Industry
India to work with rest of Brics countries to further ease trade
Summary
- In recent months, economists in the Indian government had underscored the need for attracting FDI from China to boost India’s manufacturing sector.
India's trade with BRICS countries may be poised for a take-off as officials work to extend customs-related privileges to trusted merchants from these nations, which would also fetch similar benefits to Indian exporters to those markets, two persons familiar with the matter said.
While such a mutual recognition agreement (MRA) is already in place with Russia, the next one will be signed with South Africa, one of the two people said. “This is expected by the end of January 2025. Work has already started to sign a similar deal with Brazil," the person said on the condition of anonymity.
This may be followed by negotiations for a similar pact with China, India's immediate neighbour and biggest trading partner.
Once the agreements are signed, India would speed up customs clearances for so-called authorized economic operators (AEOs) from these countries, reduce inspection levels, allow deferred duty payments and quicker tax refunds for their partners in India who are not covered by India’s own AEO programme, and accept self-declaration on the origin of goods. The same benefits will be available to Indian merchants, customs brokers and logistics players involved in trade with the partner country.
Queries emailed to the Central Board of Indirect Taxes and Customs (CBIC), Union finance ministry and the Chinese embassy in New Delhi seeking comments for the story remained unanswered.
Also read | India-China trade: An alarming $18 billion discrepancy
Extending customs-related privileges is common in international trade to boost goods movement. The European Union operates an AEO scheme across all its member states. Countries including China, Singapore, South Korea, US and Canada have AEO programmes. In certain countries, the scheme is known by a different name, for example, as Customs Trade Partnership Against Terrorism (CTPAT) in the US. India's latest effort in this respect is essentially an integration of the AEO scheme with BRICS nations.
Enhancing cooperation in trade and customs is the next logical step, explained Biswajit Dhar, distinguished professor at the Council for Social Development. The freeze in bilateral relations, which had spilled over to economic matters, has now been lifted at the political level, and overall, there could be a lot of cooperation between India and China, said Dhar. “It would also pave the way for the removal of uncertainties and a new beginning in economic ties between the two nations in 2025," said Dhar.
India's traditionally strong petroleum, gems and jewellery exports fell steeply in the first half of this fiscal year, hurt by slow growth in developed countries, although pharmaceutical, electronics and engineering goods bucked the trend, commerce ministry data showed. India’s trade with BRICS nations expanded 8.3% annually to $215.3 billion in FY24, as per official data from the commerce ministry.
A second person said the road is clear for negotiating a similar deal with China, a major trade partner and India’s largest source of imports. “However, work is yet to start. There are many factors to be taken into account," said the person. A deal with China could help Indian exporters as India has a huge trade deficit with the world's second-largest economy.
Also read | India ranks among top 10 globally for patents, trademarks, industrial designs
India's expanding network of MRAs with countries like South Korea, Hong Kong, Taiwan, USA, UAE, Australia, and Russia, along with the ongoing negotiations with BRICS nations, marks a significant stride towards streamlined trade and enhanced global partnerships, said Saurabh Agarwal, tax partner, EY. This promises to reduce compliance burden, foster trust among trade partners, and solidify India's position as a trusted and interconnected trade hub within the BRICS bloc and internationally, said Agarwal.
The recent border disengagement with China and the bilateral meeting between Prime Minister Narendra Modi and Chinese President Xi Jinping in October on the sidelines of the 16th BRICS Summit in Russia are seen as major milestones in bilateral ties, with both nations committing to work on shared development goals.
An Indian statement on 23 October said the leaders underlined the need to progress bilateral relations from long-term perspective and explore cooperation to address developmental challenges, while China’s foreign ministry said, “Development is now the biggest shared goal of China and India." In recent months, economists in the Indian government had underscored the need for attracting FDI from China to boost India’s manufacturing sector.
And read | L&T’s Algeria project derailed after BRICS ‘snub’
More MRAs would be a game changer for Indian businesses, said Abhishek Jain, Indirect Tax Head and Partner at KPMG. “They would help simplify trade processes, increase market access and trade partnerships with nations. It will better India’s position as a trusted global partner," said Jain.
