Reactive Dyes Electronic Cash Registers the Colour of Money Ringing in Profits

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EXCLUSIVE INTERVIEWS H.E. DATO’ HIDAYAT ABDUL HAMID High Commissioner of Malaysia to India V. NARAYANASAMY Chief Minister, Puducherry WILLIAM J. ANTHOLIS Director & CEO, Miller Center, University of Virginia TIMOTHY CHESTON Research Fellow, Harvard University YIFAN ZHANG Faculty, Department of Economics, Chinese University of Hong Kong

...AND MANY MORE!

The Doklam stand-off between India and China multiplied posibilities of a trade war between the two Asian powers. The strain in relationship has forced industry leaders in both countries to ask one hard, simple question about the future of this bilateral affair: Can either country afford a trade war with its neighbour?

Reactive dyes Electronic cash registers The colour of money Ringing in profits. Literally! What makes India its biggest exporter Growth in organised retail is driving imports LETTER FROM THE EDITOR–IN–CHIEF

CAN INDIA AFFORD A TRADE WAR NOW? he recent Modi Cabinet rejig was certainly not a last-ditch effort to save the next General Elections. A popular political outfit led by a seasoned statesman, and dominant in close to 68% of India’s regional territories, is not affected with the “sitting on the fence” syndrome as Tfar as populism goes. And the moves made have largely been debated. Con- troversial they’ve been by design perhaps. But bearing enough firepower to be discussed… demonetisation, verbal and physical spats with neighbouring nations (even across international forums), GST implementation (considered premature by many), demonetisation, shuttling bureaucrats, delays in FTP release, and so many more. The recent Cabinet rejig is one amongst such much-discussed acts. More so for the exim community. During a time when exporters were waiting for some encouraging news in the form of post-GST Drawback Schedule and FTP revisions (the new Draw- back rates are out now and there’s nothing much to celebrate about if you were hoping for anything “extra”; the FTP isn’t out still!), what happened was far removed from what was expected. (Pure Modi-style!) Our Commerce & In- dustry Minister was given charge of the Defence Ministry. I’m not speaking of some bureaucrat’s reputation being built bigger; just amused at how even this There are only two political move has drawn a straight line connecting “trade” with “war”. Literal- differences between China ly! Not that we are expecting a trade war. Are we? In terms of good neighbour-bad neighbour episodes, India is all over the Inc. and the Communist Asian map at present. And despite all the “I’ll shoot you” threats that Trump Party of China – how we has been giving China for months now (we know he’ll do nothing much there), Indian exporters and importers are more worried about how an India-China write them and how we trade war will hurt them. The highly dramatised military standoff between pronounce them. Chinese India and China at Doklam plateau (Sikkim) saw India retaliating to the Chi- nese military and verbal belligerence with trade tactics. Almost immediately, investment being suspend- it imposed anti-dumping duties on 93 Chinese products! Whether there will ed as a result of the trade be a Chinese counter-trade attack is to be seen. If that happens, it could mean China losing a few winks and India suffering insomnia. war could imply suspen- Why the damage differential you ask? In value terms, India imports from sion of billions of dollars China almost 5x of what it exports to that nation. But there are three schools of thought as far as such a trade war goes. worth of investment in India's infrastructure. School of thought #1 – India shouldn’t worry First, such a trade war will mean minor disturbance in the immediate term and will have a positive impact on India in the long run. What is interesting is that while India predominantly exports “raw materials and intermediate goods” to Chinese, mostly meant for B2B buyers (which it could as well to manufacturing hotspots like Vietnam, Mexico, Thailand, Poland, Canada, markets across EU, USA, etc.), what it buys from China are mostly “finished” goods, a big proportion of which is for B2C buyers. Steven Philip Warner The advantage of being in India’s shoes in such a situation is threefold. President (VMPL) & Editor-in-Chief, One, as a supplier of raw materials, you are either at a geographical advan- The Dollar Business tage or in control of a factor that may be exclusive to you and there is a good [email protected]

www.thedollarbusiness/blogs/steven @SPWarner www.tumblr.com/blog/steven-p-warner

OCTOBER 2017 II THE DOLLAR BUSINESS 3 LETTER FROM THE EDITOR–IN–CHIEF WHATEVER YOU MANUFACTURE. WHATEVER YOU SELL. THERE’S A MARKET FOR IT OVERSEAS!

Indian exporters and manufacturers who buy industrial machinery and other goods from China could get hurt by a trade war between the two nations. chance of discovering buyers for your raw materials else- For some, trade wars mean a fancy economic term that’s where (who will process the materials to manufacture minimal in influence. For them, the Suez canal closing for goods for consumers across other parts of the world). a month will have a far greater impact on India’s exports Two, as a buyer of finished goods, the products being and imports than a real year-long trade war with say, Chi- rolled out of Chinese factories would be customised for na. It’s hard to counter that argument going by how diplo- the typical Indian consumer. And that may not actually macy often gets the better of such bitterness. 23,16,016 buyer & seller suit the wants of consumers across other foreign markets. But actually, even imagining the perils of a trade war records Three, in the long run, if China does place a ban on may be a trivial task. Trump has been threatening China processed exports to India, 'Make in India' should flourish. Call this and Mexico forever. There is no trade war yet. India and in the magic of import substitution industrialisation! Pakistan have forever been quarrelling. Yet we’re seeing seconds! more goods crossing the borders each year. Capitalism School of thought #2 – India should worry gets the better of geopolitics. The problem however is – if This one is driven by fear. Again, three aspects. there is a “visible” trade war, it will be damaging (despite One, agreed that there are no alternatives to many Made- the benefits). Let me take you back to the 1930s, when in-China products in the Indian market yet. Indian ex- the US Tariff Act of 1930 (the Smoot-Hawley Tariff Act) porters, manufacturers and consumers who buy indus- was passed and implemented by USA. Tariffs on imports trial machinery and other consumer goods from China were raised across 890 product categories (in compari- THE MOST POWERFUL BUYER DISCOVERY AND could get hurt by a trade war between the two. son to the previous Tariff Act of 1922). Within two years, COMPETITOR ANALYSIS TOOL Two, there are only two differences between China Inc. the value of imports to and exports from US fell by 40% FOR INDIAN EXPORTERS AND MANUFACTURERS and the Communist Party of China – how we write them each, and world trade dipped by about 65% in four years. and how we pronounce them. There is no doubt that Chi- China is to the world today what US was in 1930s – there Gain unlimited access to 2.4 million buyer and seller company profiles from across nese investment being suspended as a by-product of the are some rough similarities from a world trade perspec- 191 countries. That’s precisely what your business needs! trade war could imply non-creation of millions of jobs tive. And given that mankind has grown mature since the in India and temporary suspension of billions of dollars Smoot-Hawley Tariff Act episode, I doubt if China will TRY IT TO BELIEVE IT worth of investment in our country’s infrastructure. (By want to experiment with a trade war. infrastructure, I mean both factories, offices and roads.) Almost the same argument holds for India. SMS TDB MAPS TO 56161 FOR A FREE, PERSONALISED DEMO Three, India may be one-sixth of the world, but it also The idea is clear. It’s not whether India can afford a trade has that big a population and is that well interconnect- war. India shouldn’t. ed with Global Inc. China is known to be a market that’s There are enough headwinds for our importers and ex- guided by a vision of self-interest, and always on the of- porters for now. And we can’t have them suffer on margins fense. With a trade war could come a hurricane called and production plans, just because your visiting foreign “cyber-terrorism” that is least expected but could do diplomat burnt his tongue with the Indian masala tea much damage to a growingly connected India, or even served with honest intent. Who will win from a trade war some form of a China-influenced sanction from WTO. that India engages in? That only time will tell. What we do not need time for is to conclude on who will lose. School of thought #3 – Why even bother thinking? This ideology is that such a trade war is “…just another storm in the same ol’ tea cup!”.

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4 THE DOLLAR BUSINESS II OCTOBER 2017 Volume: 4 Issue: 10 October 2017

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President (VMPL) : Steven Philip Warner & Editor-in-Chief

EDITORIAL & RESEARCH Editor : Manish K. Pandey Executive Editor : Indranil Das Senior Editor : Niladri S. Nath COVER STORY Assistant Editors : Ahmad Shariq Khan, Anishaa Kumar, 18 Aamir Hussain Kaki EDITORIAL CONSULTING BOARD INDIA-CHINA TRADE Founder & Editor : Anil Goyal Publisher : Avnish Goyal Chief Consulting Editor : Dr. A. K. Sengupta WHAT’S ADVERTISEMENT SALES & MARKETING Deputy Managers : Payal Kapoor, Rahul Jain Senior Executive : Ayesha Fatima, Ankit Kharbanda AT STAKE? International Representatives India and China have seen many Seoul (South Korea) : Justin Yoon London (UK) : S. Puri ups and down in their bilateral relationship. But the debate on ART & PHOTOGRAPHY Art Director : Sujesh Kumar G. OBOR and the Doklam standoff Senior Designer : Jayaprakash Reddy Photographer : Dileep Kumar brought the two to the brink of a trade war. Is it time India THE DOLLAR BUSINESS ONLINE & RESEARCH Project Managers : Sridhar Bodla, Omar Larzi works towards reducing its Web Designer : Purushothama Chary dependence on China or is SEO Specialist : Y. Lakshman Varma Deputy Manager (EXIM Opp.) : Lakshmi Kondaveeti ‘better together’ the way ahead? Asst. Managers (EXIM Opp.) : G Bhanu Prasad, Priyanka The Dollar Business analyses. Bhandekar, Sravanthi Bandhla Senior Executive (EXIM Opp.) : Neetu Hotkar, A.V. Divya Madhuri, Ravali Gali, Gunna Kavya Reddy Executive (EXIM Opp.) : Vijayalakshmi Chittari, Radhika Nalluri, H.E. DATO’ HIDAYAT ABDUL HAMID Relangi Yamuna Santosh Kumari, 30 Habeeb Unnisa, N Lavanya, HIGH COMMISSIONER OF MALAYSIA TO INDIA Keerthi Sulakhe Asst. Managers (Data & Metrics) : Sharath Chandra Murthy Macha, Discusses the India-Malaysia trade ties and how Ramesh Babu Lalam RCEP can go a long way in helping both nations. CIRCULATION, SUBSCRIPTION & DISTRIBUTION Manager : M. Vinay Kumar

V. NARAYANASAMY INDUSTRIAL ELECTRONICS ALLIANCES & COMMUNICATIONS 36 Sr. Manager : Rasanpreet Kaur CHIEF MINISTER, PUDUCHERRY Asst. Managers : Sravya Palakuru, Aishwarya Ramarajan Talks about the government’s plans to convert

FINANCE & ADMIN Puducherry into an investor’s paradise. Manager : V. Srikanth Tumati Executive : Chandrakant Nawande

PRINTER Rudra Graphic Designers, INBOX SECRET INGREDIENT 8-3-949/3, Beside Gold Spot Company, Punjagutta, 08 40 Hyderabad 500073, Telangana, IN Letters to The Editor REACTIVE DYES Readers’ feedback that hit our Indian exporters are making PUBLISHED AT the most of the growing global 5-2-198/4, Distillery Road, Ranigunj, Secunderabad, mailbox in September 2017. Telangana 500003, IN demand for reactive dyes. 12 MONOLOGUE © Copyright 2017 PEOPLE SPEAK POLICY MONITOR No part of this magazine may be reproduced in whole or in part without an ex- 44 pressed permission of the publisher. The information on this magazine is for Arun Jaitley on the Indian PDEXCIL information purpose only. Manish K. Pandey, Editor, The Dollar Business, is re- economy, Wilbur Ross on Purushottam K. Vanga, Chair- sponsible for the selection of news and content under PRB Act. Vimbri Media Pvt. Ltd. assumes no liability or responsibility for any inaccurate, delayed or incomplete NAFTA & much more. man, on the role of the power- information, or for any actions taken in reliance thereon. The information contained loom sector in India’s exports. about each individual, event or organisation has been provided by such individual, event organisers or organisation without verification by us. All disputes are subject 14 TRADE WRAP to exclusive jurisdiction of competent courts and forums in Hyderabad, Telangana. Australia-Peru FTA, UK’s TDB FORUM Printed and published by Avnish Goyal for Vimbri Media Pvt. Ltd. 46 Published at : 5-2-198/4, Distillery Road, Ranigunj, Secunderabad - 500 003, post-Brexit plan, Indo-Japan Questions about foreign trade Telangana. partnerships, HSD exports to that hit our mail box in Sept 2017. Printed at: Rudra Graphic Designers, 8-3-949/3, Beside Gold Spot Company, Punjagutta, Hyderabad - 500 073, Telangana. Myanmar & more. SUBSCRIPTION FORM FOR EDITORIAL/CONTENT 47 Email: [email protected] 32 IMPORT’ONOMICS Subscribe today and get upto FOR ADVERTISEMENT ECR AND PoS TERMINALS 65% discount. Email: [email protected] With the push for digital, FOR SUBSCRIPTION importers find new BORDERLINE Email: [email protected] . +91-40-67609999 50 opportunities. Editor’s Column For queries / comments you can send us an SMS at +91-888-633-1947

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100 $2 and your services for some time now. I EXCLUSIVE INTERVIEWS ness if you could carry more stories on I CAPTAIN AMARINDER SINGH Chief Minister, Punjab am glad to say that I am satisfied with both VANAJA N. SARNA bakery products, food ingredients and Chairperson, CBEC H.E. TON SINH THANH the quality of your magazine and your ser- Ambassador of Vietnam to India coconut products. Member, BoardBISWAJIT of Trade, DHAR GoI vices. I find the topics covered in The Dol- Chairman, SIRAJCargill CHAUDHRYIndia Pvt. Ltd. GAURAV Academic Director,LOURDES Emerging CASANOVA Markets Institute, Cornell University lar Business to be both informative and ...AND MANY MORE! Partner, G. P. Impex, Bangalore analytical. Keep up the good work and 8147751XXX continue to educate the foreign trade [email protected] NON-TARIFF BARRIERS fraternity with your impeccable articles. (NTBs) RANJITH RAYABHARI VISIBLE

Tariff barriersROADBLOCK? – discussions linking them to Indian exporters are common. Non-tariff barriers the other hand, have been conventionally less criticised. But the less talked about NTBs are increasingly Managing Partner, Adarsh Eco posing bigger challenges to India’s exports. What can be done to minimise the headaches and harm he Dollar Business is a well-detailed

caused by these masked, expensive barriers to India’s foreign trade? Friendly Specialty Papers (NTBs) on Tpublication, with good insights into the 9885362XXX world of exports and imports. I am a subscrib- [email protected] er and each month I look forward to reading

Lithium-ion battery A power-packed business idea the magazine. The information on the website New applications are driving its imports Optic fibre cable Need for speed he Dollar Business editorial team A high-potential export opportunity is also very useful for the foreign trade com- Tshould be proud of the good work munity, and the EXIMAPS feature is outstand- it has been doing. You have motivated me to aim higher ing. It will be useful if you could carry some in foreign trade, and I am sure there are many readers more stories related to the logistics sector. like me who feel encouraged by your magazine. We need R. JAYAKUMAR more platform like yours that can voice our concerns. The Gomas Systems revamped website is user friendly and I hope it will contin- 9590280XXX ue to benefit many businesses like ours. [email protected] PARAPURATH PRADEEP Proprietor, Whitenair Technologies am really delighted to read the articles in your magazine. 9246246XXX IEach issue of the magazine has stories that can help the [email protected] foreign trade community. Your website too has plenty of useful data. It appears very useful a medium of information t’s after a long time that I found a good magazine related for exports from not just India but even to those overseas Ito international trade. The Dollar Business offers good looking at India as a market for imports. data and analyses and is definitely an excellent resource CHINTAN SAMPAT for importers and exporters. I also find your website to be Partner, Oman Trade very informative and helpful for exporters like us. I look 9773003XXX forward to reading each issue of the magazine with great [email protected] interest. MOHAN DAS came across The Dollar Business website while search- Travancore-Co Iing for foreign trade-related data, and I must say this is a 9447977XXX very useful site. I am interested in the latest Customs Noti- [email protected] fications and their interpretations and will be grateful if you could carry more interpretations on your website. he September issue of the magazine looked great! In RAMAKRISHNAN BALAKRISHNAN Tfact, all the issues that I have read have been out- Coromandel International Limited standing. The Dollar Businesses is a highly informative 8978566XXX magazine and your selection of topics is impeccable. That [email protected]

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monologue

e should push for an have trust in the UK he character of trade has Wopen world economy, I economy after Brexit. Even Tbeen highly inequitable. promote trade liberalisation after Brexit, the UK will Exports from South Africa and facilitation, jointly create continue to be an attractive have been driven particularly a new global value chain, and and compelling place for by raw materials. This realise a global economic business people, I am dominance [of raw materials] rebalancing. convinced of that. has adversely impacted us. XI JINPING SHINZO ABE JACOB ZUMA CHINESE PRESIDENT PRIME MINISTER OF JAPAN SOUTH AFRICAN PRESIDENT On developing an open economy On Japan-UK relations after BREXIT

On South Africa’s trade with its BRICS Source: Reuters Source: The Guardian partners

Source: Bloomberg

or upgrading mutual Fcooperation, I urge the creation of a BRICS rating agency to cater to the financing needs of sovereign & corporate entities of developing countries. NARENDRA MODI INDIAN PRIME MINISTER On the way ahead for BRICS cooperation

Source: PTI ou can argue that Yanything that makes for more trade is useful, lobal economy is improving but I don’t think that’s the Gfaster than what we thought point. The point is, is it an and that is a positive trend. The appropriate agreement? Did it domestic public investment is fairly distribute the benefits? certainly going to be quite high And we don’t think that it did. because the revenue trend WILBUR ROSS seems to be positive. US COMMERCE SECRETARY ARUN JAITLEY On the United States’ rationale for INDIAN FINANCE MINISTER renegotiating the NAFTA On the Indian economy Source: Washington Post Source: PTI

12 THE DOLLAR BUSINESS II OCTOBER 2017 TPP Handing out a lifeline If you thought that months after the US pulled out from the TPP, the ambitious trade deal had no chance of revival, you would be wrong. The agreement is getting a new lease of life, and that too for the second time in the last four months. Although over the last few months some BRICS SUMMIT countries have been discussing regional deals similar to the TPP, steps towards a full-scale revival of the deal have also taken place. Officials from 11 member Are we moving ahead? countries recently met in Sydney for a he situation in Doklam was defused just in time for the Indian Prime three-day meeting to discuss the possi- Minister Narendra Modi to attend the 9th Annual BRICS Summit that bility of amendments to the TPP. Trade was hosted by China early last month. The conclave, attended by the ministers from TPP group will pres- Tfive member nations – Brazil, Russia, India, China and South Africa, aims ent their proposal for the future of the to strengthen cooperation and trade between the countries. This edition of deal to leaders at the APEC summit in the international trade summit comes at an important juncture in the Chi- Da Nang, Vietnam in November. na-India trade relationship. China has been aggressively pursuing its One Belt THEA SOAPS One Road (OBOR) initiative in a bid to become the world’s next superpower. WE STAND FOR QUALITY India, which also aspires for the same position, regards OBOR as a threat to JAPAN-UK its economy and sovereignty. Having been at loggerheads over these projects A genuine natural product, Thea Soaps, knows how to nurture your skin. Free from all chemicals, our products Planning for tomorrow for months, the summit presented the perfect opportunity to mend bridges. are carefully handcrafted using only natural ingredients sourced from different parts of the world such as shea oil, shea butter As a part of the Summit, the five nations signed four agreements, namely and shea cocobutter from Africa, argan oil from Morocco, black olive from Spain, clay from India etc. The British Prime Minister has had a the BRICS Action Agenda on Economic and Trade Cooperation, BRICS Ac- Thea Soaps products contain coconut, castor, rice bran, neem seed, onion seed, flax seed, etc. oil that are manually extracted. rough couple of months. Theresa May tion Plan for Innovation Cooperation, an MoU between the BRICS Council So, whether it’s a moisturiser, body wash, face pack, or a simple soap bar, you know we care! has been taking fire from EU officials, and the New Development Bank on Strategic Cooperation and a Strategic *All our products are 100% vegan / * All are products are 100% herbal extracts Remainers, and even her own party. Un- Framework of BRICS Customs Cooperation. They also discussed the issues of der this immense pressure, May contin- security and terrorism. Interestingly, for the first time, China acknowledged ues her search for economic allies with the violence caused by Pakistan-based terror groups LeT and JeM. This was a a steely resolve. Her latest ray of hope, victory for India, even if only a symbolic one. Japan. While her latest trip to Japan did not succeed in concluding a trade deal, reports hint that the Asian giant and UK AUSTRALIA-PERU are all set to sign an FTA, almost immediately after Brexit is finalised. Exploring alternatives Expectations were high when May made a visit to Japan, in August. She is The South American nation of Peru reported to be pushing for an FTA sim- is taking its first steps towards an ilar to the EU-Japan FTA. A move that ambitious trade deal with Australia. she hopes to replicate in most countries The deal covers goods, services, and that have an FTA with EU. investments. The first round of -ne gotiations took place in June. Anoth- towards strengthening trade part- er set of negotiations was held in late nerships in the region for some time. August. Leaders of both countries Both have also been trying to diver- are hoping to reach an early agree- sify their traditional export basket. ment. They hope to bring it into ef- Australia and Peru, who are signato- fect sometime in 2018. ries to stalled TPP, are hopeful that While Australia has not been by agreements like this will help tackle any means a major trade partner for tariff and non-tariff barriers across Peru [it is currently in 25th place], the region and nullify the impact of THEA SOAPS Theresa May I Prime Minister of UK both countries have been working US’s decision to withdraw from TPP. 3-15-156, 2nd floor, Venkataramana Colony, Mallapur, Nacharam, Hyderabad-500076, Telangana. India Mobile: +91-9949896254 / +91-9542786627 . Email: [email protected], [email protected], [email protected] www.theasoaps.com 14 THE DOLLAR BUSINESS II OCTOBER 2017 MYANMAR A friendly neighbour India is taking steps towards strengthening its relationship with neighbouring countries through various routes, including hydrocarbon exports. The first ever delivery of high-speed diesel (HSD) to Myanmar was made by Numaligarh Re- finery Limited to Myanmar’s Parami En- INDIA-JAPAN ergy Group. early last month. This trial consignment weighed 40 kilolitres. Num- aligarh Refinery is expected to export around 5,000 MT of HSD per month to Making new friends Myanmar. India is also looking to export hile the recent BRICS Summit saw India and China stepping back gas directly to Myanmar through a pro- (temporarily?) from their feud, Indian PM Narendra Modi has been posed tri-nation pipeline between India, quick to cosy up with another Asian giant – Japan. The recent visit by Myanmar, and Bangladesh. WJapanese Prime Minister Shinzo Abe to Gujarat is being talked about in the me- According to an ICRA report, Indian dia as India’s move to strengthen an alternative alliance. India hopes to counter diesel exports have increased in the first growing China-Pakistan relations with its own friend in high places. nine months of FY2017. India hopes that The visit, on the occasion of the Indo-Japan Summit, saw the two nations sign the success of this trial consignment could 15 deals covering key areas like disaster risk management, North-East connec- open the doors for increasing its petro- tivity, skill development, civil aviation, infrastructure development and sports. leum exports and expanding its reach to The announcement that generated the most hubbub was of the construction its neighbouring countries. of a bullet train between Gujarat and Maharashtra. The 508-km-long Mum- bai-Ahmedabad High-Speed Rail project is estimated to cost around Rs 1.1 lakh crore with Japan loaning India almost 81% of the amount at a 0.1% interest rate, to be paid back over the next 50 years. The project is expected to be up and running by 2022. Apart from this, India also hopes to set up six additional bullet train corridors in the near future. While India and Japan’s trade has been on the downward trend over the last few years, Japanese FDI in India has been growing. To date, around $25.7 billion worth of FDI inflow has been seen, which the Modi-led government hopes to further increase with the latest round of MoUs and agreements.

DEMONETISATION INDIA-CHINA An exercise in futility? Strange frenemies Was it worth the effort? That is what everyone is asking. The latest RBI Annual It is not every day that India and China Report has been the cause of many discussions and deliberations. According to take a stand together. So when they do, it the report, approximately 99% of the demonetised currency has been returned to must be something of utmost importance. the banks. Prompting people to ask if only a tawdry 1% of India’s cash was ill-got- The nations submitted a joint proposal ten. Critics are of the opinion that the entire exercise has done nothing more than to the WTO against the ‘trade-distorting help convert black money into legal tender. practices’ of developed countries like UK During the launch of the initiative, the government had stated that the move and US. The proposal counters the efforts would help tackle the issue of illegal money and undeclared income. With nearly by some countries to target the subsidies all of the money being returned, people are questioning not only the implemen- of the developing countries while letting tation but even the raison d’etre of the initiative. The move has detrimentally im- the developed countries retain their huge pacted the economy and led to many people losing their jobs. It has also cost the farm subsidies. Is it really too much to ask RBI a massive Rs.7,965 crore to print new notes. While India’s economy and is for a level playing field? Let’s hope the two expected to slowly regain its original strength, critics continue to express concern Asian giants can force the issue. about government’s tendency of rolling out half-baked initiatives.

16 THE DOLLAR BUSINESS II OCTOBER 2017 COVER STORY CHINA-INDIA TRADE: WHAT'S AT STAKE?

The rhetoric of banning imports from China, citing their longstanding support to Pakistan has been gaining currency over the years. India and China – the two Asian behemoths have had their differences earlier too, including fighting a border war. But economic relationship between the two has always remained strong. However, with the recent Doklam standoff, conflicts at the WTO level and rather acerbic expressions on both sides, their relationship has hit a new low. That raises a question for India. Is it time to reduce its dependence on China and focus on self sufficiency? The Dollar Business analyses what really is at stake when it comes to Sino-Indian trade.

TDB INTELLIGENCE UNIT

18 THE DOLLAR BUSINESS II OCTOBER 2017 OCTOBER 2017 II THE DOLLAR BUSINESS 19 COVER STORY CHINA-INDIA TRADE: WHAT'S AT STAKE?

alk into stores across scepticism about China’s OBOR initia- war in 1962 that led to seesawing of bilat- (an idea many believe to be past its sell India and you will tive at various fora. Many in India believe eral ties. But, in a case of ‘all is well that by date) – the paradox is that much of find the ubiquitous OBOR is China's means to achieve its ends well’ ,bilateral ties were soon revived the country’s key foreign exchange earn- ‘Made in China’ label geopolitical goal of emerging as an alter- and grew stronger by the day, so much so ing sectors are dependent on China for on products across nate power center to US by expanding its that China became one of India's biggest various components to produce these the spectrum, from low-cost lunch box- economic footprint across regions. trading partners. China’s mass manufac- India-made, export-worthy products! Wes and cutlery sets to high-end mobile While there has been simmering dis- turing capabilities with virtues of cost-ef- So, should Indian exporters be wary of a phones and televisions! And this trade is content on the Indian side for sometime fectiveness have frequently acted as a life- trade war with China? not a one-way street. While you may not now, the Doklam standoff near the Sik- line to India’s trade and manufacturing find many Indian products in Chinese kim-Tibet-Bhutan trijunction brought fraternity that looks to China to procure LET'S TALK NUMBERS supermarkets, Indian commodities like matters to a pass with the rhetoric from various supplies needed for India’s grow- The numbers do indicate that there may iron ore have made their presence felt in both sides getting increasingly vitriol- ing production requirements. be cause for concern! If one were to pick Chinese factories. "Hindi Chini bhai bhai ic. Many in India took to social media Of course, the balance of trade has any key sector of the total 25 sectors en- still", you just thought? Have no illusions demanding a complete ban on imports been in favour of China and has caused good sir, the two countries have been on from China and politicians on both sides a lot of heart burn in India. If one takes a the verge of a trade war for months now. pandered to their local constituencies by closer look at the trade balance between Over the years, the India-China rela- supporting a trade ban without looking the two, the trade imbalance comes to tionship has received its fair share of at- at the economic fallout of a break in bi- light. While India imports $61.3 billion tention. Both have made the right noises lateral trade. While good sense and the worth of Chinese products, it manages about cooperation and open trade. How- impending BRICS Summit which was to ship only $10.2 billion worth of In- “ECONOMIC RELATIONSHIP SHOULD ever, China’s ambitious One Belt One being hosted by China helped thwart dia-made items in return. This leads to the BE A WIN-WIN FOR BOTH NATIONS" Road (OBOR) initiative and its growing a complete breakdown in bilateral ties, billion-dollar question: Can the two af- bonhomie with Pakistan with the devel- it has forced many to ask the question, ford a breakdown in trade? opment of China-Pakistan Economic what really is at stake when it comes to An interesting fact here is that while TIMOTHY CHESTON, RESEARCH FELLOW, CENTER FOR INTERNATIONAL DEVELOPMENT, Corridor (CPEC) has been a cause of Sino-India trade relationship? Can either Chinese exports to India are dominated HARVARD UNIVERSITY concern for India. India has expressed its party afford a total breakdown? by value-added products such as electronic equipment, mobile phones, plas- FACT OF THE MATTER tics, machinery, etc., India’s exports to TDB: India has been focusing on strengthening its domestic predicted growth rate for both countries, to surpass China’s per INDIA'S IMPORTS The numbers and facts indicate that pres- China, in contrast, are primarily raw ma- manufacturing sector. How important is a strong Indo-Chi- capita income level. FROM CHINA IS ently India and China can ill-afford a terials like ores, cotton and mineral fuels na economic relationship in this context? Having said that, we believe the next decade belongs to In- DOMINATED BY breakdown in trade and current bilateral etc. Not quite a case of ‘Make in India’! Timothy Cheston (TC): Past research found that a country is dia. India will be the fastest growing economy in the coming - relationship between the two nations is Despite successive Indian govern- more likely to start entering the production of those products decade, according to our measure of economic complexity. VALUE ADDED still viewed as one with great economic ment's calls to encourage the idea of which its neighbouring countries are competitive at producing Economic growth will result from the diversification of man- PRODUCTS potential. This is despite the bitter truth import-substitution and achieve self-re- and that is true in India's case too. India's challenge though is ufacturing knowhow particularly into more specialised exper- that the two sides did fight a brief border liance in manufacturing domestically, the rising inequality amongst the states within India. The prod- tise which will facilitate the production of a wider variety of ucts which are being exported from India are not being pro- products of increasingly greater complexity. India ranks as the India's imports from China duced across the country, but in small pockets of a few rich 48th most complex economy in the world based on the Eco- India's major imports from China consist states equipped with specialised knowhow required to manu- nomic Complexity Index by the Center for International De- of machinery and electrical goods facture these products which are complex in nature. However, velopment at Harvard University. Our analysis predicts India other states remain stuck with low manufacturing capability should soon have a higher per capita income as per its current and make do with the slow trickle of knowledge spreading complexity level. from the richer states. We expect the states, particularly those 27% 2% with strong social and business relationship with high-income TDB: The 2025 Global Growth Projections by Harvard’s 2% countries, to percolate that knowhow to other parts of India. Centre for International Development talks about a decline On paper, the economic relationship between India and in China’s export complexity. Will this impact global trade? 36% China should be a win-win for both. India could benefit sig- TC: The initial dip reported in China’s exports, which is small- nificantly from attracting the knowhow of its neighbour to er than the decline in India’s exports, is largely driven by global 3% 9% spur its entry into new product segments. As growth slows in declines in oil prices and China’s presence as a net importer of 3% 18% China, China will be increasingly looking to serve the rising oil as compared to the significant share of refined petroleum in demand for goods and services in high-growth states in India. India’s exports. Significantly, China’s complexity also declined. China’s exports showed the greatest declines in jewellery, gold TDB: What’s your outlook on India’s economic growth? as well as textiles. Machinery and electronics exports have also Electrical machinery Machinery & articles thereof Organic chemicals Plastic & articles thereof TC: India’s economic growth is likely to outpace China’s growth declined slightly. This has allowed regional neighbours to in- Floating structures Iron & steel over the coming decade. However, India has a significantly crease their share. A slowdown in China’s exports and its re- China's ambitious One Belt One Road (OBOR) initiative has been an issue of debate between Optical, medical, etc. Other lower per capita income which is less than half of China’s per sulting economic outcome will undoubtedly redefine the con- the two countries, with India expressing concerns that the initiative can become a threat to Source: TDB intelligence Unit & Ministry of Commerce, GoI; the sovereignity of the participating nations. break-up for FY2017 capita income. So, it will take several decades for India, at the tours of the global economy. Anishaa Kumar Interview by

20 THE DOLLAR BUSINESS II OCTOBER 2017 OCTOBER 2017 II THE DOLLAR BUSINESS 21 COVER STORY CHINA-INDIA TRADE: WHAT'S AT STAKE? visaged under ‘Make in India’, be it leath- India-China trade relationship. “India ADVANTAGE INDIA? dian consumer and Indian regulations in India-China merchandise trade er, pharmaceuticals, chemicals, textiles and China complement one another’s While there is no denying the fact that In- mind. And what about India? Can India India's imports from China are worth over $61 billion, while its exports are around and garments, automobile or its com- strengths and weaknesses,” he says. Simi- do-Sino trade relations are indeed char- find a market for commodities worth $10 billion. Hence, a trade ban would hurt China more than it would hurt India. ponents or electrical machinery – they lar views are shared by Saakshi Kulkarni, acterised by many win-wins, the huge $10 billion in turn. Again a difficult task, all represent a high degree of imports Director, India-China Business Council imbalance in trade suggests that while but considering that these products are 70 ------from China. Simply put, for meeting (ICBC), who states, “Given the very fact India is more dependent on China, Chi- mostly meant for businesses, chances are 60 ------the requirements of all our necessary that China is India’s largest trading part- na may have more to worry than India. exports will be hit but not too hard. 50 ------and critical imports, China’s factories in ner, a strong trade relation is in the inter- Considering that while China exports This is one part of the story. The other most cases have so far been the ‘one stop est of both nations.” Dr. Zorawar Daulet a significant volume of finished goods is: Will consumers and businesses in In- 40 ------solution’ for Indian firms – both big and Singh, Fellow at the Centre for Policy meant for Indian consumers, India’s ex- dia be hurt by a trade ban? Surely, they 30 ------Ministry of Commerce, GoI; figures in $ billion small. China, on the other hand, mostly Research, too believes that over the years ports to China are primarily raw mate- will. China, as they say, is the factory of & 20 ------imports raw materials and intermediate the two nations have developed ‘a pattern rials meant for businesses. Can China the world, and it will be difficult to find a goods from India. of interdependence’. That sounds all nice find a market as large as India for its con- sourcing destination that can supply In- 10 ------William J. Antholis, Managing Di- and good, but who is more dependent on sumer goods? Won't be an easy task we dia with the diverse products that it needs 0 ------rector and CEO of the Miller Centre at the other is the question that needs to be think, considering that a number of these at prices that it can afford. Experts believe FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 the University of Virginia, sums up the answered. products are customised keeping the In- that while the talk of boycotting Chinese India's exports to China India's imports from China Source: TDB Intelligence Unit

“POLITICAL STANDOFFS WON'T AFFECT “CO-EXISTENCE OF MANY GEOPOLITICAL TRADE TIES BETWEEN INDIA AND CHINA” VISIONS IS POSSIBLE”

ATUL KUMAR SAXENA, PRESIDENT, INDIAN IMPORTERS CHAMBER OF COMMERCE & INDUSTRY DR. ZORAWAR DAULET SINGH, FELLOW, CENTRE FOR POLICY RESEARCH, NEW DELHI

TDB: What makes China such a behemoth in exports? na, acted as a catalyst in defusing the Doklam standoff? TDB: How practical is the ‘boycott Chinese products’ rheto- stakeholders to make trade agreements with the Chinese com- Atul Kumar Saxena (AKS): China has quite methodically AKS: China views BRICS as a platform to challenge US’ glob- ric from certain sections in the country? panies sustainable. Involving various stakeholders is necessary employed the business model that Japan has been successful- al economic hegemony. In Asia, US has a cordial relationship Dr. Zorawar Daulet Singh (ZDS): This is not practical if you because finding a common ground while signing trade agree- ly practising. Across various markets around the globe, the with Japan, South Korea and India and China doesn’t like South have developed a pattern of interdependence, which in some ments is critical. Negotiations between the two countries are Chinese products are characterised with the 3A-advantage – Asian countries in particular having such favourable relations sense we have. In the ideal state, every country would like to always driven by various priorities. It’s important to address the affordability, acceptability and availability. Apart from being with US. So, with BRICS, China believes it can build an alter- make all the things it consumes and buys. But, that has not hap- spill-over effect of such trade agreements beforehand. cost-effective due to the economies of scale, the Chinese prod- native global trade framework, moving beyond the influence pened in India, and is a wider policy dilemma. Having said that, I don’t think India is ready for any free trade ucts are customised because the Chinese manufacturers have of US. And, amongst all the member countries, China finds The government has been trying to improve the infrastruc- agreement (FTA) with China. But, an investment agreement is their fingers on their customers’ pulse. They carry out a lot of Russia and India’s role to be the key to achieving that mission. ture to increase manufacturing in India, but that does not mean something that the government should be looking at far more research prior to product development and market expansion. China shares its boundaries with India and Russia and it knows that you can turn back the clock on the India-China relation- seriously to attract Chinese FDI to the domestic market. All in all, effectively armed with such advantages, Chinese very well that a standoff with either of these countries would ship which is actually a win-win in many cases as it allows you manufacturers and exporters are ruling various world markets. not be beneficial in the long run. Given such wider geopolitical to source material at a price which is more competitive than its TDB: What’s your opinion on the government’s argument ramifications of BRICS, I feel the decision to end the standoff substitutes that are available both here and in other countries. against joining China's One Belt One Road initiative? TDB: Will issues like the Doklam standoff affect trade ties? served multiple objectives for both China and India. During the crisis, many spoke about a boycott of Chinese prod- ZDS: I think India’s stance on One Belt One Road (OBOR) is AKS: Keeping the political rhetoric aside, I feel supplies of ucts. But, I don't think that is a very viable solution because the not sustainable. OBOR, being an extremely vast project, is still Chinese products to India are governed mainly by 3As. And, TDB: Who stands to lose more if there is any stalemate in economic cost to India itself will be very high. But, I agree with amorphous and leaves a lot of room for other actors to shape products that fulfill those criteria will always keep coming in Indo-China bilateral trade? those who feel that there needs to be a more balanced relation- the process. There is space for revision and adaptation in the from China. One cannot deny the fact that products and mate- AKS: From the trade point of view, it’s China that stands to lose ship between the two nations. OBOR policy framework while maintaining the sovereignty rials made in China as well as Chinese investment are present more than India because China exports more to India. I am sure For instance, the large trade deficits can be negated. But for and other critical issues. For instance, despite being a part of in every sector of the Indian economy. This scenario can’t be Chinese President Xi Jinping knows the priority of his nation that you actually have to double down on the economic rela- Eurasian Economic Union which has a different geopolitical altered or replaced overnight. Issues like the Doklam standoff well. However, a complete breakdown in bilateral trade can’t tionship, not to dilute it or sever it but to actually invite those vision, Russia is engaging with OBOR. doesn’t bother a trader much, as for him/her economic inter- happen because both countries are signatories to World Trade Chinese companies that have been operating as suppliers from So, India joining OBOR does not mean endorsement of a ests remain paramount. Despite prevailing tensions, India’s Organisation (WTO) framework. And, even if India imposes afar to come to India through market-seeking FDIs. Chinese or any other geopolitical vision. Co-existence of many trade with Pakistan continues. My honest view is that such is- non-tariff barriers, and countervailing duties like anti-dump- geopolitical visions is possible. Both India and China have a sues won’t affect trade ties between India and China. ing duties on imports from China, it would be China that would TDB: How should the government work towards attracting competing influences in the South Asian region. They should be affected more because India imports value-added products Chinese FDI to India? work together to produce more prosperous and sustained de-

TDB: Do you think BRICS summit, held at Xiamen in Chi- from China in large numbers. Ahmad Shariq Khan Interview by ZDS: The government should consult industry and sectoral velopment across South Asia. Anishaa Kumar Interview by

22 THE DOLLAR BUSINESS II OCTOBER 2017 OCTOBER 2017 II THE DOLLAR BUSINESS 23 COVER STORY CHINA-INDIA TRADE: WHAT'S AT STAKE? goods is good political rhetoric, it’s a in China is not viable in the short run. unanimously pointed towards the fact Another sector with high import depen- mistaken belief that it will be good for He says, “Replacing China as a sourcing that the absence or reduction in supplies dency on China is solar energy. India's India's manufacturing sector. According destination will make our costs go up by from China would increase production import dependency in case of photosen- to Singh, any talk of boycotting Chinese three-four times and in today’s gloomy costs. M. Rafeeque Ahmed, Chairman of sitive semiconductor devices [HS Code: goods would not hold the test of reality. business scenario, no trader would wish Council for Leather Exports (CLE), says 85414011] that are used extensively in “Boycotting Chinese goods is not viable for that.” Dr. S. K. Mohanty, Professor that as modern machinery is required the $2.48 billion worth sector is huge. because the economic cost to India itself at Research and Information System for capacity building and technological Making the case worse is the fact that In- is much more, it is more destructive to for Developing Countries (RIS), adds, up-gradation of leather sector, CLE has dia's domestic manufacturing capabilities the Indian economy than theirs as trade “China is a global player in the manu- even been requesting Chinese machinery in this segment is nothing to write home allows India to source material at a price facturing sector and this reality cannot manufacturers and component suppliers about. Narender Surana, MD, Surana So- which is more competitive compared to be overlooked.” While trade bodies and to set-up their units in India. lar Ltd. tells The Dollar Business, “The cost its substitutes that are available both here researchers have their opinions on the Vaibhav Soni, CEO of Dynamic En- of solar energy will go up by at least 75%, and in the West,” says Singh challenges associated with breaking up gineers Private Limited, a leading fan if we were to use India-made solar cells”. Atul Kumar Saxena, President, Indi- trade ties with China, The Dollar Busi- manufacturer says, “We import quite a Surana also cautions against putting any an Importers Chamber of Commerce & ness also reached out to industry lead- few critical components for our fan as- safeguards duties such as anti-dumping Industry (IICCI), believes that for Indian ers across the spectrum, to gauge their semblies from China. We prefer Chinese on solar modules because protectionist importers leveraging the manufacturing opinion on the importance of China suppliers because they offer us different measures might prove to be disastrous China has emerged as a popular sourcing destination for manufactured goods with countries capabilities of production hubs not based in their line of operations. They almost designs and cutting-edge technology.” for India’s long-term solar programme. in both the West and the East, including India, looking towards China for imports.

“INDIA AND CHINA CAN COLLABORATE “A DYSFUNCTIONAL BILATERAL TRADE IN VARIOUS AREAS” WILL SLOW DOWN BOTH ECONOMIES”

DR. LIU ZONGYI, SENIOR FELLOW, INSTITUTE FOR INTERNATIONAL STRATEGIC STUDIES AND CENTRE FOR ASIA-PACIFIC STUDIES, SHANGHAI INSTITUTES FOR INTERNATIONAL STUDIES (SIIS) YIFAN ZHANG, FACULTY, DEPARTMENT OF ECONOMICS, CHINESE UNIVERSITY OF HONG KONG

TDB: How would you describe the growth of the China-In- there is a huge potential for investment and exports in the ag- TDB: India’s trade deficit with China has grown to more vated to innovate. That scenario will negatively influence their dia bilateral relationship so far? riculture, IT and pharmaceutical sector in China. The quality than $50 billion in 2016. What are the reasons for that? production efficiency. A dysfunctional bilateral trade will slow Dr. Liu Zongyi (LZ): I think the India-China bilateral rela- of the Indian agricultural products however is not up-to-the- Yifan Zhang (YZ): The main issue is the structure of trade. down the economic development in both countries. tionship improved significantly only after former Indian Prime mark in comparison to similar products from other Asian From China, India imports finished products such as electron- Minister Atal Bihari Vajpayee visited China in 2003. Keeping countries. So, India needs to improve the quality of the agricul- ics and machinery. This is not surprising, as China has emerged TDB: How will FDI inflows from China benefit India? up with the growth prospect, during his visit to India in 2010, tural as well as pharmaceutical products to gain access to the as the “factory of the world”. Meanwhile, India majorly exports YZ: In recent years, thanks to its Go Global Strategy aimed at Chinese Premier Wen Jiabao accompanied by then Indian Chinese market. In fact, both China and India can collaborate raw materials to China. Another reason is that India has not promoting Chinese investment abroad, China has emerged as Prime Minister Manmohan Singh, promised to work towards to remove these quality-related issues. been able to fully integrate itself into the Asian supply chains. one of the largest investors around the world. Chinese compa- increasing the bilateral trade to $100 billion by 2015. How- In addition, the manufacturing sector in China is now mov- As a result, China imports parts and components from Japan, nies are investing in various developing countries. This is an ever, in 2015, the trade between the two countries went into ing towards valued-added product manufacturing. So, there is South Korea and Southeast Asia, but not India, through the opportunity for India to attract FDI from China to augment stagnation mainly because of the global economic crisis and an opportunity emerging for India to attract labour-intensive global supply chain of multinational companies. domestic capital, technology, innovation, skills and improve the Indian government’s political and economic barriers to manufacturing from China. infrastructure. All these factors should contribute to accelerat- the flow of Chinese investments to India. Even at a later stage, TDB: How will barriers and restrictions in bilateral trade ing the pace of India’s economic growth. Chinese President Xi Jinping while visiting India promised to TDB: What kind of impact have Chinese initiatives like impact the economies of China and India? invest $20 billion in India. Both India and China agreed that String of Pearls, CPEC and OBOR had on the bilateral trade? YZ: Barriers in the bilateral trade or a complete ban on the In- TDB: Is there any significant change in the Chinese econom- Chinese companies will set up a few industrial parks in Gujarat LZ: China is very active in South Asia presently, but the activ- do-China trade will prove detrimental, as both the countries ic growth model? and Maharashtra. But, the industrial parks didn’t come up as ities are mainly economic in nature and these activities do not will lose opportunities to learn from each other. For instance, YZ: China has entered the so-called ‘New Normal’ phase of promised. The Indian government rejected a lot of the propos- emanate from explicit geopolitical ambitions. China also car- China can learn from India how to improve output from its economic growth. The pace of growth has now shifted from als. Only a handful of Chinese private investments were green ries out maritime activities in the Indian Ocean, but the main information technology and services sectors. Similarly, India high to medium-high trajectory coupled with structural op- signalled by India citing various reasons. objective of those activities is to safeguard China’s own invest- could gain insights on infrastructure and skill development timisation. The change happened because the previous in- ments, imports and exports. China has built ports in Sri Lanka from China. vestment-driven growth model proved unsustainable. Hence, TDB: What kind of opportunities can India explore to re- but these ports will not only benefit China but also help South I think the end-consumers will end up paying more if bilat- the Chinese government is trying to move from input-driven duce its trade deficit with China? Asian Countries, including India. At the Colombo Port, 80% of eral trade is severely restricted. Under a less competitive envi- growth to innovation-driven growth. The change is significant

LZ: The trade deficit is huge from India’s point of view. But, the goods handled are from India. Interview by Niladri S. Nath ronment, companies in both countries will not feel fully moti- and will impact bilateral trade. Anishaa Kumar Interview by

24 THE DOLLAR BUSINESS II OCTOBER 2017 OCTOBER 2017 II THE DOLLAR BUSINESS 25 COVER STORY CHINA-INDIA TRADE: WHAT'S AT STAKE?

This means while China loses in terms would lose its low-cost labour advantage. infrastructure development and technol- of exports, Indian industry too will be at And as has been seen in other mature or ogy upgradation while giving China ac- a disadvantage when it comes to sourcing maturing economies, this would mean cess to a large consumer market without - of goods at a competitive price. Well, this China will now seek to increase its over- having to deal with tariff and non-tariff “TRADE SHOULD BE RING FENCED FROM seems to bring us back to what in tennis seas presence, either through the foreign barriers. POLITICAL AND BOUNDARY ISSUES" parlance is 'Love all'. direct investment (FDI) route or by en- As per a Department of Industrial Pol- tering into joint ventures to take advan- icy & Promotion (DIPP) report, India THE INVESTMENT ANGLE tage of low-cost economies across the received $60 billion as FDI in FY2017, SOURABH GUPTA, RESIDENT SENIOR FELLOW, INSTITUTE FOR CHINA-AMERICA STUDIES (ICAS), With China's economy increasingly globe. of which a good chunk came from Chi- GEORGETOWN UNIVERSITY showing signs of maturity, it is but nor- Indeed, China has already been ag- na and went to sectors like automobiles mal that the growth rate will stabilise to gressively investing in pursuance of this (60%), metallurgical industries (14%), what is being called the 'new normal'. strategy and as such has been investing electrical equipment (4%), industry ma- TDB: What impact will China’s geopolitical ambitions and cost producer economy, cost-conscious manufacturing sectors This would mean a consumer-led econ- in India too. Considering that India is on chinery (4%), and power (3%) indus- initiatives like CPEC and OBOR have on India-China bilat- will seek to migrate to new localisation opportunities within omy rather than a domestic investment the cusp of rapid industrialisation, Chi- tries. Many of the current government’s eral trade relationship? Asia. Vietnam and Bangladesh have already benefitted from driven economy. It will also mean that nese investments offer a win-win situa- flagship projects such as the various in- Sourabh Gupta (SG): They will not have any impact on In- such opportunities. India too must take advantage of this. going forward wages will rise and China tion. It gives Indian industries capital for dustrial corridors and the multi-billion dia-China bilateral trade per se. India will not be punishing Finally, India must make itself a welcoming destination for specific Chinese companies that conduct business in other Chinese investment, especially in sectors such as power, tele- South Asia countries under the aegis of CPEC or OBOR. In com equipment, automotive and electronic components, tex- fact, some of the Chinese state-owned enterprises (SOEs), tiles and clothing, etc., where China is looking to transfer some which operate in the infrastructure space and may participate of its productive capacity abroad. Industrial parks in India in CPEC and OBOR, are also likely to have independent op- where such Chinese capital is invested could thereafter become “THERE IS NO GUARANTEE A SIMILAR erations in Indian industrial parks. In fact, a number of MoUs a base for exports to China. between Indian state government agencies and Chinese com- SITUATION MAY NOT ARISE IN FUTURE” panies have already been signed. TDB: What role has the BRICS Summit played in defusing On the other hand, to what extent CPEC and OBOR will the tension between the two countries? have an impact on improving the economic environment and SG: The end of the Doklam standoff and the successful BRICS DR. SRIKANTH KONDAPALLI, PROFESSOR IN CHINESE STUDIES, JAWAHARLAL NEHRU UNIVERSITY potential of other South Asia countries – and thereby impact- Summit have somewhat restored the tenor of ties, particularly ing India – will depend on the rollout and implementation of bilateral economic ties which the Chinese too have every inter- the projects in these countries. The impact may not be imme- est in safeguarding. Going forward, both sides should commit TDB: With the end of the Doklam standoff and the sub- why Beijing is adopting double standards while addressing diate and we will have to wait and observe. to their consensus that economic engagement be ring-fenced sequent BRICS Summit in China, is the worst over for In- sovereignty concerns of India. from China-India political and boundary-related tensions. do-China bilateral trade relationship? TDB: China's economy is rebalancing itself to become more China and India have working groups on infrastructure, ener- Dr. Srikanth Kondapalli (SK): The standoff at Doklam can be TDB: While exports from China to India are dominated by consumer-led. What effect will this have on bilateral trade? gy, high-technology and resource conservation, as part of their termed as “one of the worsts” in the bilateral relationship be- value-added products, India’s exports to China, on the con- SG: China’s turn towards a more consumer-driven economy Strategic Economic Dialogue. The activities within these work- tween India and China. But there is no guarantee that a similar trary, are primarily raw materials. What reasons do you at- will necessarily impact India, given that India’s export basket ing groups need to be deepened, and the existing MoUs that situation may not arise in the future. The fundamental problem tribute to this qualitative imbalance? vis-à-vis China is biased towards resources and raw materials. have been signed between Indian state government agencies in the India-China bilateral relationship is that both have not SK: India’s manufacturing sector is growing at present but its Rather than restrategise regarding its resource exports, India and Chinese investors should also be hastened to their shov- agreed on the definition of the Line of Actual Control, let alone share still stands at less than 20% of the GDP, compared to should focus on products where it could enjoy latent compara- el-ready rollout stage. the entire territorial issue. Any misperception on the border manufacturing sector comprising over 40% of the GDP of Chi- tive advantages, especially in the area of light manufacturing as could once again trigger such incidents. na. So, China has an edge when it comes to exporting consum- China loses its cost advantage and graduates to a higher-wage, TDB: How can two nations strengthen trade cooperation? er durables and low-end finished products to India. In such a consumption-driven economic model. Vietnam and Bangla- SG: China and India must engage each other on trans-bound- TDB: What are the key concerns of India on OBOR? scenario, India ends up exporting raw materials like iron ore to desh are already going down this path. ary connectivity initiatives – in South Asia and beyond. While SK: One Belt One Road (OBOR) is an initiative by China to China. As a matter of fact, exports of iron ore to China consti- India will never participate in CPEC, India must raise its game overcome its “new normal” relative decline in growth rates by tute nearly 60% of the total volume of iron ore exports from In- TDB: The trade deficit with China is a cause of concern for and be much more forthcoming in cooperating with China on exporting its excess capacities to the regions included in OBOR. dia. China, in return, exports finished goods to India. So, India India, which stood at $51 billion in FY2017. What can India the Bangladesh-China-India-Myanmar (BCIM) sub-regional India is, in a way, a participant in OBOR to the extent of being needs to focus on expanding its manufacturing base. do to make its trade relationship with China more balanced? connectivity initiative. the second-largest contributor to the Asian Infrastructure In- SG: Rather than reducing dependence on Chinese imports, the Down the line, coordination can also be envisaged in infra- vestment Bank. India has endorsed the Bangladesh-China-In- TDB: What are your expectations from RCEP? emphasis on India’s part should be to boost its capacity to ex- structure projects in Nepal and Bangladesh. Moreover, India dia-Myanmar (BCIM) economic corridor of OBOR, although SK: Although India is a part of the Regional Comprehensive port more into the Chinese market. There are three important and China must ensure that the Asia Infrastructure Investment progress on BCIM is slow due to India’s security concerns. Economic Partnership (RCEP) negotiations, it has some con- avenues to do so. Bank (AIIB) and the New Development Bank (also known as The main concern of India on OBOR is related to the viola- cerns which I believe must be addressed before real progress Firstly, certain areas of Indian export specialisation such BRICS Bank) operate on ‘lean, clean, and green’ principles and tion of sovereignty in Kashmir by China with the China Paki- is made in finalising the RCEP deal. As the Trans-Pacific Part- as pharmaceutical exports and IT-enabled service exports meet high standards of loan disbursal and development out- stan Economic Corridor (CPEC) projects, which are not en- nership (TPP) has been blocked by the Trump Administration, are hobbled by cumbersome tax and regulatory processes in comes. Finally, India must be far more forthcoming in making tirely infrastructure-based. These projects have provisions for RCEP offers better prospects for its member nations including China. These hindrances should be reduced as best as possible deeper trade liberalisation offers, both at-the-border and be- deploying troops in the Kashmir region. If China is concerned India. As the stand-off between India and China is over, we can within the framework of the India-China Strategic Economic yond-the-border, to China and other trading partners in the Interview by Ahmad Shariq Khan Interview by on its sovereignty related to Taiwan and Tibet, India wonders soon expect some progress in this direction. Dialogue. Secondly, as China ages and becomes a more high- context of the RCEP negotiations. Interview by Niladri S. Nath

26 THE DOLLAR BUSINESS II OCTOBER 2017 OCTOBER 2017 II THE DOLLAR BUSINESS 27 COVER STORY CHINA-INDIA TRADE: WHAT'S AT STAKE?

'Smart Cities' projects have been major ten-member states of the Association of All said and done, both are facing eco- about the anti-dumping duties that have utive Director, Electronics and Comput- that both countries will lose from a trade recipients of Chinese FDI. Many Chinese Southeast Asian Nations (ASEAN) and nomic and social challenges, and this been imposed by India on many Chinese er Software Export Promotion Council war. “Economic theory tells us, moving companies have also expressed interest the six states with which ASEAN has ex- would be as bad a time as any to jeop- products. But these small skirmishes are (ESC), adds, “While China is strong in from trade to autarky causes efficiency in setting up manufacturing facilities isting free trade agreements (Australia, ardise their hard earned positions in the part of the negotiation tactics that coun- hardware, India has an edge in software. losses," he adds. Consumers, Zhang says, in India. A trade ban will obviously put China, India, Japan, South Korea and world of trade. tries usually employ. Nothing that a small The two can together capture the trillions will be the ultimate sufferers from a bro- these projects in jeopardy, not something New Zealand). RCEP therefore has the dose of diplomacy cannot overcome. of dollars-worth embedded technologies ken trade relationship as they will bear that India would want at a time when the potential to bring home a market whose TIT FOR TAT market. Several such trade complemen- the burnt of the loss in efficiency by pay- economy is sluggish and private invest- total combined GDP is more than $17 While we have established that it makes BETTER TOGETHER taries can be tapped if the two nations ing higher prices. ment has been hard to come by. trillion and collectively account for 40% little sense for either country to break Diplomacy did win the day during the work in the spirit of partnership.” The case for maintaining bilateral rela- of world trade. India could gain a lot if it trade ties, the two also justified grievanc- Doklam standoff. And now that matters tionship is strong. Yes, with countries the RCEP MATTERS negotiates a fair deal in the services sec- es against each other when it comes to are returning to normal, the industry A SHARED FUTURE size and complexity of India and China The other big factor that one needs to tor, which is its major strength. And be- trade. China makes use of non-tariff bar- hopes to see mature decisions on both The significance of bilateral trade be- there will be differences in opinion and keep in mind when talking about trade ing a party to RCEP would mean China riers (NTBs) such as sanitary and phy- sides to leverage the enormous potential tween India and China is clear. With domestic political compulsions that may restrictions is the mega-trade agreement doing away with the present roadblocks tosanitary measures (SPS) and technical that the two countries have. K. K. Lal- both economies targeting an annual force certain decisions, but it is time to – Regional Comprehensive Economic that it has put for India's services exports barriers to trade (TBT) to discourage In- puria, Executive Director, Indo Count growth rate of more than 8%, they need separate politics from economy for the Partnership (RCEP) – that India is nego- when it comes to mobility of talent in the dian exports into the market. Industries Limited, a leading exporter to find markets which are also growing benefit of both countries. tiating and which China is a driving force services sector. Chinese authorities claim that this of home textile products feels that soon at the same pace to absorb their products Both China and India are precarious- behind. In today’s global trade environ- Trade restrictions from either side will is because of the low-quality of Indi- there will be win-wins taking shape out of and services. ly positioned in terms of their respective ment, free trade agreements are increas- be the end of the dream of enhanced ac- an products. This is at a time when, on the Indo-China trade basket. He believes For sustainable growth of both econ- economies, and will be ill-advised to ingly playing a big role in bringing down cess to China as well as other countries the contrary, India has been enjoying a fair bit of the crisis was posturing for omies, it is essential that their huge mar- allow politics to define the contours of trade barriers. And RCEP is important who are members of RCEP. Again not a positive balance of trade with many the benefit of restive domestic audiences kets remain open for trade to each other. trade. They say this is the Asia's century. for India because not only does it include something India would want, nor for that advanced and open economies like US. on both sides, and soon economics will Yifan Zhang, Associate Professor at the But then, what is Asia without China and China as a party but also includes the matter would China. Of course, China has also gone to town trump over rhetoric. D. K. Sareen, Exec- Chinese University of Hong Kong agrees India bonhomie?

“INDIAN GARMENT INDUSTRY HAS “STATE AND LOCAL LEADERS CAN HELP LIMITED DIRECT EXPOSURE TO CHINA” STRENGTHEN BILATERAL TRADE”

ASHOK G. RAJANI, CHAIRMAN, APPAREL EXPORT PROMOTION COUNCIL (AEPC) WILLIAM J. ANTHOLIS, DIRECTOR AND CEO, MILLER CENTER, UNIVERSITY OF VIRGINIA AND FORMER MANAGING DIRECTOR OF THE BROOKINGS INSTITUTION TDB: Did exports to China from your sector suffer due to limited which is evident from the nominal, export and imports the recent Doklam standoff? to and from China. As an industry, we constantly explore the TDB: Despite growing political differences, China continues India and China will have an adverse impact on the global Ashok G. Rajani (AGR): Available data shows some decline opportunities available outside India and based on an assess- to be one of the largest trade partners of India. How can the trade and economy? in our exports and a marginal increase in imports. However, ment of all the investment-related factors of that country, in- two benefit from each other's experience? WJA: Both nations are now in an elite circle of nations in trade we feel that these trends are more of a demand-supply position vestment decisions are made. It is an ongoing process and any William J. Antholis (WJA): On a broader perspective, India negotiations. Their interests diverge – both in terms of their ne- and cannot be correlated to the political situation. decision regarding leveraging the manufacturing capabilities of and China complement each another’s strengths and weak- gotiating priorities and in terms of their view of international manufacturing hubs based elsewhere is done after weighing in nesses. India’s service sector can be of a great value to China organisations. This already makes it difficult for them to coor- TDB: With bilateral trade skewed in favour of China, would all the factors necessary before making an investment. whose main focus has always been on manufacturing. China dinate policy. So, a further fallout of relations between the two a total ban on imports from China for your sector be more can teach India about export-oriented manufacturing. countries would only make a difficult situation worse. of India’s loss than that of China’s? TDB: The India-China border standoff should not threaten AGR: For the apparel industry, imports from China are nom- RCEP deal is the widely held view. What’s your take on this? TDB: What can India do to improve its exports from the TDB: How do you see the India and China relationship inal. The same holds true for exports as China doesn’t figure AGR: RCEP is a mega trade deal that aims to cover goods, manufacturing sector? developing in the future? in the top 10 export destinations for India as far as the apparel services, investments, economic, technical co-operation and WJA: Globally, manufacturing has become so diversified WJA: Many important initiatives within India and China have industry is concerned. In June 2017, India's apparel exports to intellectual property rights. We welcome the RCEP deal. We that supply chains are spread across a range of countries. The come from state and local leaders. On one hand, diversity China stood at $19.4 million, while imports of apparel from recognise it as one of the most important deals for India. India manufacturing sector in India needs to develop a better un- makes it harder for each of the nation’s capitals to manage bi- China stood at $5.5 million. So, under present circumstances, already has implemented an FTA with the ASEAN, Japan and derstanding on how its industries can fit into various supply lateral relations. On the other hand, local leaders can forge re- we don’t see any major impact on exports to China. South Korea and negotiations for similar pacts with Austra- chains. The stakeholders of the manufacturing sector in India lations with one another and take advantage of complementary lia and New Zealand are underway. So, a mega trade deal like need to discover their prospective partners in the supply chain. strengths. We’ve seen that with western China's tech centres TDB: What are India’s sourcing options beyond China? RCEP will only benefit India and since the border standoff has partnering with south India in the service sector. I expect those Interview by Ahmad Shariq Khan Interview by AGR: The exposure of Indian garment industry to China is been resolved we don’t foresee any impact on RCEP. TDB: Do you think any fallout in the relationship between local-to-local ties to continue. Anishaa Kumar Interview by

28 THE DOLLAR BUSINESS II OCTOBER 2017 OCTOBER 2017 II THE DOLLAR BUSINESS 29 OVERSEAS TALK H.E. DATO’ HIDAYAT ABDUL HAMID, HIGH COMMISSIONER OF MALAYSIA TO INDIA

with a combined GDP of $22.8 trillion large SME sector. In what ways can the or 30.7% of the world’s GDP. It is hoped two work together to boost trade? MICECA HAS “RCEP WILL BOOST that through RCEP, we will achieve a HAH: SMEs play a very important role modern, comprehensive, high-quality in driving the Malaysian economy. I CONTRIBUTED and mutually beneficial economic part- think more collaborative efforts, smart SIGNIFICANTLY nership. Early implementation of RCEP partnerships and cooperation should be TOWARD EXPANSION BILATERAL TRADE” - will enable the business sectors from initiated between Malaysian and Indian OF TWO WAY TRADE both countries to tap the huge potential SMEs for them to network and explore Malaysia and India have always maintained a strong trade relationship. The that all 16 partner countries have. Ma- the economic opportunities available. much-accomplished ties are now being backed by an increasing number of trade laysia hopes that the negotiations can be Mentorship and regional value chain In addition, Malaysia has a huge trained agreements. In an exclusive interaction with The Dollar Business, H.E. Dato’ Hidayat completed this year. programmes should be introduced to and educated workforce, a sound and re- these SMEs so that they can avail the silient banking system and offers strong Abdul Hamid, High Commissioner of Malaysia to India, discusses the ways and TDB: What are the highlights of benefits under MICECA and AIFTA. IP protection. means to further strengthen the economic relationship between the two countries. MICECA, the treaty that was initiated Relevant agencies in Malaysia and India in 2011 between Malaysia and India? can also work together in sharing their TDB: The Andhra Pradesh Econom- INTERVIEW BY ANISHAA KUMAR HAH: The implementation of MICE- experience in promoting this segment. ic Board and Malaysia-based Might CA has contributed significantly to the Technology Nurturing Sdn Bhd have expansion of two-way trade and in- TDB: Do Malaysian companies face signed an MoU to develop a technology vestment between India and Malaysia. any problem while operating in India? park in Amravati. What expertise does However, it is yet to reach its fullest HAH: There are many Malaysian com- Malaysia bring to the table? potential. Of course, there are several panies that have investments and set- HAH: Initiatives like these will broaden implementation issues that require both ups in India. Today, many Malaysian India-Malaysia economic cooperation. countries to discuss and review in detail companies have developed expertise Malaysia’s experience in building Pu- – to help make the agreement reach its and specialisation in many areas – and trajaya, our new Federal Government fullest potential. We believe that officials we could complement what Indians are Administration Centre and many such from both countries are working hard in good at and work together. In the past, modern sustainable townships, technol- addressing some of these issues despite some Malaysian companies have faced ogy parks with modern facilities could their focus being on the effort to con- tough challenges due to bureaucratic be shared with India to produce better clude the ongoing RCEP negotiations. delays and other reasons. But, many of and grander cities. them have found the right synergy and TDB: In FY2016 Malaysia-India trade good partners. I must mention that Ma- TDB: Malaysia adopted GST a couple witnessed a sharp decline, which recov- laysian companies have been attracted of years back. How do you see GST im- ered slightly in FY2017. What contrib- to India because of the similarities in pacting India’s economy? uted to this fluctuation? laws and governance. Additionally, the HAH: GST implementation is said to be HAH: Take it as a blessing in disguise. way of life as well as culture and tradi- the biggest economic reform in India. Every challenge offers a new opportuni- tion of our peoples are quite similar. In- But, every change has its own uncertainty. In 2016, most countries were hit by dian and Malaysians traders have been ties and challenges. We believe it will falling commodity prices, currency vol- doing business together for many years. help improve tax compliance and gener- atility and uncertainty in future trading ate more revenues for the government. TDB: Malaysia and India have always since 1998. Trade with India accounted TDB: Malaysian PM Najib Razak has arrangements – not to mention other ex- TDB: What assistance does Malaysia Unfortunately, the change will not come shared strong economic ties. What has for 3.3% of Malaysia’s total global trade been vocal about the need for early ternal factors such as Brexit, changes in provide to foreign companies? overnight and it takes persistent efforts been the cornerstone of these ties? in 2016 – amounting to $11.7 billion conclusion of RCEP talks. How do you monetary policy of developed nations, HAH: There are many Indian compa- to be implemented effectively. Based on H.E. Dato’ Hidayat Abdul Hamid (RM 48.7 billion), an increase of 4.0% see RCEP impacting trade relations? etc. And during the unfavourable times, nies that have invested in Malaysia. The our experience, the benefits of GST will (HAH): India-Malaysia bilateral trade (in RM terms) from 2015. Malaysia and HAH: We have seen an upward trend our countries came closer. I think the Malaysian government is a pro-business far outweigh the initiation pains. relations have been developing at a rapid India are also signatories in several bi- in trade between India and Malaysia. private sector, including SMEs, played government. We not only facilitate their clip. Being amongst the fastest growing lateral and regional cooperation agree- The implementation of AIFTA in 2010 an important role in boosting trade. entry, but also provide all the neces- TDB: Both Malaysia and India are nations in the world, India has been an ments. The Malaysia-India Comprehen- and MICECA in 2011 are some of the Initiatives such as a business forum and sary assistance required. The Malaysian popular tourist destinations. However, important economic partner for Malay- sive Economic Cooperation Agreement major drivers. Other FTAs will further private sector-led trade missions should Investment Development Authority tourists flow from Malaysia to India is sia. Based on our 2016 records, India (MICECA) and ASEAN-India Free contribute to the expansion of two-way be encouraged to promote networking (MIDA) is a one-stop agency for foreign still very low. How can this be changed? was Malaysia’s 7th largest trading partner Trade Agreement (AIFTA) are two im- trade. The conclusion of RCEP will take and closer cooperation between busi- investors. Malaysia offers liberal invest- HAH: India is a popular destination for as well as the 7th largest export destina- portant determinants of our trade rela- our trade relations to the next level as the ness people and companies – this will ment policies, stability in politics and Malaysians. To encourage visitors, more tion. In the same year, Malaysia was In- tions. Soon, we are likely to have another trade agreement is important when we maintain the upward trend in trade. economy, a pro-business government, a direct flights should be established. This dia’s 11th largest trading partner. multilateral pact, the Regional Compre- talk about ASEAN-India economic rela- business-friendly environment, well-de- was seen when Air Asia introduced di- In 2016, India was Malaysia’s largest hensive Economic Partnership (RCEP). tions, of which Malaysia is a part. Col- TDB: In 2016, World Bank reported veloped infrastructure, great connectiv- rect flights to Bhubaneswar and Kochi export destination in the South Asian These engagements are crucial to ensure lectively, the 16 RCEP countries account that 97% of business establishments ity, harmonious industrial relations, ex- from Kuala Lumpur. It led to an increase region, a position it has maintained our relations remain healthy. for almost 50% of the global population, in Malaysia are SMEs. India too has a cellent MICE facilities and much more. in visitors to Odisha and Kerala.

30 THE DOLLAR BUSINESS II OCTOBER 2017 OCTOBER 2017 II THE DOLLAR BUSINESS 31 IMPORT’ONOMICS ELECTRONIC CASH REGISTER (ECR)

ECR and PoS terminals going forward is the growth of the Indian retail sector, Profit estimates for electronic both the organised and unorganised re- cash register (ECR) imports tail segments, and the adoption of retail Margins can range from 8% to 20%, RINGING OF THE automation products by retailers. As per depending on the variant a 2016, Federation of Indian Chambers Cost ($/Unit)* 90.00 of Commerce and Industry (FICCI) and Freight & Insurance ($/Unit)** 2.47 CASH REGISTER. PwC report, the domestic retail sector in CIF ($/Unit) 92.47 India is likely to double to $1.1-1.2 tril- CIF (Rs./Unit)*** 5,946.75 lion by 2020 from $630 billion in 2015, BD (0%) 0.00 SWEET SOUND. growing at a CAGR of 12%. CIF + BD 5,946.75 The India Brand Equity Foundation Cess (0%) 0.00 (IBEF) estimates that the share of or- CIF + BD + Cess 5,946.75 Imports of electronic cash registers (ECR) ganised retail sector will grow to 24% IGST (18%) 1,070.41 and point of sale (PoS) terminals has in FY2020 from the 8% in FY2015. The Final Cost 7,017.16 become a lucrative business, especially projection indicates a high adoption rate Selling Price in India# 8,420.59 of new systems, processes and technolo- Profit 1,403.43 over the last year, thanks to the acceptance gies by Indian retailers. More specifically, Profit Margin 16.67% of retail automation, implementation of GST the report also states that the transfor- *Standard electronic cash register model; mation from manual accounting to ma- HS Code: 84705010; **Freight and insurance cost from and the government’s thrust on making Ningbo Port in China to Chennai Port in India; Minimum chine-led systems will gain momentum. order quantity (MOQ): 100 units;***Assuming USDINR at 64.31; # Wholesale Price (TDB Intelligence Unit); India a digital economy. An analysis of These numbers certainly indicate that Note: Profitability ignores brand equity.

whether it makes sense to import these importers of ECRs will continue ringing Important disclaimer: Profitability has been calculated based on time-bound indicative prices (prevalent during the third week of September 2017). Prices in profits in the near future. may vary during a different time period, resulting in profit fluctuation. Factors like brand value, supply chain-related costs like warehousing and logistics, ad- products in volumes. And from which ministrative costs, sales and advertising costs, etc., have not been included in the cost of procurement. Margins have been calculated considering government policies (announcements, notifications, etc.) as on September 20, 2017. supply markets. THE DRAGON RULES Risk factors and currency fluctuations have to be considered while importing. Calculations have been provided for informational purposes only; The Dollar At the global level, China holds a signifi- Business takes no responsibility for any loss resulting from investments in the said commodity/product. Though all efforts have been made to ensure the accuracy of the content stated herewith, the same should not be considered a cant share of the exports pie. In CY2016, statement of law or used for any legal purposes. Prior permission is required before calculations stated herein are published or quoted in a third party web China accounted for 30% of the world’s or print property. exports of ECR, by value – followed by Vietnam with a 14% share. In India too BYBY NILADRINILADRI S.S. NATHNATH China’s dominance is rather overwhelm- ing, though Vietnam has been giving it a CHINA-MADE ECRs rowing up, you may remem- card machines have also become quite in imports next year. But, the growing One of the aims of demonetisation, as stiff competition of late. Although China ARE 20-30% CHEAPER ber walking to the local kira- ubiquitous. And since domestic man- adoption of ECRs and PoS terminals in announced by the government in No- shipped 50% of the total ECRs imported na store, where along with ufacturing in this sector is lacklustre, the domestic retail market will keep the vember 2016, was to promote a digital by India in FY2017, Vietnam continues THAN ECRs FROM the comforting smell of spices rather non-existent, it is no surprise that numbers strong in the future,” says D. and cashless economy. As a result, PoS to capture a significant share by fulfilling OTHER COUNTRIES Gand soaps you would be welcomed by imports of these machines have been on Baskaramoorthy, Vice President – Sales terminals became one of the tools neces- 37% of the import requirement. the sight of a calculator and a meticu- the rise, with China, Vietnam and Ma- & Services, Posiflex Technology India sary for retailers to keep up with the hi- Price is the only factor which is keep- lously handwritten bill. Not any more. laysia being the sourcing destinations of Pvt. Ltd., a PoS terminal manufacturing tech mode of transactions. “The importing China ahead of other sourcing des- the Chinese,” he adds. Welcome to digitisation. Today, retail choice for importers. Together they ful- brand from Taiwan. “The supply of ECR ers actually struck a deal with the banks tinations, feel importers. “Products from In China, Guangzhou and Shenzhen stores and even small neighbourhood filled 98% of India’s demand for import- and PoS terminals is mostly dependent to supply PoS terminals to the banks and China are 20-30% cheaper compared to are the leading sourcing destinations. stores are moving towards electronic cash ed ECRs and PoS terminals in FY2017. on imports. So, the growth in retail will imported them in large numbers,” says products from other countries,” says Mo- Importers usually take trips to these cit- registers to tally up bills. Hand-written surely have a positive impact on the im- Bhaskar Venkatraman, Group CEO and hit Kaushik, CEO of Swaggers Technolo- ies to finalise the deals. A trip which they receipts are being replaced by itemised A QUANTUM LEAP ports. In the last three years, we have Director of Millennium Retech Ventures gy, a Delhi-based ECR importer whose say is worth the costs involved. printed bills. These machines are also a Looking at the numbers, one can say been witnessing 25-30% growth in busi- India Pvt. Ltd., a Chennai-based import- business has been witnessing a dramatic Overall, importers say that importing familiar feature at most restaurants and without a doubt that last fiscal has proven ness. And, in FY2018, we expect a 35% er of ECR and PoS terminals. growth because of GST. these machines is usually challenge free, smaller eateries where they are used to to be quite the turning point for import- y-o-y growth,” adds Baskaramoorthy. After demonetisation came the Goods However, while comparing the quali- barring the usual procedure-related is- print cash receipts or tokens to manage ers – in FY2017, India’s imports of ECRs and Services Tax (GST), which has made ty of imports from China and Vietnam, sues with Customs and issues related to orders. Electronic cash registers (ECRs) registered a y-o-y growth of 288.20% . GROWTH TRIGGERS ECRs and PoS terminals more relevant Baskaramoorthy says that companies efficiency at ports. GST (18% IGST) too are steadily becoming a standard feature Although importers are not expecting The question now is what triggered such than ever before. “To file a GST return, from Vietnam and Taiwan focus on has not been a major deterrent to the im- across all retail formats, and across tiers. such a large-scale increase in the com- a massive import influx and will the im- retailers must keep their accounts in or- quality whereas the Chinese ones stick port of these machines. While ECRs are used for cash paying years, they are confident that the ports business still be worth the invest- der, making these devices even more in- to the volume game. “The companies Although large-scale importers are ments, with the growth of credit and growth in imports will remain healthy ment in the next five years? Demonetisa- dispensable,” explains Baskaramoorthy. in Vietnam and Taiwan invest a lot on not facing any issue with Bureau of In- debit card payments, ECRs with PoS ter- and steady in the near future. “One tion is said to be a major reason for the Sounds logical! However, the key fac- research and development. Hence, they dian Standards (BIS) certification, for minals, the hand-held debit and credit shouldn’t expect such a gigantic uptick sudden rise in imports of PoS terminals. tor which will drive domestic demand for can’t offer products at a lower price like medium and small-scale importers like

32 THE DOLLAR BUSINESS II OCTOBER 2017 OCTOBER 2017 II THE DOLLAR BUSINESS 33 IMPORT’ONOMICS ELECTRONIC CASH REGISTER (ECR)

Mumbai-based Rais Pardesi, Owner of Rs.1,20,000,” he explains. minor compared to the opportunities dously in the unorganised retail sector. Real PoS Technology, the cost of getting In addition, according to Dinesh they offer. Earlier, there was a lot of reluctance in a BIS certification is a crucial factor. “The Bhatia, Director of Grandmaster Inno- using these machines amongst small re- manufacturer and importer bear the cost vations Pvt. Ltd., importers usually face OPPORTUNITIES GALORE tailers. They were under the impression The domestic ECR of BIS certification equally. The actual documentation related issues with man- The domestic market for ECRs and PoS that these devices were only for big retail and PoS terminal market is growing at a cost of a BIS certification is Rs.45,000. ufacturers and exporters in China while terminals is maturing fast, says Venka- houses. There was also a lack of effort on healthy rate of However, if you hire a consultant to get applying for BIS certification. However, traman. “The acceptability of ECRs and their part to understand the operations 15-20%, year-on-year. the certification done, the cost goes up to importers say that these challenges seem PoS terminals has increased tremen- and utility of these devices. But things have changed for the better. We don’t Import of ECRs from China India’s import of ECRs India’s largest sourcing markets have to educate them anymore, they now ness. Importers make anywhere between fledged PoS systems. Newer forms of PoS India’s import from China increased Import of electronic cash register witnessed China has been the sourcing destination of know about the benefits these machines 8% and 30% in profits, depending on have also emerged in the market such as 1,139.46% between FY2013 and FY2017 a 288.20% y-o-y growth in FY2017 choice for Indian importers of ECRs can bring to their business,” he adds. the region and market competitiveness. devices to convert any computer to a PoS Interestingly, some importers are Some importers also provide after-sales or tablets with the software and facilities 70 140 2% 11% also importing various components of service to their clients. to send an electronic bill to the custom- 60 120 ECRs and assembling the machine in Venkatraman feels the domestic ECR ers thereby saving on paper and space. 50 100 the country to cater to the local markets. and PoS terminals market is growing at The importers are confident of new and 40 80 50% They import completely knocked down a healthy rate of 15-20%, year-on-year. continued opportunities for both basic 30 60 37% (CKD) and semi-knocked down (SKD) “The traders who are still not initiated as well as sophisticated models. 20 40 China units, mainly from China. into retail automation are now upgrad- With the absence of domestic manu- 10 20 Vietnam Malaysia ing themselves to ECRs to have better facturing and the growth in popularity of 0 0 Other FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 BIG POTENTIAL control over their businesses,” he adds. credit and debit cards, importers feel that Not only is the potential huge, the mar- In addition, the retailers who are cashless India just might be their ticket Source: TDB Intelligence Unit & Ministry of Commerce, GoI; Source: TDB Intelligence Unit & Ministry of Commerce, GoI; Source: TDB Intelligence Unit & Ministry of Commerce, GoI; figures in $ million; HS Code: 84705010 figures in $ million; HS Code: 84705010 break-up for FY2017; HS Code: 84705010 gins are equally attractive in this busi- ahead of the curve are switching to full- to becoming cash-rich! Good idea.

“RETAIL AUTOMATION IS DRIVING GROWTH” “THE FUTURE LOOKS VERY PROMISING” TDB: Has demonetisation turned out TBD: What makes China a destination TDB: How has GST impacted the de- from the vendors for all the equipment to be a growth driver for electronic cash of choice for sourcing retail automation mand for ECRs and PoS terminals in acquired a difficult task. registers and point of sale terminals? products? the domestic market? Anil Kumar Samineni (AKS): I think AKS: It’s the price that makes the differ- Dinesh Bhatia (DB): Although most TDB: What margins can one expect in the growth isn’t driven by demonetisa- ence in the case of these devices. Chi- importers are of the view that GST has ECR import business? tion, rather by the growth of the organ- na-made ECRs are 30% cheaper than impacted imports of ECR positively, my DB: The margin varies from product to ised retail sector. Large-format stores those manufactured in other countries. personal view is that GST, in a way, pos- product. It ranges between 20% and 30%. such as Spencer’s, More, etc., have pen- On an average, we import 2,000 ECRs es a challenge to ECR imports with its The margin includes after-sales service. etrated across tiers with stores equipped annually from China. Our buying cost is multiple tax slabs. For example, in case However, the margin could be lesser in with retail automation products. This around $90 per unit. of an ice-cream vendor, GST is differ- a highly competitive and price-sensitive trend has also motivated other retailers ent for chocolate ice-cream and vanilla market like New Delhi. from the unorganised segment to switch TDB: We understand profits can range ice-cream. So, it’s very difficult to cal- to electronic cash register (ECRs) and/or between 30% to 40%. Isn’t that high? culate them on ECR. However, we are TDB: Do you think the market will point of sale (PoS) terminals. The trans- Anil Kumar Samineni AKS: It’s not a huge margin. It includes in discussions with our manufacturer Dinesh Bhatia grow even faster in the future? formation started a few years ago and it DIRECTOR, various operational costs including af- in China about recalibrating the ECR to DIRECTOR, GRANDMASTER DB: The future looks promising. In my PARK SYSTEMS INNOVATIONS PVT. LTD. is now reaching its peak. The implemen- ter-sales service. The net margin is lower accommodate various slabs of GST. GST opinion, almost 90-95% of the domestic tation of GST has also played its part. But at about 20%. If you don’t get that kind has also spurred the growth in the im- retail market is unorganised and most it’s the changing mindset of retailers that of ECRs and PoS terminals. The trend of margin, you won’t be able to operate. port and sale of PoS machines in certain if they can meet their requirements. An- of that market functions without proper is the main driver of demand for retail is catching on and almost all the retail- The clients need continuous support for retail segments. Changing the billing other important aspect is getting the BIS billing solutions. So, it’s a huge opportu- automation products. No doubt, GST ers now want ECR and PoS terminals at updating their billing system. system is easier for PoS terminals. certification. The documentation pro- nity. Going forward, we are aiming at a and demonetisation have added to the their stores. Everyone wants to switch to cess is quite cumbersome. The manufac- 25-30% year-on-year growth in our busi- numbers. But, proliferation of organised retail automation. ECR and PoS termi- TDB: Your outlook on the future? TDB: What are the things one should turers in China must provide numerous ness. Over the past seven years, demand retail has been the main driver of growth. nals enhance the profile of any retailer. AKS: I believe demand for retail auto- keep in mind while importing retail documents during the process of getting has been growing steadily thanks to in- I have been importing retail automation mation products will continue to grow as automation products from China? BIS certification. In most of the cases, the creasing awareness. The new generation TDB: Which retail segment was the first products, including ECRs, for five years the market matures. In addition to ECRs, DB: One needs to be very careful. Al- Chinese companies source manufactur- of retail marketers wants to be organised. to move to ECRs and PoS terminals? and have witnessed a 20% year-on-year importers should look at PoS systems most all manufacturers in China claim ing equipment from multiple vendors They understand the importance of good AKS: I think hospitality and food and growth. I expect to see an even higher that boast of more advanced technology. to offer quality products. The importer in China or from other countries and billing infrastructure. This will make the beverage sectors were the early adopters growth rate in the years to come. These machines are the future. should visit the manufacturers to check that makes sourcing quality certificates demand see an upward trend.

34 THE DOLLAR BUSINESS II OCTOBER 2017 OCTOBER 2017 II THE DOLLAR BUSINESS 35 RENDEZVOUS V. NARAYANASAMY, CHIEF MINISTER, PUDUCHERRY

31 EOUs IN “INDUSTRIES HAVE PUDUCHERRY CLOCKED EXPORTS WORTH RS.864.83 STARTED COMING TO CRORE IN FY2017

PUDUCHERRY” infrastructural development in all four regions i.e. Puducherry, Karaikal, Yanam and Mahé. We have already submitted a Since V. Narayanasamy took over as the Chief Minister of Puducherry in June 2016, proposal of Rs.192 crore to the Ministry he has been on a mission to attract investments to this beautiful union territory of Tourism for FY2018 to promote tour- situated on the southern coast of India. In an exclusive interaction with The Dollar ism in Puducherry. The proposal has been approved and Rs.108 crore has al- Business, Narayanasamy talks at length about the progress his government has ready been sanctioned. made thus far to make Puducherry an investor’s paradise. TDB: Could you highlight some of the INTERVIEW BY NILADRI S. NATH transportation and logistical develop- ments in Puducherry? TDB: You became the Chief Minis- velopment and Investment Corporation tral Sales Tax (CST) and Puducherry VN: We have worked towards connect- ter of Puducherry in June 2016. What Ltd. (PIPDIC) started functioning in a General Sales Tax (PGST) exemptions. ing Puducherry to 14 major destinations steps have you taken to further indus- full-fledged manner just a year ago. The The income tax holiday had been with- across India like Delhi, Bengaluru, Man- trial development since then? Centre is helping exporters find new drawn in 2001. As a result, most of the galore, Mumbai, Kolkata, etc., through V. Narayanasamy (VN): As far as in- markets and is offering export incen- companies that had set up their base rail networks. We are also working to- dustrial development in Puducherry is tives. In October, we are organising an here migrated to other states. The pre- wards setting up East Coast Railways concerned, we have opened a new chap- investors’ meet in Chennai. vious governments didn’t pay adequate that will help link Chennai, Mahabalipu- ter of progress. The Union Territory of attention to the industrial development. ram, Puducherry and Cuddalore. Puducherry has substantial potential for TDB: What is the Puducherry’s export On top of that, after the implementation In addition, the government has sanc- industrial and tourism development. To projection for FY2018? of Goods and Services Tax (GST), the tioned a national highway connecting Vi- realise that potential, within five months VN: In FY2017, the 31 export oriented pace has slowed down again. council meeting of the Confederation of motors, compounds of plastics, etc. luppuram, Puducherry, Cuddalore and of forming the government, we formu- units (EOUs) operational in Puducherry Indian Industry (CII) in Puducherry. A In addition, 839.77 acre and 596 Karaikal. The 250-km four-lane stretch lated the new Industrial Policy. clocked exports worth Rs.864.83 crore, TDB: The new industrial policy section of the CII members at the meet acre of land have been allotted in Se- will add momentum to the industrial In addition, we have launched a single a 43% increase from Rs.489.59 crore in launched in 2016 identified nine prior- had showed a lot of interest in setting up darpet-Karasur Industrial Estate and developmental activity in the Union Ter- window clearance system in all govern- FY2016. The government’s export pro- ity sectors and 15 thrust areas to trigger IT SEZs in Puducherry. Polagam (Karaikal) Industrial Estate, ritory. We would like to see Puducherry ment departments. In fact, a committee jection for FY2018 is Rs.1,200 crore from growth. What has been the progress? respectively, for setting up multi-sector connected by air with more destinations has been constituted under the chair- 69 units. These numbers don’t include VN: There are some encouraging devel- TDB: How is Industrial Guidance Bu- manufacturing units. like Hyderabad, Bengaluru, Coimbatore, manship of the Minister of Industries handloom and gems & jewellery exports. opments taking place on those fronts. reau (IGB) helping attract investments Tirupati, Cochin in near future un- and Commerce M.O.H.F Shahjahan, to So, the figures will grow even bigger in Halal Industry Development Corpora- to Puducherry? TDB: The potential for tourism in der the new ‘Ude Desh Ka Aam Nagrik’ facilitate clearance of the proposals for coming years. We expect exports from tion, an agency under the Ministry of VN: Since April 2016, Industrial Guid- Puducherry is enormous. What is the (UDAN) scheme. We have also written setting up industries in Puducherry. We the basic drug manufacturing sector to International Trade and Industry (MITI) ance Bureau (IGB) of the Government of government’s strategy for further de- to the Ministry of Road Transport and have also started interacting with indus- increase to Rs.500 crore in FY2018 from of Malaysia, is setting up units for man- Puducherry, which acts as a facilitator be- veloping this sector? Highways to connect Puducherry with trialists, not only from India but also Rs.350 crore in FY2017 – which will fuel ufacturing and export of halal foods tween the industries and the concerned VN: We will be formulating a five-year two proposed industrial corridors i.e. from Malaysia, Singapore, Dubai, Abu growth. Also, exports are likely to grow from Puducherry. A Dubai-based com- departments when it comes to obtaining tourism policy soon. We want to focus Chennai-Bengaluru and Visakhapat- Dhabi and Germany to attract invest- from manufacturing units of companies pany has also shown interest in investing clearances, permissions or licenses, has on three types of tourism in Puducherry nam-Chennai Industrial Corridor. ments at various platforms. They all have like L&T and MRF in Puducherry. Rs.20,000 crore to set up cluster to man- processed applications of 177 industry - heritage, pilgrimage and leisure. We Logistics is also set to improve as soon shown interest in setting up industries in ufacture pharmaceutical products. enterprises and given them clearances to are already leveraging the leisure tour- as the Puducherry Port starts function- Puducherry. We are also reviewing some TDB: Puducherry got its first indus- The government is interested in de- set up industries in Puducherry. ism potential. In addition, we want to ing as a satellite port of the Chennai Port. proposals which have been already sub- trial policy in 1997. However, over the veloping a 25-acre IT SEZ or IT park These projects are in various stages promote heritage tourism by preserving Only about 15% work on the Puducherry mitted for setting up industries. Simulta- last 20 years, industrial activities hav- under public-private partnership (PPP) of implementation with an investment and renovating the old French architec- Port is remaining. In the first year of its neously, we have started allotting land to en’t reached the desired level. What are mode. Land for this is readily available outlay of Rs.459.58 crore. The products ture with an aim to attract tourists from operation, we expect the Puducherry 22 companies in the Karaikal region for the reasons for that? in Mettupalayam in Puducherry. More which will be manufactured in these abroad. We also have beach nourishment Port to handle 4 lakh tonne of cargo. setting up manufacturing units. VN: I think the industrial development land is available at Karaikal and Sedar- units are auto components, LED bulbs, project to restore beaches. Pilgrimage Further, the Port’s cargo handling capac- The Export Facilitation Centre under in Puducherry slowed down from 2002 apet-Karasur regions, which are under PVC wires and cables, leather goods, tourism also has potential, thanks to ity is expected to go up to 10 lakh tonne Pondicherry Industrial Promotion De- onwards due to the withdrawal of Cen- PIPDIC. Recently, I addressed a southern pharmaceutical formulations, hydraulic Aurobindo Ashram. We are investing in from 2018 onwards.

36 THE DOLLAR BUSINESS II OCTOBER 2017 OCTOBER 2017 II THE DOLLAR BUSINESS 37 MANAGEMENT INTELLIGENCE FEATURE

INVESTMENT IN R&D “WE ARE IS CRITICAL FOR THE GROWTH OF THE EXPORTING TO INDUSTRY.

portant is R&D to the business? MORE THAN 20 NP: Ayurveda is an ancient “living system” of healthcare. Even though most of the ingredients and subsequent products are available in various texts, we have COUNTRIES” been trying to improve the quality of our products through R&D. Good R&D, in- While the science of Ayurveda has always been revered cluding that on high-yielding variants of in India, it is now fast becoming a part of the global raw materials, is critical for long-term success. The government has to help the health lexicon. And not to say home-grown Ayurveda industry by providing more R&D infra- companies like Adara Ayurveda have been amongst structure and funding, as Ayurveda has the leading agents of change. Nikhil Pradeep, Director, NIKHIL PRADEEP been the mainstream system of healthcare in India right from the Vedic ages. Adara Ayurveda takes The Dollar Business through the DIRECTOR, ADARA AYURVEDA company’s origins and future expansion plans. TDB: With many big brands now taking the Ayurveda route, how has it impacted the market. Do you plan to TDB: Could you tell us about the or- growth over the years. What would sible for our manufacturing team to send nature and use natural materials and ties for exports, there are many challeng- expand your product porfolio? igins of the brand? What was the in- you attribute this success to? What feedback to the R&D team during each methods of ancient times is helping es in this sector. The lack of knowledge NP: The estimated revenue in the or- spiration behind developing a brand makes Adara stand out amongst the step of the development cycle, and that Ayurveda grow across the globe. on international and specific regulations ganised sector, in 2016, was between based on Ayurveda? competition? allows us to see what works and what of importing countries governing imports Rs.10,000 crore and Rs.15,000 crore. Nikhil Pradeep (NP): Adara Ayurve- NP: Adara in Greek means “outer and doesn’t in a time-efficient manner. Hav- TDB: While Ayurveda is a traditional of such products, including quality, intel- So, it is good to see more and more big da has an interesting story. In the late inner beauty”. We decided on this name ing such feedback available immediately product, Adara also uses an e-com- lectual property rights (IPR) issues is a brands taking the Ayurveda route, as it 1800s John Henry Garstin, the Private because Ayurveda provides holis- allows us to make improvements in the merce platform for sales. How has the major challenge. The other issue is the helps improve the sector, both in terms Secretary to the then Governor of Ma- tic healing of the body, mind and soul. products, raw materials and process op- response been? lack of credible documentation of thera- of revenue and quality of the products dras (Chennai), was visiting the ruler Adara is a 133-year-old customer facing timisations, while addressing issues that NP: To expand our reach and busi- peutic values of medicines and their for- and services. Everyone in the industry of Travancore, His Highness Moolam brand of the Kerala Ayurveda house. It may have been overlooked earlier. This ness opportunities, we started our own mulation, and that is a major constraint has taken the role of both competitors Thirunal Maharaja. Garstin was suffer- brings everything from therapist training also helps us find, control, and eliminate e-commerce website where all our prod- for export, particularly to countries like and collaborators. We too are expanding ing intensely from diabetic blisters. The to manufacturing of products, all under barriers to our product’s evolution. The ucts are up for sale. We focused on our US and EU. and are launching at least one over-the- Dewan of Travancore, T. Rama Rao, ad- one roof. Our mission is to create cen- other big advantage of in-house manu- returns and digital media is one platform counter product, every 3-4 months. vised Garstin to undergo treatment from tres of Ayurvedic excellence that will of- facturing is knowledge protection. The where we have been getting a good re- TDB: Can you tell us about Adara’s one of the young palace physicians, the fer holistic Ayurvedic wellness to every combination and blending of the raw sponse for both products and franchisee domestic business operations for TDB: How do you see the company Kottaram Vaidyan, Vasudevan Unni. individual by drawing on our centuries materials makes a huge difference in expansion. both services and products? growing over the next five years? Are Garstin was impressed and recom- of learning and our constant research to manufacturing. The challenges include NP: Since our inception, almost a year you even planning to expand your mended the Governor to start the first improve and innovate. We offer the best the lack of skilled labour in the domestic TDB: As an exporter, what challenges ago, we have come a long way. We have services internationally? ayurvedic pathshala (School of Ayurve- of authentic and affordable Ayurveda industry and the high cost of the same. do you face and how easy or difficult now started operations in Trivandrum, NP: Ayurveda offers immense oppor- da). It was set up at the Kashayapura services and products to our customers. has the process of exports been? Ballari (district), Bengaluru, Varkala and tunities in various fields of health and (Ayurveda Manufacturing area) of the TDB: Could you tell us about the NP: When we started off, we want- Gurgaon. We have signed up for five wellbeing. We aim to take the number of Travancore Palace and our founder, N. TDB: Adara manufactures all its prod- company’s international business? ed to provide the best quality products more wellness centres that will be op- centres to 500, over the next five years. Vasudevan Unni was appointed as the ucts locally. What have been the ad- How has demand for Ayurveda at a reasonable price. So, we got our erational before the end of the year. We We are also planning to open our own superintendent and head physician. In vantages and challenges associated exports changed over the years? products and raw materials tested by a have also tied up with major Ayurveda Ayurveda college to improve the quality 2016, we developed a consumer-facing with in-house manufacturing? NP: We export our products to over 20 third-party inspector. That was a tedious colleges and hospitals for the supply of of education and for our own in-house brand, Adara, for authentic Ayurveda NP: We manufacture over 500 prod- countries including Sri Lanka, Indone- and expensive job. Also, the packaging products’ knowledge. requirements. We would love to expand products, therapies, and holistic well- ucts at our own manufacturing units. sia, Russia, Philippines, Maldives etc. materials for exports is completely differ- our services abroad, but the domestic ness treatments. The biggest advantage of keeping our There has been a surge in demand for ent from that in the domestic market and TDB: Ayurveda, though an age-old market is so vast that we have not found production in-house is the continuous Ayurveda products and services all over the materials are very difficult to procure. practice, has a growing market in In- time to negotiate with foreign investors TDB: The company has seen a steady learning that it offers. This makes it pos- the world. A common intent to go back to Although there are ample opportuni- dia as well as internationally. How im- who have approached us.

38 THE DOLLAR BUSINESS II OCTOBER 2017 OCTOBER 2017 II THE DOLLAR BUSINESS 39 THE SECRET INGREDIENT REACTIVE DYES

ndia’s association with colour and and disperse dyes to reactive dyes – but Reactive dyes are popularly used in dyes is well-known and date back it is the reactive dyes segment where In- tanning industry as they possess the INDIAN REACTIVE BRIGHT HUE centuries. While cotton was dis- dia has really taken giant strides when it property to attach to a fabric and hence DYES MARKET HAS covered in India around 6000 BC, comes to exports. give a richer and stronger colour to the Ithe trace of natural dyes that were used According to a report by US-based fabric on which they are applied. In fact, BEEN GROWING AT OF PROFITS to colour the fabric goes back roughly Global Industry Analysts Inc., the re- they are the most commonly used dyes A CAGR OF 4.3% to 1200 BC. Come today, and India has active dyes segment is one of the fastest for colouring cotton fabrics. And, not to grown to become one of the largest ex- growing segments of dyes across the say the growth of textiles and apparels India is popular for textiles. Even those that come in porters in the world, of both cotton ap- globe, with the Indian reactive dyes mar- sector is further helping the industry. in this product category, the battle is only parels and reactive dyes that give them ket growing rapidly at a CAGR of 4.3% Reactive dyes are available in several half won. India’s presence in US and Eu- bright-colours. It is not a surprise therefore that India is their vibrant colours! over the last few years. In fact, the paint varieties and types such as Mild Exhaust rope, the two largest markets for reactive one of the largest producers and exporters of reactive The global market for dyes (includ- and dye industry has been an important (ME) as well in a broad range of colours dyes, is still quite negligible. In FY2017, dyes that give fabrics their many hues. What makes ing pigments and dye intermediates) contributor to India’s exports basket, – orange, brown, blue, green, violet, yel- Indian exports to US and EU were $9.16 is at present worth around $23 billion with export of reactive dyes growing at a low, red, black, etc., with the most pop- million and $52.02 million, respectively, India a clear exports leader in this segment? – while the dyes and pigment market is decent pace. In FY2017 the exports of re- ular in exports being blacks, blues and which is only 10.81% of India’s total ex- The Dollar Business analyses. valued at $16 billion, dye intermediates active dyes [HS Code 320416] increased reds which contributed $226.50 million, ports of the product. market is worth about $7 billion. Dyes 5.93% y-o-y, to $565.97 million from $126.62 million and $96.76 million re- This, exporters say, is because of the BY ANISHAA KUMAR are of various kinds – from direct dyes $534.28 million in FY2016. spectively to India’s exports in FY2016. ever-increasing regulations imposed on dyes – like Registration, Evaluation, Au- THE STORY SO FAR thorisation and Restriction of Chemicals Profit estimates for export The exports from the industry has wit- (REACH) – by EU authorities. Agrees of reactive dye nessed a remarkable growth over the Monil Shah, Partner, Roop Dyes and In- Profit margins vary with type and last few years, with exports of reactive termediates when he says, “REACH has colour of the reactive dye dyes reaching a whopping $565.97 mil- been an obstacle not because the policy lion in FY2017. In fact, between FY2013 Cost of Production (INR/Kg) 371 and FY2017, exports reported a jump of Indian exports destinations FOB Value (INR/Kg) 400 53.7%. In FY2015, exports had touched Turkey and Bangladesh are the biggest Operating profit 29 $643.60 million mark. But, it dropped destinations for Indian reactive dyes Operating margin (%) 7.25% to $534.26 million in FY2016. Accord- Reactive Turquoise Blue 5G; HS Code: 320416; FOB ICD 5% Sabarmati; MOQ: 25 Kg; The cost of production excludes ing to exporters, the poor performance 6% government subsidies (like duty drawback of 1.5%) and was because of the changes in the busi- incentives (like 3% reward under MEIS). 7% Important disclaimer: Profitability has been calculated based on time-bound indicative prices ness environment and a drop in prices of 35% (prevalent during the third week of September 2017). Prices may vary during a different time 7% period, resulting in profit fluctuation. Factors like brand value, supply chain-related costs like the product, globally. Hence, in FY2016, warehousing and logistics, administrative costs, sales and advertising costs, etc., have not Other been included in the cost of procurement. Margins have been calculated considering govern- while exports volume went up 7% y-o-y, ment policies (announcements, notifications, etc.) as on September 20, 2017. Risk factors Turkey 7% and currency fluctuations have to be considered while exporting. Duty drawbacks have not value of exports dropped 17% y-o-y. Bangladesh been factored in while calculating indicative profitability. Calculations are provided for informa- Thailand tional purposes only; The Dollar Business takes no responsibility for any loss resulting from “Exports of reactive dyes has been 15% 18% investments in the said commodity/product. Though all efforts have been made to ensure the Singapore accuracy of the content stated herewith, the same should not be considered a statement of law constantly growing over the last few Pakistan or used for any legal purposes. Prior permission is required before calculations stated herein Honduras are published or quoted in a third party web or print property. years. The growth, although not rapid, has been steady. And that is a good Brazil Source: TDB Intelligence Unit & Ministry of Commerce, GoI; thing,” comments Bhupendra Patel, HS Code: 320416; break-up for FY2017 President of Gujarat Dyestuffs Manufac- turers’ Association. Further, the product category has World’s largest exporters been very successful in penetrating into India is by far the world’s largest India’s non-traditional exports markets. exporter of reactive dyes Last year, India managed to export reactive dyes to about 90 countries. While exports to Turkey, Bangladesh, Thailand, 28% Singapore and Pakistan made up 52.59% 35% of the total exports, exports to Americas constituted an alluring 19.11% share, 10% with Honduras, Brazil and Mexico being India China 16% the largest markets of Indian dyes. Korea 11% Thailand BATTLE HALF WON Other Source: TDB Intelligence Unit & UN Comtrade; Although India has achieved a great deal HS Code: 320416; break-up for CY2016

40 THE DOLLAR BUSINESS II OCTOBER 2017 OCTOBER 2017 II THE DOLLAR BUSINESS 41 THE SECRET INGREDIENT REACTIVE DYES

is complicated, but because obtaining Indian traders are unwilling to risk the tives and duty drawback. While export- port from the government is the current kets, both in Asia and Latin America, (MT) in FY2016. It also reveals that the certificates under the norm is expensive. investment; a reason why exports to EU ers of reactive dyes, in general, currently banking system. Shah explains, “While pay around 6.7% import duty, which country’s production capacity can be in- Big companies can afford it, but for meis low,” explains Dakshesh Machhar, Di- receive a 2% reward under Merchandise doing business with some countries, we makes Indian dyes less competitive. creased by another 23%. Well, more pro- dium-size companies like ours it’s diffi- rector, Jay Chemicals. Exports from India Scheme (MEIS), can transact only through select banks. duction also means more exports from cult to recover the money spent on cer- REACH requires importers/buyers to exports of reactive red, yellow and blue For instance, while dealing with Iran, VIBRANT FUTURE the country at competitive price! tifications.” get the product tested, but the practice dyes is entitled to a 3% duty credit scrip we can only go through UCO bank. This Profit margins, exporters say, depend on Despite a few challenges, exports of Certification can cost anywhere be- has been the reverse. “Interestingly, Indi- under MEIS. Alongside, they also re- imposes a limitation.” several factors such as colour, specifica- reactive dyes remain a lucrative business. tween €20,000 and €80,000, per sub- an exporters are paying for the test from ceive a duty drawback of 1.5%. Shah also adds that India needs to tion, etc. Shah explains that competition While global demand for reactive dyes stance. This is what is hampering India’s their pocket as they live under a constant The Foreign Trade Policy 2015-2020 sign strong free trade agreements to has compromised profit margins for ex- is growing, there are many markets that exports to the region. “The market is fear of losing the market share,” states slashed the MEIS benefit from 5% to boost exports of reactive dyes. “Look porters. He says, “In Ahmedabad alone, remain untapped. Exporters of reactive very competitive, which is why many Patel. That said, on the positive side, the 2%. Due to this, exporters have a mixed at countries like China, a major com- there are about 650 factories that man- dyes too feel that both old and new com- government has been very helpful. It opinion of the new FTP. However, there petitor in this segment, that has strong ufacture and export the product. At the panies must step in with innovative ideas provides financial assistance of 50% of are exporters like Rajgopal, Vice Pres- trade agreements with major markets moment, manufacturers work at 5-8% to increase production – which will also DYE EXPORTERS the cost of getting a lab test done. ident, Ria Dyes and Chemical, who are like Italy, Germany, etc. These free trade and traders at 3-5% margins.” boost competitiveness. No doubt, the - indifferent towards the benefit. “We want agreements provide a duty-free import According to the National Informa- opportunity is huge. And with a stable RECEIVE A 2 3% SINE QUA NON the government to support the domestic status in these markets. We should also tion Centre, the total consumption of growth rate, a leadership position, and BENEFIT UNDER THE Besides subsidising the lab/certification industry in order to propel exports, with push for such agreements with countries dyes and pigments in India has gone up several untapped markets, Indian ex- MEIS SCHEME costs, the government has been extend- or without the incentives,” says Rajgopal. where there is business potential.” by as much as 80.95% in the last eight porters of dyes seem well-poised to reap ing support to exporters in form of incen- Another area where exporters need sup- Currently, importers in major mar- years, touching 304,000 metric tonne benefits of this vibrant market.

“OPPORTUNITY IN THIS SECTOR IS HUGE” “THE INDUSTRY NEEDS TO INNOVATE”

TDB: How has the export performance bears 50% of the testing costs. However, TDB: What challenges do manufactur- of Hazardous Chemicals (ZDHC). More of reactive dyes industry been? I still feel that the government can do a er-exporters of reactive dyes face? and more apparel and textile brands are Bhupendra Patel (BP): Over the last lot more by also bearing the registration Dakshesh Machhar (DM): In the recent demanding this approach and insist that couple of years, exports volume and value and licensing expenses, etc. years, the Indian government has be- dye producers adhere to it. haven’t increased much. But it isn’t nega- come more stringent with regards to the The Registration, Evaluation, Au- tive. It is stable and we’re happy about it. TDB: How important is R&D for the implementation of environmental regu- thorisation and Restriction of Chemi- China has also been exporting reactive industry’s growth? lations. So, companies are now obliged cals (REACH) regulation demands that dyes since the mid-1990s, but India has BP: R&D is crucial for the industry’s to follow strict regulations, which has a reactive dye importers in Europe register been stronger than China in this product growth because it an important driver of direct impact on the company’s overall and evaluate each product, which is ex- category. India and China both face the innovation. For instance, take the colour expenses. While there are effluent plants pensive. Depending on the product and same pollution problem. But, we have an yellow – it requires R&D efforts to cre- that are being set up by the industry with the volume, the cost can vary between advantage over them because the indus- ate different shades of yellow which react assistance from the government, waste €20,000 to €80,000 per substance. As tries in India are in clusters and testing differently on different fabrics. Further, treatment remains a concern as it is ex- for our company, we have implemented facilities are easily available in one place. Bhupendra Patel R&D ensures we keep on progressing pensive. Waste management is some- Dakshesh Machhar ‘Advance Care’, an initiative where we PRESIDENT, GUJARAT DYESTUFFS DIRECTOR, and evolving, in terms of various co- thing that will remain associated with emphasise on ‘Renew, Reuse, Recycle’. MANUFACTURERS’ ASSOCIATION JAY CHEMICAL INDUSTRIES LTD. TDB: What makes Indian reactive dyes lours, raw materials used, etc. this industry, with or without assistance We are already working on ‘zero liquid popular in the international market? from the government. discharge’ at one of our main manufac- BP: The dyes industry in India is very stringent regulations. Has the govern- TDB: Does the market have space for ing fabrics. If it happens, the consump- turing locations. diverse. We produce a huge array of co- ment done anything in this regard? new entrants? TDB: How has the market evolved over tion of reactive dyes will be impacted. lours with different specifications. Also, BP: The Registration, Evaluation, Au- BP: The opportunities in the reactive the years? TDB: Are you content with the current our small-scale industry is larger than thorisation and Restriction of Chemicals dye market are enormous. Currently, our DM: India has been a leader in this seg- TDB: Over the years, regulations on duty drawback rates and MEIS benefits that of China. The Chinese produce dyes (REACH) requires the dye buyers/users emphasis is only on certain areas. But ment for a long time. The reason is sim- exports to EU have increased. Can you that the industry is entitled to? in volumes, in large facilities. So, when to get the products tested before im- the market is big and there are many un- ple – both technology and raw materials explain the situation and how your com- DM: What the industry now needs to customers want dyes in large quantity porting it. However, instead of buyers/ touched areas that can yield opportuni- are easily available in India. At present, pany is addressing this issue? do is to focus on innovation. Incentives they order from China. But this sector users conducting the test, manufactur- ties for entrepreneurs and new entrants. it is estimated that the global market is DM: The world over, ecological and en- under MEIS, whether 2% or 3%, are not isn’t about volumes. It’s about quality and ers in India are getting the registration The one point for new exporters to keep growing at a rate of around 4% annually. vironmental issues are at the top of the sufficient to keep investing in innovation variety which our small-scale industry and testing done for the fear of losing in mind is that the dyestuff industry has And India is well placed to keep up with agenda, be it governments or the apparel and technology. On top of that, these produces, giving us an edge over China. their market share. This is one way to a renewed focus on the environment. So, this growth rate. brands. Similarly, everybody in our in- incentives keep on reducing every year. keep the buyers attracted, but it chews a new player in the industry must have a In the future, I believe, the market will dustry is also trying to produce the dyes in Each company has its own way to remain TDB: In the recent years, exports to into our margins. To stabilise the situa- thorough understanding of eco-friendly become more challenging because of the the safest way possible. And now, the in- competitive, for us it is innovation that EU and US have been bogged down by tion, the government has stepped in and technologies. increasing use of synthetic fibre in cloth- dustry is moving towards Zero Discharge plays an important role.

42 THE DOLLAR BUSINESS II OCTOBER 2017 OCTOBER 2017 II THE DOLLAR BUSINESS 43 POLICY MONITOR PURUSHOTTAM K. VANGA, CHAIRMAN, PDEXCIL

EXPORTS WENT “LOWERED INCENTIVES DOWN AFTER THE FTP 2015- 2020 REDUCED HAVE HURT EXPORTS’’ INCENTIVES The decentralised powerloom sector is the backbone of India’s textile business. It not only contributes about 60% to India’s fabrics export, but also provides employment leverage this brand image. to over seven million people. The Dollar Business caught up with Purushottam TDB: How has GST effected the sector? K. Vanga, Chairman of Powerloom Development and Export Promotion Council PV: Powerloom is a decentralised sec- (PDEXCIL), to understand what the Council is doing to boost exports from the sector. tor with mostly marginal weavers, and since the conversion of yarn into fabrics INTERVIEW BY ANISHAA KUMAR is just an interim process, there was no incidence of tax. However, with the im- TDB: How has the sector been per- them up with the concerned authorities the cost by 50%, the weavers still ends plementation of GST this is no longer the forming over the last couple of years? are some things that the Council does on up spending Rs.10 lakh. States like Ma- case. We also need clarification on a few Purushottam Vanga (PV): The power- a regular basis. harashtra already enjoy 50% subsidy on issues. Earlier cross-border trade with loom sector produces fabrics like cotton, electricity and millers pay only Rs.3 per Nepal was considered domestic trade, polyester, rayon, etc, as well as blended TDB: In April 2017, the government unit. So, in these states, considering the but we are not sure whether this will be fabrics. Although the sector is mostly launched PowerTex India scheme. Can cost of installation against the per unit the case under the GST regime. We also decentralised, it contributes about 60% you tell us more about the scheme? cost of power, the scheme does not make don’t know how much tax must be paid to total fabric exports from India. Un- PV: The new scheme has combined all business sense. But, in the long run, solar for blended fabric as it’s a combination til the Foreign Trade Policy 2015-2020 the existing schemes under one umbrel- energy will become viable. Shifting to so- of several fabrics with different tax slabs. modified the schemes and reduced cer- la and also has some additional compo- lar power is necessary. We have asked the tain incentives, exports from the sector nents. Some of the prominent schemes government to install a few units in Bhi- TDB: How do you envisage the future were constantly growing. The current are In-Situ Upgradation of Plain Pow- wandi and Sircilla to see if weavers can of Indian powerloom sector? trend isn’t encouraging, but I am hopeful erlooms; Group Workshed Scheme truly understand how solar energy could PV: The powerloom sector is the back- that with the support from the govern- (GWS); Pradhan Mantri Credit Scheme be beneficial for them in the future. bone of the textile sector and we are con- ment and intervention by EPCs, sectoral for Powerloom Weavers; Solar Energy tinuously trying to promote the sector, growth will take a positive turn. Scheme for Powerlooms (SESP) and fa- TDB: Some time back a delegation both domestically and internationally. cilitation and upgradation of Powerloom from PDEXCIL had raised concerns a fillip to the sector in the region. exploited. However, we also need to be But, there are certain issues that need to TDB: How is Powerloom Develop- Service Centres (PSCs). Through these about the poor condition of the pow- Schemes such as In-Situ Upgradation aware that countries like Vietnam, Indo- be addressed, and these include availabil- ment and Export Promotion Council schemes, the government is assisting small erloom sector in Maharashtra. Could of Plain Powerlooms, Yarn Bank Scheme, nesia, Cambodia, Thailand and Bangla- ity of raw material at reasonable price, (PDEXCIL) helping its members? powerloom weavers to grow and is devel- you share some of the concerns? etc., are the outcome of the PDEXCIL’s desh are emerging as well-honed com- better infrastructure, modern technol- PV: Since 1995, PDEXCIL has been oping this sector as a whole. PV: Maharashtra has the highest num- interventions. PDEXCIL is not only petitors to India. ogy, social security for our workforce, helping its members by conducting sem- ber of powerlooms in the country, working with the government but also The availability of raw material has better marketing of powerloom products inars and workshops for weavers, small TDB: Speaking about the SESP scheme roughly 13 lakh powerlooms. They em- making small entrepreneurs aware about given India an edge over the rest. But, at the international level, etc. The sec- entrepreneurs, etc., to make them aware under PowerTex India, to what extent ploy about 30 lakh workers, directly and the support systems available to them availability of cheap labour and raw ma- tor definitely has a bright future, but we about various government schemes, the will it ease the burden of power costs? indirectly. As this is an important region, from the government through seminars, terial alone will not help us stay compet- need support from the government in export scenario, etc. The Council also PV: Not only for the powerloom sec- PDEXCIL considered it important to road shows, etc. itive. India has to employ state-of-the-art the form of favourable policies. organises activities such as interna- tor but for most sectors the future lies raise the issues with the concerned au- technology with better infrastructure, The present government has been pro- tional buyer-seller meets, reverse buy- in renewable energy. The Solar Energy thorities. Maharashtra has both devel- TDB: Countries like China, Vietnam for the sector to produce better and more actively assisting us. And if this kind of er-seller meets, etc., to encourage small Scheme for Powerlooms (SESP) will help oped and underdeveloped clusters in and Bangladesh are strong competitors competitive products. commitment continues, India’s share in powerloom operators to export. In fact, an entrepreneur tackle high power tariff. terms of infrastructure and technology. in your sector. What must India do to Skill development is also very cru- the international market will scale new through these activities, 109 small pro- The power tariff varies from place to For instance, places such as Ichalkaranji stay ahead in the game? cial, and I am glad that the government heights. The sector produces 56-57% of ducers have forayed into exports. place. For instance, in places like Surat and Solapur have come up well in terms PV: Cheap labour plays a crucial role in has introduced various schemes such as the fabrics in the country, and the num- Additionally, the Council helps its where subsidy on power isn’t available, of technological development and mar- this sector and India, China, Vietnam, Pradhan Mantri Kaushal Vikas Yojana, ber is growing. But, despite our contri- members participate in both interna- the scheme is a good solution, but, in the keting their products, whereas some Bangladesh, etc. have an abundance of and the Integrated Skill Development bution, people aren’t aware of the sector. tional and national trade fairs at a highly short run it may not make business sense important clusters such as Bhiwandi cheap labour. At the moment, India is Scheme to address this issue. With the help of the new schemes, the subsidised rate. Other than that, encour- for many other states as there are upfront and Malegaon are yet to technologically amongst the top players, but, looking India has the advantage of a good sector will become more centralised and aging members to upgrade their technol- costs involved. For example, if installa- upgrade and most of the looms there are at China’s mammoth share in the glob- brand image, something that has been organised and it will be able to improve ogy, marketing powerloom products and tion of a solar energy unit costs Rs.20 conventional. PDEXCIL wants the au- al market, it is apparent that there is an developed over a long period of time. its stature in both the domestic and addressing sectorial concerns by taking lakh and the government subsidised thorities to address these issues and give enormous opportunity waiting to be What we now need is technology to international markets.

44 THE DOLLAR BUSINESS II OCTOBER 2017 OCTOBER 2017 II THE DOLLAR BUSINESS 45 << CUT THE DOTTED LINE >> TDB FORUM

Code: 72081000. The Basic Customs << CUT THE DOTTED LINE >> Duty on this product is 12.5%. An additional 3% education cess is also levied, bringing the total tax incidence to 12.875%. Sadly, the product SUBSCRIBE SPECIAL is not eligible for preferential tariff OFFER! under India-Korea Comprehensive GET UP TO 65% DISCOUNT ON Economic Partnership Agreement NOW! SUBSCRIPTIONS The Dollar Business magazine (CEPA). Coming to the next part of Read this exclusive platform on foreign trade and get an unbeatable edge your question, the Directorate Gen- in the business of exports-imports. Welcome to globalisation! eral of Anti-dumping & Allied Du- ties (DGAD) has fixed the assessable Print version Ask a Question value of hot-rolled steel coil import- INR USD ed under this HS Code from South No. of Issues 12 24 36 12 24 36 Korea at $478/MT. For more infor- Cover Price 1,200 2,400 3,600 24 48 72 In the world of export-import, mation, you may want to visit the e-Magazine INR USD Central Board of Excise and Customs each shipment counts. No. of Issues 12 24 36 12 24 36 I want to export medicines to Viet- And you cannot afford to website (cbec.gov.in). The BIS stan- nam from India. What steps do I dard for hot-rolled steel coils vary Cover Price 1,200 2,400 3,600 24 48 72 make any “uninformed need to follow? Do I need to regis- according to various factors and is Total Price 2,400 4,800 7,200 48 96 144 investment”. So, if you have ter my products before exporting? available at bis.org.in. In case our as- Discount 55% 60% 65% 50% 55% 60% If yes, what is the procedure? [Kis- any doubt or a question, sumptions about the intended export You pay 1,080 1,920 2,520 24** 43** 58** han Modi, Partner, Krishna Import Export ask us. Our team of experts product isn’t exact, please write to us. Pvt. 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Ltd., Level III & IV, 8-2-542/A, Chemexcil sume you want to import hot-rolled the product to Netherlands, Czech Company: Industry: Road No. 7, Banjara Hills, Hyderabad 500 034, Telangana, IN steel coil that falls under ITC HS Continued on page 49 SUBSCRIPTION REQUESTS CAN BE PLACED BY LOGGING ON TO WWW.THEDOLLARBUSINESS.COM, FILLING-IN NECESSARY DETAILS IN THE APPLICATION FORM GIVEN AND MAKING PAYMENTS USING CREDIT CARDS/ DEBIT CARDS OR VIA NET BANKING To advertise / subscribe, please call us on +91 40 67609999 46 THE DOLLAR BUSINESS II OCTOBER 2017 or write to us directly on [email protected] or log on to www.thedollarbusiness.com << CUT THE DOTTED LINE >> TDB FORUM

<< CUT THE DOTTED LINE >> Republic and Sri Lanka in small I want to export surgical products << FOLD HERE >> quantities. Further, sadly, India’s ex- and sports goods from India. I al- ports under the HS Code: 44029090 ready have an Importer Exporter has only been falling over the last Code (IEC). How do I find over- few years. seas buyers? [Ankit Prajapati, Propri- AFFIX etor, Oso Contractor & Suppliers, +91- POSTAGE More of such pure, researched STAMP information is available to mem- 9634113XXX, [email protected]] HERE bers of The Dollar Business GROW, Dear Ankit: We are happy to hear of CONNECT and CONQUER pro- your decision to head into the world grammes. (You can read more on of foreign trade. You can approach The Dollar Business Membership your concerned associations – Phar- BUSINESS REPLY MAIL Programmes on https://www.thedol- maceuticals Export Promotion larbusiness.com). Besides detailed Council (PHARMEXCIL) for phar- To: The Dollar Business Market Access and Potential Identi- ma products and Sports Goods Ex- The Dollar Business CONQUER

<> Vimbri Media Pvt. Ltd. fication System (MAPS) report, The port Promotion Council (SGEPC) Programme (You can read more on Level III & IV, 8-2-542/A, Road No. 7, Banjara Hills, Dollar Business GROW, CONNECT for sports goods – for assistance or TDB CONQUER Programme on Hyderabad, Telangana – 500 034, IN and CONNECT Programme mem- directly reach out to potential buyers https://www.thedollarbusiness.com) bers get access to unique features by posting your product information that gives an in-the-making super <> and innovative buyer discovery and on https://www.thedollarbusiness. successful exporter like you access to competition analysis tools like EXI- com/marketplace. From discovering TDB EXIMAPS (https://www.the- MAPS that ensure a more lucrative the best markets to source from or dollarbusiness.com/exim-maps), the From business beyond boundaries. supply to, to overcoming statutory most powerful buyer discovery and In case our assumptions about the and procedural challenges with re- competition analysis tool for Indian intended export products isn’t exact, spect to export-imports documenta- exporters, which ensures you touch please write to us. The Dollar Busi- tion, to identifying the right logistics newer highs in global trade. In case ness Intelligence Unit would like to partners, International Marketplace you have further queries, do write hear from you. understands all your requirements back to us. and accordingly connects you with Response by: the right market and partners so that Indranil Das Response by: Executive Editor, you can make a fortune out of for- Manish K. Pandey The Dollar Business Editor, eign trade. The Dollar Business <> Additionally, you can also explore

I am planning to import copper ronment and Forest, Government of

www.thedollarbusiness.com scrap from Thailand. Could you India, for importing these varieties Email: [email protected] Email: please let me know a few import- of the product.

Tel: +91-40-67609999 Tel: ant things that I need to be aware In case you plan to import cop-

Banjara Hills, Hyderabad, Telangana – 500 034, IN 034, 500 – Telangana Hyderabad, Hills, Banjara of before I embark on this business. per scrap falling under HS Code:

& IV, 8-2-542/A, Road No. 7, 7, No. Road 8-2-542/A, IV,

Level III III Level Is copper scrap available at cheap- 74040012, which does not require

Vimbri Media Pvt. Ltd. Pvt. Media Vimbri er rates in Thailand than in India? the aforesaid license, you will need

The Dollar Business Dollar The [Ankush Saraswat, Director, P. P. Corpo- to pay a basic customs duty of 5% << CUT OUT THE DOTTED LINE>> Please fill this form and mail it with your remittance to: to: remittance your with it mail and form this fill Please ration, +91-9887869XXX, ankush.saras- and an educational cess of 3%. The [email protected]] prices of copper scrap are volatile Dear Ankush: We are happy to know and you should check the prices in that you want to get into imports of the Indian market before importing copper scrap. The most important the product from Thailand. point that you need to keep in mind

<< CUT OUT THE DOTTED LINE >> while importing copper scrap is that Response by: a few categories of copper scrap fall R. K. Sharma under the ‘Restricted’ category. This Secretary General, Federation of Indian Mineral would mean that you would need a Industries (FIMI)] license from the Ministry of Envi-

You can log on to www.thedollarbusiness.com/tdb-forum and submit your foreign trade-related queries, or write across to our experts at [email protected]. Every question matters – to your business, to The Dollar Business.

OCTOBER 2017 II THE DOLLAR BUSINESS 49 BORDERLINE EDITOR’S COLUMN

BETWEEN THE DEVIL Manish K. Pandey Editor, AND THE DEEP SEA The Dollar Business

oods and Services Tax (GST) Council will customs duty, excise duty and service tax. This decrease meet in New Delhi on October 6. This would in the avenues of utilisation is bound to have wide ramifi- be its 22nd assemblance since the roll out of cations on exporters. Also, MEIS and SEIS scrips, which the new tax regime on July 1, 2017. Chaired used to attract 5% VAT now attract 18% GST because the Gby Finance Minister Arun Jaitley, the Council is said to scrips fall under the residual category. This issue must be deliberating on the findings of the Group of Minister also be addressed, otherwise GST will sharply reduce the (GoM) on technical glitches and procedural problems incentive aspect of these scrips. If utilisation does not on GST Network (GSTN) portal as well as issues faced gets integrated with GST, the premium on these scrips is by India’s EXIM community. Given the complexity of also bound to go down drastically. the new tax structure, not surprisingly, over two dozen Further, the ‘pay-first-and-get-a-refund-later’ mecha- issues have been identified in GSTN by a five-member nism under GST has been a cause of concern amongst GoM headed by Bihar Deputy Chief Minister Sushil Ku- exporters, particularly MSMEs, who are already bur- mar Modi so far. And not to say, they all need imme- dened with high cost of credit and are on the constant diate attention if the taxmen really want the exporting lookout for working capital financing options. Although fraternity to gain from the implementation of GST. exports have been zero-rated under GST, to claim input The MSME sector, which is regarded as the backbone tax credit on inputs required to manufacture exported of the Indian economy, accounts for about 45-50% of goods an exporter is either required to pay Integrated India’s exports. No doubt, GST is expected to bring par- Goods and Service Tax (IGST) [which can be claimed adigm shift in the functioning of these growth engines. as refund once the product has been exported] or ex- But then at what cost? That’s something worth ponder- port under a bond or a letter of undertaking (LoU)]. In ing. The high cost of compliance associated with GST both the cases, MSMEs end up on the losing side – while is making their businesses unviable. Hence, there is an it’s difficult for them to obtain a bank guarantee, paying urgent need to ease the burden of compliance on micro, IGST means stretching the working capital cycle. It’s like small and medium enterprises (MSMEs). And it’s not getting caught between the devil and the deep sea! The a difficult task. All that the government needs to do is industry hence expects the government to pull it out of increase the threshold of GST’s Composition Scheme. the situation through some policy instrument, preferably The Composition Scheme should be made available incentives. If that is not possible immediately, it should at to MSME taxpayers having an annual turnover of up least allow exports of goods and services without paying to Rs.1.5 crore from the current turnover threshold of IGST till the time they come up with the mechanism to Rs.75 lakh. If this happens, it will not only come as a offset losses arising out of the new tax regime. great relief to the MSME sector that has been grappling While export promotion councils (EPCs) and individ- with many challenges that GST has thrown at it but ual exporters have welcomed GST with open arms and will also make the Composition Scheme more attrac- agree that the GST regime will result in more transpar- tive whilst benefitting the exchequer through improved ency and ease of doing business, their concerns with re- compliance. spect to issues arising out of the implementation of GST GST has also narrowed the ambit of duty credit scrip are real and can have far reaching implications on In- only to payment of basic customs duty, whilst earlier the dia’s exports. Well, now that’s something too serious to utilisation of the scrip was allowed for the payment of ignore. You would agree!

www.thedollarbusiness/blogs/manish @MK_Pandey

50 THE DOLLAR BUSINESS II OCTOBER 2017 RNI: APENG/2014/54643; POSTAL REG. NO.: H/SD/486/17-19. Date of posting: 05th - 06th of this month. Date of Publication: 30th of every month.