have been worried about the impact of the political crisis in Bangladesh on bilateral trade.

India and Russia are discussing holding trade in local currencies and reducing non-tariff barriers by Moscow to boost bilateral trade.

“We discussed a lot of issues to improve trade between India and Russia. We also discussed how to facilitate rupee-rouble trade, how non-tariff measures are impacting our trade and how they should be reduced,” Barthwal said, adding that diversification of trade beyond petroleum products was also discussed between both countries.

Last month, the secretary met Russian Minister for Economic Development Maxim Reshetnikov, among other key officials.

“The rupee-rouble trade will also be affected only when there is more balance of trade,” he said, adding over 53 vostro accounts have been opened recently. Vostro account is a bank account held by a foreign bank with a UK bank, usually in sterling.

India is focussing on various sectors like electronics, besides taking up issues of non-trade barriers in areas like shrimp and pharma, to boost exports to sanction-hit Russia and move towards achieving a $100 billion bilateral trade target.

The commerce department has sought the approval of the Union Cabinet to extend the interest equalisation scheme. Since the export-boosting scheme RoDTEP (Remission of Duties and Taxes on Export Products) is valid till September, the department has sought the finance ministry’s approval for its extension.

First Published: Aug 14 2024 | 8:31 PM IS