New Delhi: Suresh Prabhu, minister of commerce and industry in the Narendra Modi government, will on Thursday chair a meeting of secretaries of eight ministries to devise a way to tackle effectively the sharply depreciating rupee and the widening trade deficit. Secretaries in the ministries of economic affairs, petroleum, steel, coal, electronics and information technology, industry and heavy industry, and pharmaceuticals are expected to be present in the meeting.
“The government has already increased tariffs on some non-essential items to curb imports. Thursday’s meeting will focus on non-tariff measures such as import substitution to curb rising trade deficit, minimise dollar outflow and thus help rupee stabilize," a commerce ministry official said, speaking on the condition of anonymity.
The official, however, ruled out any further hike in import duties on non-essential items immediately which could trigger backlash from other countries. US President Donald Trump on Monday termed India “tariff king" for the first time and accusing it of slapping levies as high as 100%.
The government had on 26 September raised import duties on 19 non-essential items, including refrigerators, air conditioners, jewellery, diamonds and jet fuel, accounting for annual imports worth ₹ 86,000 crore, to arrest a widening current account deficit (CAD) and a weakening rupee.
On Monday, Prabhu held a separate meeting with secretaries of various departments to fine tune the government’s strategy to boost exports. The commerce ministry is focusing on nine sectors—gems and jewellery, leather, textile and apparel, engineering, electronics, chemicals and petrochemicals, pharma, agri and allied and marine products—to boost exports.
The World Trade Organization (WTO) had last week downgraded global trade growth to 3.9% from 4.2% in 2018 estimated earlier as a result of escalating trade tensions between the US and China.
Federation of Indian Export Organisation’s president Ganesh Kumar Gupta said slowdown in global growth due to increasing trade protectionism will cause temporary setback to Indian exports. “The sanctions on Iran, payment problems in Venezuela, huge depreciation of currencies of Argentina, Turkey, South Africa, Russia, Brazil, etc., and banking restrictions on large number of OFAC (Office of Foreign Asset Control) sanction countries like Syria, Sudan, Libya, Iraq, etc., are affecting exports," he added.
During April-August period, exports rose 16.1% while imports grew 17.3% leading to a trade deficit of $80 billion during the period. Last year, during the same period, trade deficit was $67.1 billion. India’s current account deficit in June 2018 quarter rose to a four-year high of 2.4% of GDP, or $14.3 billion, which has put further pressure on an already weakening rupee.
Prabhu in the meeting to boost exports urged the ministries to work within the WTO commitments while designing export incentives. The commerce minister emphasised that China and the US are emerging opportunities and industries which are relocating from China on account of rising labour cost may be invited to invest in India after immediately revising regulatory procedures, a commerce ministry statement said.
Alok Chaturvedi, the director general of foreign trade, informed that based on the inputs received from export promotion councils, line ministries and other stakeholders, a comprehensive export strategy and action plan has been finalized.
“Commodity-wise and territory-wise specific short-term and long-term goals have been put on a matrix, to enable regular monitoring of implementation of action plan at the highest level. Issues like removal of pre-import condition, retrospective amendment in CGST rules, allowing flexibility of product mix in case of pharma products as long as pollution load is same, have been taken up with the respective ministries," he added.