Friday, August 31, 2007

SEZ agitations have little impact on India's FDI zeal

NEW DELHI: India continues to be an attractive foreign direct investment (FDI) destination to foreign investors despite controversies over special economic zones (SEZs), a global investments expert here said.

Noting that the SEZ issue was a "political landmine" in India, Courtney Fingar, editor of Financial Times' global investments magazine fDi, said SEZ investment is a "double- edge sword" that could be a mode of development at some places but not everywhere.

"It may be too early to say what it will do for India, but apart from anything else, the creation of such zones do send a signal to the global business community about the country's keenness for FDI," Fingar said.

He was here to felicitate Commerce and Industry Minister Kamal Nath who was selected for the "fDi Personality of the Year" award among other business and political leaders from Latin America, Africa, Middle East, Europe and North America.

JVDheldden, the Indian arm of fDi, also released a study called "India as FDI Destination" which said despite huge FDI interests, the country is not realising its full potential because of the business environment and policy- related impediments.

Noting that GDP growth accelerated at 9.4 per cent during the last fiscal, JVDheldden director Suren Uppal said a significant increase in investment levels will be required for a sustainable growth of 8 per cent.

The promise of 500 million dollar-plus investment opportunities in diverse sectors in India was marred by the obstacles at various levels, he said.

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India, Bangladesh to sign MoU to boost exports

DHAKA: Bangladesh will sign a memorandum of understanding (MoU) with India for duty-free export of eight million pieces of readymade garments.

The offer had been made during the 14th summit of the South Asian Association for Regional Cooperation (SAARC) in New Delhi and was firmed up during a subsequent visit of External Affairs Minister Pranab Mukherjee to Dhaka.

Chaired by Bangladesh Chief Adviser Fakhruddin Ahmed, a meeting of the Council of Advisers on Tuesday approved the MoU proposal for duty-free import by the Indian government.

The move comes amidst a steep fall in Bangladesh's readymade garments' exports.

The manufacture has been hit by labour unrest due to bad working conditions and failure to revise wages, while the exports were hit by political turmoil in the second half of 2006.

Growth in the readymade garment industry, the powerhouse of the country's export economy, has slowed with the sector for the first time failing to reach export targets and facing a sharp decline in new orders, the newspaper said.

"Yes, we passed a rare disappointing year," said Anwar-Ul-Alam Chowdhury, president of Bangladesh Garment Manufacturers and Exporters Association.

Chowdhury blamed the slowdown on a weakened US economy and the unprecedented rioting at garment industries in and around Dhaka for eight weeks when nearly 400 factories were damaged and the Dhaka Export Processing Zone was shut down twice.

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Exporters don`t buy govt claim on target

Contrary to expectations of a slowdown in export growth due to rupee appreciation, the commerce ministry today said India would meet the $160-billion export target for 2007-08.

Exports in 2006-07 stood at $125 billion, which prompted Commerce Minister Kamal Nath to announce an ambitious target for this year.

However, in recent months, the rupee has appreciated to 40-41 to a dollar, giving rise to fears the target may not be met.

“We are confident of meeting the export target of $160 billion for 2007-08 if the rupee remains at 40-41 to a dollar. Going by current indications, we do not see any reason to revise the target,” Commerce Secretary GK Pillai said on the sidelines of a CII conference here.

Pillai’s remarks come even as the Prime Minister’s Economic Advisory Council recently said the 2007-08 exports would be around $147 billion due to the appreciating rupee, a growth of 18 per cent over 2006-07.

However, Indian exporters are pessimistic about reaching even the $140-billion mark.

“In the coming months, the growth will be in the range of 7-8 per cent only. We will not be able to cross even the $140-billion mark,” said Ganesh Kumar Gupta, president of the Federation of Indian Exporters Organisation, the apex body of Indian exporters.

A large number of Indian exporters have had to increase the prices of their products by up to 12 per cent.

Business Standard had found that exporters across the country were yet to get new orders as buying from countries like China was a cheaper alternative.

A recent government survey also painted a gloomy picture and predicted that a large number of jobs could be lost in export-oriented industries.

Business Standard recently visited export clusters like Jalandhar (sports goods), Agra (footwear), Moradabad (brassware) and Bhadohi-Mirzapur (carpets) and found that exporters, hit hard by the rise of the rupee, were either turning down orders or shipping consignments for a loss.

On its part, the commerce ministry expects that by 2012-13, exports will touch $300 billion and imports $400 billion, on the back of the continuing strong growth in the manufacturing sector, especially in special economic zones.

Pillai said in July, merchandise exports grew 16 per cent in dollar terms. “We will talk to various export promotion councils on ways to increase exports,” he said.

However, he ruled out any additional relief measures for exporters in the near future. Growth in merchandise exports in June was 14.05 per cent while the May growth was 18.07 per cent. In April, growth in merchandise exports stood at 23.06 per cent.

Pillai said the procedures related to export and import would be automated by the end of 2008. This, he added, was likely to reduce the transaction costs by up to 3 per cent.

“The cabinet secretary is chairing a meeting of various ministries today to take stock of the situation. When the system is up, exporters will be able to use the Internet to complete all procedures associated with imports and exports.”

THE STORY SO FAR

April 2007: Commerce Minister Kamal Nath sets an export target of $160 billion for 2007-08

July 2007: The Prime Minister's Economic Advisory Council says exports during the year will be around $147 billion

August 28, 2007: Commerce Secretary G K Pillai says $160 billion target will be achieved

# Federation of Indian Exporters' Organisation says exports to be $140 billion

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INDIA’S IMPORT DUTY EXEMPTION: CURSE OR BLESSING?

(This article was published in Israel): The Indian diamond industry is, in a strange way, enjoying a period of exceptional goodwill in the highest echelons of governance. There is a tremendous behind-the-scenes willingness to assist the industry in the development of relations with African producer countries and Russia. But the government is forthcoming at home. Just look at the Indian government’s agreement to impose a “presumptive tax system” (i.e. an agreed profit level on turnover, which is comparable to the tax systems enjoyed by the industry in Israel and Belgium) and the removal of all import taxes on polished diamonds.

What may not be sufficiently appreciated is that it takes two to tango. If the industry doesn’t do its part, the current goodwill may quickly evaporate. Not everybody in India’s government is enthusiastic about assisting the diamond industry and meeting its requests. Import duties, which have been removed, for example, can also be reinstated. Actually, manufacturers in India had severely protested the removal of these duties (fearing competition with China), and any pretext for pleading for the reimposition of the tax may well be welcomed.

The enormous success of the Indian industry is partly, maybe largely, a result of good cooperation throughout the years. The recent removal of import duties on polished diamonds was an additional step meant to make India a more attractive trading center, to enable foreign buyers to find all their polished requirements in Mumbai.

Sadly, as is often the case, one needs only a handful or so of unscrupulous profiteers to ruin a good thing for everybody. That may be the case now regarding the import duties.

The duties on polished imports were dropped from five percent to zero in May 2007. Because of the sky-rocketing activities in the four-month period preceding and following the announcement, Indian traders imported $1.41 billion worth of polished, mostly into Surat. As the system needed a “warming up,” the activity developed in earnest in July, when polished diamond imports reached nearly $0.5 billion. ($482 million, to be precise.)

These imports largely represent a “circular” trade (in-out, in-out), mostly with Dubai. One might argue that this is nothing new. But hitherto “circular” trade involved combined rough and polished transactions, balancing rough imports with (overstated) polished exports, etc. What is different now is that the free imports of polished have made it much easier to achieve greater exports and, consequently, more access to cheaper financing.

Needless to say that these newly developed manipulations are also reflected in India’s diamond export figures: in these four months (April-July), India’s polished exports soared to 12.9 million carats worth $4.07 billion – a 25 percent increase over the comparable period last year. The polished manipulations were clearly evident in July, when total polished diamond exports registered a growth of 50 percent over the same months last year!

The Nature of the Circular Trade

In all fairness, part of the polished imports is quite legitimate. The zero duty enabled many Indian diamantaires to bring home some of their own stocks held in overseas inventories, especially appealing to do when there is an active and attractive local market for the goods.

Surat is the preferred location for imports. In the Mumbai trading hub, there is a two percent tax (octroi) on all imports from other Indian states if the diamonds are sold for consumption within Mumbai limits. A tax exemption is possible when a guarantee of re-export is given.

It is therefore prudent tax planning that many of the imports go to affiliates in Surat, where there is no such a tax.

As in the last fiscal year – when there was still a five percent duty in effect – monthly polished imports averaged $158 million (about the equivalent of 32 percent of July’s imports). It is probably fair to say that about a third of the current imports represent ordinary business serving the domestic trade. Allowing also for natural trade growth and inventory returns, one might conjecture that the “unusual” “circular” trade only applies – so far – to about half of the activity.

How does the “circular” trade operate and what is its purpose to begin with? Certain individuals, or agents,(not necessarily from the diamond business) will import polished diamonds from Dubai for a service fee on behalf of third parties. These fees are as low as 0.1 percent, but, of course, these commissions “add up” to nice income. These agents may themselves pay for these imports at the official exchange rate and then sell the dollar proceeds off on the local black currency market. The differences can be substantial. It’s easy profit.

However, there is a variation on the scheme that is far more prevalent: The agent imports the polished into Surat on behalf of a third party (again, for a service fee) and then sells these goods officially (i.e. invoiced) to that very same party, which will then officially export these goods (to Dubai) and enjoy subsidized (concessionary) export financing.

These funds are put to work in the domestic informal non-bank financing sectors. When the margins on the proper diamond business are minimal or non-existing, it is tempting to earn good money on the grey financial markets. Moreover, a few months down the road, when the export proceeds are officially remitted, there is an added bonus of earning rupees because of the continued appreciation of the exchange rate.

Officials of the Gem and Jewellery Export Council are Concerned

These are very sensitive issues and it is hard to get either official information or comments about them. However, after talking with some members of the board of directors of India’s Gem and Jewellery Export Promotion Council, I am aware that they are privately distraught about these practices and, frankly, they also find it hard to “quantify” the volumes involved.

From the Council’s perspective, everything is proper and legal. All imports are official, the shipments take place through the established courier services, and all subsequent re-exports are also official. Even if the Council may not like some practices, it probably isn’t allowed or capable to intervene.

Of the various leading local manufacturers and exporters with whom I have talked, some confirmed that they “have been approached” by operators suggesting their participation in the “circular” scheme, mainly to get an advantage of exchange rate differentials. One sophisticated trader said, “Chaim, there are some aspects of these transactions I frankly don’t understand. Playing safe is staying away from it all.”

A major player points his finger to the Indian banks. Their eagerness to finance “circular” export trade deals is seen as a disgrace. Bank financing sources aren’t infinite – and proper exporters need to compete with “less proper” exporters for the available borrowed resources.

The irony is that the forthcoming government support in the form of “presumptive taxes” may make it less attractive – or even undesirable – to artificially increase one’s exports.

In a vast industry that employs close to a million people, there will always be some “deviants” whose understanding of “two to tango” is limited to “dirty dancing.” They should be made known that they dance out of sync with the great majority. By taking quick action, the Indian diamond industry might rid itself from the new circular menace before real damage is inflicted.

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Textile exports may take a hit this quarter

There are concerns over the performance of textile exports in the current quarter on account of rupee appreciation, said a senior Textile Ministry official on Thursday. “While the first quarter performance was not badly hit…some segments were badly affected while other segments did well…we are worried about the current quarter performance,” he said.

On asked whether the sector would be able to achieve the export target of $25 billion set for the current fiscal, the official said, “We are trying are best.”

While speaking at a curtain raiser for the two-day TEX Summit 2007, to be organised in the Capital from Friday, the Minister for Textiles, Mr Shankarsinh Vaghela, said, “The issue of duty draw back for small textile players and other issues will be discussed in the summit.”

The sector is faced with faced with high transaction cost, lack of power and need for labour reforms. The summit will try to look into all these aspects with the participation of bureaucrats, industry representatives and other intelligentsia.

The Commerce and Industry Minister, Mr Kamal Nath, is scheduled to inaugurate the event.

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India-Asean FTA final details to be worked out by negotiation panel

The final details on the India-Asean FTA will be hammered out by the Trade Negotiation Committee (TNC) before September 2007 so as to draw a broad framework for the launch of the free trade agreement early next year.

This would also enable the heads of Government of India and Asean when they meet in Singapore in November to give a political endorsement to the whole plan and iron out last-mile differences, if any.

Speaking to Business Line, Commerce Secretary Mr Gopal K. Pillai, who returned after taking part in the senior official-level meeting in Manila on August 25, said that on special products such as crude palm oil, refined palm oil, te a, coffee and pepper, India has reiterated its stance that it would not reduce tariffs any further.

Even as New Delhi has said that it would be reducing tariff from 100 per cent to 50 per cent over the years 2012 to 2022, Vietnam has argued that such slower pace of tariff reduction on tea, coffee and pepper would block 29 per cent of its trade with India.

On the other hand, Mr Pillai said, Vietnam has put 450 items in the highly sensitive track (HST), which also blocks 29 per cent of India’s trade with Vietnam.

“If we are giving 50 per cent duty cuts on the five special products, will Vietnam give similar cuts on so many items in its HST?”

Mr Pillai also said that Vietnam, while agreeing in principle, ahs promised to work out details and revert.

Barring the special products, negotiations on minor issues such as tariff lines under negative list, five-year standstill and special and differential treatment for Cambodia, Laos, Myanmar and Vietnam would be thrashed out as the deadline for reaching the agreement is September 30.

The FTA is already behind schedule by two years.

For some countries with already lower tariffs such as Malaysia, the pain of duty concession is less as compared to India, Mr Pillai said.

“When you enter into an FTA on the goods part, you have to face this but we will get it back when the services negotiations come, as we gain more in that area.”

On India’s liberal offer till date in any of its negotiations to Asean with no matching accommodation from the other sides, Mr Pillai said that there is a distinct geopolitical gain in forging an FTA with Asean.

“If you are not there, there are FTAs between Asean and China, Japan and Korea. These countries would trade on zero duty and take away the market and what we are exporting to Asean would come down further.

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Wednesday, August 22, 2007

New definition of Basmati Rice may harm Indian Export Market


If the category is expanded, other countries can claim that their long-grained rice too makes the cut.

India’s agriculture ministry plans to expand the definition of basmati to include more varieties of aromatic long-grained rice in an effort

to facilitate the development of new varieties of the cereal that has a huge export market.

However, doing so could leave the door open for aromatic long-grained rice varieties developed in other countries to be classified as

basmati, says the commerce ministry. And that would hurt India’s trade prospects.

Basmati is a fragrant rice variety that is traditionally grown in the Himalayan foothills in India and Pakistan.

The agriculture ministry is pushing for the redefinition on the basis of a recommendation from the Indian Agriculture Research

Institute. The commerce ministry has to notify the new definition for it to be accepted.

"The new definition will not only include new evolved varieties but will not affect trade value of basmati. We are looking to keep trade

intact while keeping scientific research in new varieties alive,"says a government official close to the development who did not wish to

be identified.

"Basmati should be limited to traditional and evolved varieties as it is under the current definition,"says another government official

familiar with the matter. This official, too, did not wish to be identified.

The present definition allows only pure lines of basmati (traditional) and the next generation, with at least one pure line as a parent, to

be dubbed basmati.

Traders, the people most likely to be affected by the new definition should it be notified, say redefining basmati would effectively end

India and Pakistan’s monopoly over the rice variety. "The definition came after six years of debate, longer than we took for our

Constitution. The US threat was the wake-up call but basmati has been threatened (by varieties) from all parts of the world,"says R.S.

Seshadri, director, Tilda Riceland Pvt. Ltd, an Indian exporter of basmati.

In 1997, an American company, Rice Tec Inc., tried to patent "Texmati"at the UK Trademark Registry. This triggered a trade spat with

India. During the dispute, Indian lawyers established that the name "Texmati"reminded consumers of basmati, which was grown in

India.

Realizing that the threat fr-om long-grain rice grown els-ewhere was genuine, the government drafted the first definition of basmati in

2003 to protect its identity. However, if the government now redefines ba-smati in a broader way, its cla-im that long-grained aromatic

rice grown elsewhere cannot be called basmati may weaken.

"Broadening (the definition) must a carefully thought out exercise. We must look at the long-term implications. The line between

generic and exclusive in the case of basmati is a thin one. We have strived hard to prevent basmati from becoming a generic

term,"says Seshadri. "Broadening the definition will bring in scores of new varieties (that can be called basmati) and reduce the

premium,"he adds.

If basmati were to become a generic term, Indian rice exporters stand to lose out to exporters from other countries who can brand

their long-grained aromatic rice basmati if it meets the definition set by the government.

"Basmati was seriously thre-atened as the name was in the danger of becoming generic... The step to define basmati was taken to

protect it,"says a lawyer familiar with the matter who did not wish to be named.

As first reported by Mint on 15 August, the agriculture ministry wants to redefine basmati. It wishes to make the definition broader and

more generics because scientists have be-en unable to develop new varieties of the rice that meet the current definition. New varieties

are usually created to incr-ease yields or fight pests.

"Nobody is stopping research,"says Karan Chanana, managing director of rice exporter Amira Foods India Ltd, who adds that the

agriculture ministry can achieve its objective by simply defining a new rice variety. "Right now, we don’t need to redefine basmati. We

need a new segment in rice for aromatic, long-grained rice. Right now, all rice is either basmati or non-basmati.”

The issue of definitions will cease to be as important if India manages to obtain a Geographical Indication (GI) for basmati. If the

country manages to acquire this, only long-grained aromatic rice grown in certain parts of the country (and Pakistan) can be called

basmati. India and Pakistan plan to pitch for a joint GI, although this could be operationally difficult to implement and monitor.

However, Seshadri says that a GI may not solve the problem, but only compound it. "We have some critical differences to other

GIs,"he says. "All the rice that is grown in the area is not basmati unlike other GI products.”

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Tuesday, August 14, 2007

India-China trade imbalance growing

Beijing, (PTI): Despite the India-China bilateral trade growing at nearly 50 per cent this year, the surging trade deficit is all set to top the record figure of USD 4.11 billion in 2006.The growing trade imbalance in India-China bilateral trade has caused concern among Indian officials who are highlighting the need for the Indian industry to diversify the country's trade basket with the Communist trading giant, whose total foreign trade has touched a record USD 1.17 trillion, up 24.4 per cent, in the first seven months of 2007.

India-China bilateral trade in January-June zoomed to USD 17.20 billion, achieving an impressive growth of 47.97 per cent over the same period last year, latest Chinese customs figures said.

If the current momentum of USD two billion of bilateral trade per month continues, the targeted trade figure of 20 billion US dollars by 2008 will be achieved a year earlier than expected.

Indian exports to China touched USD 6.9 billion during January-June, up 29.29 per cent over the corresponding period in 2006.

At the same time, Chinese exports to India soared by an impressive 64.07 per cent to touch USD 10.24 billion during the first six months of the year compared to the same period in 2006.

India suffered a trade deficit of USD 3.34 billion during the first six months, compared to USD 1.09 billion in the first quarter of 2007, signalling that the deficit is set to reach a new record in 2007.

In 2006, India's trade deficit with China amounted to a record USD 4.11 billion compared to USD 843 million of trade surplus the country enjoyed in 2005.

"We are greatly heartened by the positive momentum in our bilateral trade. Yet, both countries need to examine its various parameters closely, particularly the narrow composition of the trade basket and the insufficient use of each other's comparative advantages," sources told PTI here.

"For sustainable high volumes of bilateral trade, diversification of the trade basket is not only important but imperative," they said.

During his visit to China in April this year, Commerce and Industry Minister Kamal Nath had raised the issue of the growing trade imbalance with his Chinese counterpart, Bo Xilai.

India-China trade ties have witnessed a qualitative change in recent years and it has the potential of growing even faster. "For this we need to work on diversifying the India-China trade basket and facilitating greater interaction and information flow between the commercial sectors of both our countries," industry sources said.

In 1995, India-China trade was just over USD one billion. Less than a decade later in 2004 trade crossed the USD 10 billion mark to record 13.6 billion. In 2005, bilateral trade stood at USD 18.7 billion and in 2006, it touched USD 25.05 billion, registering a growth of 33.87 per cent.

Sources say there are several areas, including the fields of agriculture, dairy industry, food processing, auto-components, pharmaceuticals, health care, machine tools and Information Technology, where the two countries could benefit from expansion and diversification.

India is currently exporting iron ore, cotton and other raw material, IT-related products and services to China, while China is mainly exporting finished industrial products to India.

Meanwhile, China's foreign trade reached USD 1.17 trillion, up 24.4 per cent during January-July, according to Chinese customs statistics.

The European Union remained its largest partner with a trade volume of USD 190.1 billion, a growth of 28.5 per cent over the same period of last year, followed by the United States with USD 167 billion, up 17.5 per cent, and Japan with USD 130 billion, up 15.2 per cent.

The total trade volume included USD 654.4 billion in export, up 28.6 per cent, and USD 517.6 billion in import, up 19.5 per cent. The trade surplus was USD 136.8 billion, or 77 per cent of the figure for the whole of last year.

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Foreign buyers scared of visiting Pakistan: APTA

LAHORE: Foreign buyers are reluctant to visit Pakistan due to the law and order situation in the country and the export target of $19.2 billion, with the current cost of doing business, will not be possible to achieve, observed the All Pakistan Textile Association (APTA) members in a meeting held on Monday.

According to APTA Chairman Adil Mehmood, exporters have to travel to Dubai, Hong Kong, UK and other countries to meet importers/buyers. He said that in the meeting all the chairmen of committees refuted the government policies and declared it anti-export and anti-employment.

“Our exports will increase only if the government of Pakistan gives matching incentives as given by India, China and Bangladesh regarding utility charges, mark-up, transport, packing material,” he said adding that raw material particularly cotton scenario is very alarming as the current year’s new crop of cotton is being sold at Rs 3500 per maund against last year’s price of Rs 2300 per maund, giving a big blow to spinning industry.

He said that because of this reason, raw cotton will be exported giving all the benefits of textile trade to China, India, Bangladesh and Sri Lanka.

He claimed that the government totally ignored the textile spinning industry while announcing incentives to the rest of the sector and has given R&D rebate to other sectors of textiles, whereas maximum employment and revenues are paid by the spinning sector. “It is very clear that if spinning shuts down, all down-stream textile industries will also be affected,” Mr Mehmood said.

Economic advisors of the government are not taking it seriously whereas the business community is taking it as writing-on-the wall. He said that the government must realise that what could happen if spinning sector shuts down even partially by 50 to 60 percent. He said that in such situation, the millers would have to import yarn worth millions of dollars to run the value-added sector in addition to unemployment of 500,000 workers, huge bank defaults and massive decrease in tax/revenue collections.

“Under the given circumstances, one can easily think about the export target, GDP growth rate, budgetary deficit, poverty elevation, developmental funds, education, health etc.,” he said.

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Thursday, August 9, 2007

Stronger rupee: End of India's export boom?

Since March, the rupee has risen sharply, by roughly 9 per cent against the US dollar, to a nine-year high. The rise has also been significant in what economists call "real effective" terms, meaning appreciation that is adjusted based on inflation, and measured against the currencies of a range of India's trading partners. This trend has brought a chorus of concerns that the strong rupee is eroding India's competitiveness, and that it represents a threat to the country's buoyant export growth. These concerns are overstated.

All else being equal, exchange rate appreciation will, of course, make India's exports more expensive, and hence less competitive. But all else is not always equal. For starters, the rupee's appreciation has lagged behind the regional trend. For example, between July 2005 - when the Chinese renminbi was revalued - and December 2006, most regional currencies appreciated by about 10 to 20 per cent in real effective terms. At the same time, the rupee actually depreciated by about 4 per cent.

Moreover, the exchange rate is only one of many factors that determine an economy's ability to compete. Since India is becoming more competitive along other fronts - for example by boosting productivity and improving business conditions- export growth can remain buoyant despite a stronger rupee.

Finally, and equally important there are benefits to a strong rupee. Corporations benefit from cheaper imported inputs, and households benefit from increased buying power.

In any case, a weaker rupee would provide no guarantee that exports would grow faster. India's experience during the 1970s and 1980 makes this clear. Even though the rupee lost more than half its value in real terms against the US dollar, exports grew slowly, and India's share in world trade fell by a third.

A survey of Asia illustrates how strong export performance can go hand-in-hand with a strengthening currency. In Korea, for instance, export growth averaged 20 per cent per year between 2003 and 2006 - even as the won appreciated about 23 per cent in real effective terms.

Exports in Indonesia and Thailand have also grown rapidly despite stronger currencies. Even India's 30 per cent export growth - the fastest export growth in 33 years - was achieved in 2005, when the rupee appreciated by over 4 per cent.

Rapid productivity growth plays an especially important role in explaining why a country's export performance can remain robust even when its currency strengthens. Again, the experience of the fastest-growing Asian economies is instructive.

In Korea, industrial productivity growth averaged over 6 per cent between 1972 and 2004. This was significantly higher than in the United States and Japan, where industrial productivity grew by a mere 2 per cent and 2%, respectively, during the same period.

In India, strong productivity growth, robust corporate profits, and corporate pricing power augur well for continued competitiveness in the medium term. Over the last 15 years, total factor productivity growth - the productivity of capital and labour taken together - has averaged about 2 per cent per year, more than double that in the US for the same period.

With total factor productivity growth expected to rise to 2% in the coming years, India should continue to gain competitiveness. In addition, service exporters may have some scope to raise prices, especially in industries that focus on customer-specific services. Finally, the high profitability of India's corporate sector should buffer the costs of rupee appreciation.

Where does this leave monetary policy? The Reserve Bank of India [Get Quote] remains under pressure to resist the strengthening of the rupee by buying foreign currency. But the liquidity that such intervention would create could stoke inflation.

And to mop up the impact of this liquidity, the Reserve Bank of India would have to issue bonds, possibly at higher interest rates. This could encourage further capital inflows and further appreciation pressure.

Moreover, given the productivity-driven momentum of the rupee's appreciation, intervention is unlikely to be successful in the long run, since financial markets expect the rupee to appreciate eventually.

The best policy response would be to push ahead with reforms to boost competitiveness. The list is well-known. It includes investing to address the very serious problems in infrastructure, which cost an estimated 1 per cent per year in foregone growth.

It also includes reducing import duties on capital goods to stimulate investment. Other possible measures include making labour markets more flexible to encourage job growth and a more efficient allocation of workers, and scrapping small-scale reservations to promote competition and innovation.

Reforms in education are also vital to address the critical shortage of skilled labour. Finally, continuing to rein in fiscal deficits will make room to fund infrastructure investment. Implementing these measures on an aggressive footing will give India the best chance of realising its full export potential, and it will make currency appreciation less worrisome.

-Kalpana Kochhar & Andrea Richter Hume. [Kalpana Kochhar is the International Monetary Fund's mission chief for India, and Andrea Richter Hume is a senior economist on the Fund's India team]

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Wednesday, August 8, 2007

Israel proposes FTA with India

JERUSALEM: Israel has proposed a Free Trade Agreement (FTA) with India to boost burgeoning economic and bilateral ties. Israel's deputy prime minister and Minister for Trade and Industry, Ellie Yishai conveyed this during a meeting with Indian Minister of State for Trade and Industry, Ashwani Kumar, who is leading a high-level FICCI business delegation to Israel.

"The wish to renew and deepen bilateral ties was reiterated during the meeting, outlining major areas of cooperation for comprehensive economic development," Kumar said, adding India will also actively consider Israeli proposal for an FTA.

Israel also plans to open its second trade office in the country, which is likely to come up in Bangalore where several of its hi-tech companies have been active for almost a decade.

High-tech, genomics, nanotechnology, water technology, security systems, agriculture etc were mentioned as some of the areas where existing cooperation could be enhanced and new areas explored.

"The focus on multi-dimensional, multi-faceted comprehensive economic development can give a new dimension to Indo-Israel bilateral ties," the minister told PTI.

The two countries had agreed to consider a Preferential Trade Agreement (PTA), proposed by a Joint Study Group (JIGS), during Yishai's visit to India in December last year.


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India, Pakistan to ship goods directly

Indian ships will now be allowed to come into Pakistan. This will allow direct movement of goods from Pakistan to India. The two countries have signed a new shipping protocol bringing an end to the 31-year-old protocol which allowed goods to be ferried by India only through third-country ships.

The two countries are also discussing a comprehensive visa agreement, which will also take into account business visas. Both have decided to open two bank branches in each country and facilitate cement exports from Pakistan and tea imports from India.

The decisions have been taken as part of the composite dialogue held between the two countries. Addressing a business session organised by Ficci, Pakistan commerce secretary Asif Shah said that the new shipping protocol was already in place and there were no legal issues restricting Indian ships from going into Pakistan. “I don’t know if there are any technical issues left to be sorted out. But legally, Indian ships are now allowed to enter ports in Pakistan,” he said.

The commerce secretary revealed that the two countries were in the process of discussing a visa regime and a comprehensive visa agreement was on the anvil, which would include business visas. “It takes two to tango. If India agrees to the proposals made by Pakistan, there would be a sea-change in the visa regime,” he said.

On export of cement to India, Mr Shah said that discussions on the required certification process had proved to be fruitful and the first tranche of cement was likely to be exported by August-end. “There are three Pakistani companies which have already cleared the required procedures for exporting cement to India and three more are in the pipe-line,” he said.

Former Ficci president Onkar S Kanwar pointed out that instead of having a positive list of items from India, Pakistan should have a negative list for trade with India comprising items which are in nascent stages of production and need production.

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Bangladesh bans Hilsha export to India

Kolkata, City of Joy, is feeling deprived of their cherished 'Hilsha' variety of fish after Bangladesh banned its export to India. "For a Bengali, Hilsha (a fish variety) is something that is always relished during the monsoons. So, when it is not there in the market, so naturally, we are deprived of that," Jyotirmoy Banerjee, a customer.

The fish, which sells for between 350-400 rupees a kilogram in Kolkata, has become a luxury item for Bengalis.

Shopkeepers say that they are left with no choice but to increase prices.

"For the past 15-20 days, we are not receiving the Hilsha variety from Bangladesh. So, the prices are high, as there are limited stocks. Though there are some local varieties of fish in the state, from Diamond Harbour and Digha, Bengalis have a special liking for the Bangladeshi Hilsha," Sambhu Prasad Sau, a retailer.

The livelihood of many people involved with the trade has been severely hit.

"During the Hilsha season, everyone has the opportunity to earn livelihood. This particular ban has not only shattered us importers, our employees, but even the wholesalers," said Sayed Anwar Maqsood, Secretary, Hilsa And Other Fish Importers Association.

Bangladesh has banned the hoarding and export of Hilsha, its national fish, for the next six months, to keep domestic prices of the product down and to ensure regular supply.

Bangladesh export Hilsha worth 70 million dollars every year, mostly to India.

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More incentives likely for exporters hit by rising Re

The government is thinking of another package of incentives for exporters hit by the appreciating rupee, Commerce Minister Kamal Nath said on Tuesday. "We are thinking of a new package for exporters... the appreciating rupee has impacted exports and we are seized of the matter," he told reporters.

Nath said Prime Minister Manmohan Singh was keeping himself apprised of the situation and government was looking at measures on how to deal with it.

According to officials, Commerce Ministry has constituted a team to understand the impact of rupee rise at the ground level and some more incentives could be announced for exporters by August-end.

The rupee has appreciated from Rs 45 to a dollar in October-November last year to slightly over Rs 40 in July. The appreciating rupee has hurt growth in exports which has come down to 14 per cent in June from 23 per cent in April.

The government has already announced a Rs 1,400-crore package for exporters in July but it seeks to benefit only the employment-intensive sectors such as textiles, leather and small companies.

Now, the demand is coming from the sectors which have not been extended the benefits of the package for inclusion.


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Maha Mumbai SEZ in a jam: Residents, farmers oppose RIL's SEZ land buy

The Maha Mumbai multi-product special economic zone (SEZ), promoted by Reliance Industries, may experience difficulties in obtaining government approval. Some farmers and locals residing in the area where the SEZ is supposed to come up have officially registered their opposition to land acquisition. A number of land owners have informed the government that they do not want to part with their land and should not be made to do so.

Officials in the commerce ministry say that since the Centre had already decided that objection from even one land owner from the affected area would be enough to stall an SEZ project, developers will have to take some remedial action soon to save the situation. New rules notified recently by the government specify that land required for SEZs has to be surrendered willingly.

Commerce ministry sources said that the developers might have to exclude the area where they are facing resistance from the proposed SEZ. “It seems that the developers may have to lower their ambition and settle for a zone much smaller in size. Or else, the compensation package has to be made so lucrative that everybody accepts it,” an official said, adding that for some land owners in the area, adequate compensation may not be an issue at all. They are simply not willing to sell their land.

When contacted, a Maha Mumbai SEZ spokesperson said that the company had now come up with a very attractive compensation package. It is offering either Rs 40 lakh per hectare in cash or a combination of Rs 25 lakh per hectare, one job per family and 12.5% of developed land to the land owners. “We are hopeful that those who have expressed their unwillingness to sell, will accept this package,” the spokesperson added.

Interestingly, the validity of the in-principal approval given to the Maha Mumbai project runs out this week. The validity, however, is likely to be extended by the Centre under the new rules that limit the size of all SEZs to 5,000 hectares.

The government has decided to extend the validity period for all SEZs for a two-year period (one year at a time) if they apply for an extension before the validity period expires. In-principal approval is the first of the three-stage process the government’s board of approvals (BoA) follows while clearing SEZs. This is followed by formal approval when the land is acquired. After this, the SEZ is notified when certain formalities are fulfilled.

Sources say that one way to get around the problem could be to divide the area into a number of smaller SEZs keeping the problem areas out. Reliance Industries is attempting to chart a similar course for its proposed SEZ in Jhajjar, which had been planned over an area of over 10,000 hectares. For the Navi Mumbai SEZ, adjacent to Maha Mumbai, the company has received formal approval for a number of smaller SEZs.

The developers of Maha Mumbai had earlier proposed to build the zone over 10,000 hectares. However, with the empowered group of ministers (eGoM) on SEZs deciding, earlier this year, to limit the area for all SEZs to 5,000 hectares, the size of the zone has to be mandatorily reduced.

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IMPORT OF SENSITIVE ITEMS DURING APRIL JUNE 2007

The total import of sensitive items for the period April-June 07 has been Rs.4877 crores as compared to Rs.4371 crores during the corresponding period last year thereby showing an increase of 11.6%. The gross import of all commodities during same period of current year was Rs.226321 crores as compared to Rs.185988 crores during the same period of last year. Thus import of sensitive items constitute 2.4% and 2.2% of the gross imports during last year and current year respectively.

Imports of fruits & vegetables (including nuts), products of SSI, spices, marble & Granite, Tea & Coffee and milk & milk products have shown a decline at broad group level during the period. Imports of items viz. edible oil, cotton & silk, automobiles, rubber and Alcoholic beverages have shown increase during the period under reference.

In the edible oil segment, the import has increased from Rs.2407 crores last year to Rs.2802 crores for the corresponding period of this year. The import of both crude oil as well as refined oil have gone up by 15.7% and 30.9% respectively. The increase in edible oil import is mainly due to significant growth in import of Crude palm oil and its fractions, which has gone up by 28%.

Imports of sensitive items from Indonesia, China P RP, Brazil, Germany, Japan, Thailand, Australia etc. have gone up while those from Argentina, United States of America, Cote D’ Ivoire, Malaysia, Benin, Sri Lanka DSR, Egypt A RP etc. have shown a decrease.

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Export target to be met: Nath

The commerce ministry hopes to meet the $160 billion export target despite viewing the appreciating rupee as a deterrent in meeting the 2007-08 export target. “The rupee appreciation has impacted exports (till June). The government is seized of the matter,” the commerce and industry minister, Mr Kamal Nath, today said when asked about the dipping export growth over the last few months.

Mr Nath said the government was looking at several measures to ensure that the decline in export growth was arrested, including a new package of incentives for exporters.

With Rupee appreciating consistently against the Dollar, India’s first quarter export growth in the current fiscal decelerated to 7 per cent in rupee terms and in June, export growth was less than one per cent. In dollar terms, the export growth during April-June 2007 was 18 per cent against the trend rate of over 20 per cent witnessed in the recent past.

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Swiss government not to take Novartis case to WTO

The Swiss government indicated that it was unlikely to take Novartis AG's challenge to India's intellectual property rights regime to the World Trade Organization's disputes settlement body, local papers reported. The Madras High Court Monday dismissed a petition filed by the Swiss pharma major citing provisions of the Indian Patents Act and claiming that it was non-compliant with the Trade-Related Intellectual Property Rights (TRIPS) agreement.

Doris Leuthard, Swiss Federal Councillor to the Department of Economic Affairs, told Indian media that: 'The Swiss government never gets involved in any any judicial pronouncement of other countries. We accept any case which is settled in India. It is normal litigation in which one party happens to be a company while other is a country.

'We must have a reliable TRIPS system, and the one in India is good enough,' the Business Standard quoted her as saying.

Leuthard was in India to sign a memorandum on closer cooperation for the protection and promotion of intellectual property rights with Kamal Nath, India's Minister for Commerce and Industry.

The Hindustan Times quoted Nath as saying: 'Our (Indian) patent laws are WTO compliant. It is only one company that has raised its voice. In the last two years, since Indian patent laws became WTO compliant, no one has ever made any complaint.'

The complaint centres on Novartis (nyse: NVS - news - people )' anti-cancer drug Glivec, which was denied patent protection at the Madras High Court on Monday.

Novartis had sought a patent for Glivec in India, challenging the Indian patent law which -- in its current form -- does not protect incremental innovation.

India has a unique provision in its patent law -- Section 3(d) -- which excludes 'incremental innovation' from patent protection and denies patents for modifications to known medicines.

Indian law does not grant patents for modifications to old medicines, but only to properly innovative drugs developed after 1995.

The WTO recently urged India to improve its intellectual property system during Trade Policy Review.

Novartis had reiterated on Monday that it thinks Section 3(d) will have long-term negative consequences for research and development into better medicines for patients in India.

'Medical progress occurs through incremental innovation. If Indian patent law does not recognise these important advances, patients will be denied new and better medicines,' said Paul Herrling, head of corporate research at Novartis, on Monday.

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No tax relief for overseas services

The Union finance ministry will not exempt services rendered overseas for executing export orders from the purview of service tax. This is despite the commerce minister’s announcement of the relief while unveiling the export import policy. According to officials in the finance ministry, the 14.4% growth in exports in June 2007 did not justify sacrificing revenues by granting the exemptions. The June figure was lower than the 18% growth achieved in May 2007.

The officials said that though the commerce ministry may have announced the exemption of tax on services rendered overseas, the finance ministry had not found any firm evidence that granting such an exemption would in any way mitigate the impact of the appreciating rupee on exports.

In view of the unkept promises of the exim policy, exporters are having to bear the burden of 12.5% service tax on all payments remitted from the country for services like commission agents who book orders, haulage from port to customers’ premises and expenses incurred in participating in B2B events overseas.

Back of envelop calculations by export organisations show that such expenses constitute 10-15% of the billing amount and a 12.5% service tax translated into an additional payout of 2% of the total export turnover.

“International business does not offer margins of more than 2-4% and the additional liability of service tax wipes off export margins in big markets which are very competitive in any case,” said P K Shah of Nipha Exports and former chairman, Engineering Export Promotion Council (EEPC).

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Tuesday, August 7, 2007

Medicines likely to cost more

The prices of certain medicines, including vitamin B complex, are set to rise following certain changes in its export policy by China, according to sources in the pharmaceutical industry. The sources say China has recently decided to either withdraw or reduce incentives on the export of about 300 items, Medicines likely to cost more.including basic drugs used as raw material by the Indian pharmaceutical industry.

Though the Chinese authorities have made known their intention to withdraw or slash the sops sometime back, the decision has become effective from July 1, the sources say.

The price of riboflavin, used in a wide range of vitamin preparations, is being quoted at Rs 5,000 per kg in the market today as against Rs 1,000 a kg just two months ago.

The sources say as a result of unprecedented rise in the price of riboflavin several brands of multivitamin tablets will become costlier in the coming days. The major reason for the sudden spurt in price is the steep shortfall in supplies from China. They say the production of riboflavin in that country has gone down after the Chinese government enforced stricter environment and anti-pollution measures.

The Indian pharmaceutical industry has been importing active pharmaceutical ingredients (APIs) from China because many of them were about 15 per cent cheaper than those produced in India. Even many Indian API manufactures depended a lot on raw material from China, as it was much cheaper than what it costs in India.

Besides the raw material, certain types of pharmaceutical machinery like the ALU-ALU blister packing machines from China were also favourite with Indian manufacturers for its lower costs. The cost of such machinery was 25 per cent to 30 per cent lower than that in the Indian market.

Dr Sunil Sethi, managing director-cum-CEO of Sanchez Pharmaceutical, Tohana, who is also setting up a unit at Baddi in Himachal Pradesh where tax concessions are very attractive, says the recent developments will not only hit the pharmaceutical industry badly but will also make the drug formulations dearer.

Dr Sethi, who has recently come back after attending a pharmaceutical expo at Shanghai, says the move has disappointed the Chinese drug industry and it will affect the export of bulk drugs and intermediates from that country.

He says though it is not possible to assess the exact fall out of the development at this stage, but the Indian pharmaceutical industry will have to bear 10 per cent to 15 per cent extra cost on inputs.

The price of an ALU-ALU blister-packing machine from China starts from $ 15,000 while in India its price starts from Rs 10 lakh. Similarly, an automatic capsule-filling machine with an output of 1,200 capsules per minute is available for $ 20,000, which is equivalent to the cost of a semi-automatic machine in India.

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Novartis plea on patents struck down

MUMBAI/CHENNAI: In a much-awaited judgement, the Madras High Court has held as valid a legal provision unique to India, which stipulates that modifications of known medicines cannot be patented unless they make the drug significantly more effective. On Monday, the court dismissed a petition by Swiss pharmaceutical giant Novartis challenging the constitutionality of Section 3(d) of the new Indian patent law. Novartis has filed another case, an appeal against the rejection of patent for its anti-cancer blockbuster drug Glivec, which is still pending.

The Basel-based drugmaker had filed a petition with the high court last year, after the Glivec patent rejection, pleading that incremental innovation should be patented in India. While India’s patent law does allow patents for modifications of already-known medicines, Section 3(d) stipulates that these modifications must improve drug efficacy to qualify.

A division bench comprising justice R Balasubramanian and justice Prabha Sridevan, ruled that the Section 3(d) of the Act, as amended in 2005 (along with its explanation), is valid and could not be termed vague, ambitious or unconstitutional.

“The discovery should result in the enhancement of the known efficacy of the substance and the derivatives are significantly differing in properties, with regards to efficacy,” the bench ruled.

In its petition, Novartis had prayed to declare the provision as being non-compliant with TRIPS agreement, vague, arbitrary and in violation of Article 14 of Indian Constitution.

“It is a sad day for innovation,” said Novartis’s vice-chairman and managing director Ranjit Shahani. “Incremental innovation has value not just in improving therapeutic efficacy, but also in providing significant benefits in terms of drug delivery, patient safety and compliance,” he said.

Novartis has also noted that in order to compare the efficacy of the new version of a drug with the old one, clinical trials need to be conducted. But, such trials can start only after the drug is protected by a patent.

However, the court decision should not have any significant impact on the company’s financial performance, said analysts. Drugmakers such as Ranbaxy, Sun Pharmaceuticals, Cipla, Natco Pharma and Camlin Pharma were already selling generic versions of Glivec in India. Even an eventual denial of patent on Glivec would not change the current situation.

Novartis said that while it disagreed with the Madras HC’s judgement, it won’t appeal its decision to the Supreme Court. “However, we have opened an important debate on the value of incremental innovation and the World Trade Organisation may take up the issue. We feel that there are great inadequacies in the Indian patent law,” said Mr Shahani.

The now-famous Glivec case has kept alive the debate over the patentability of pharmaceutical substances. Product patenting was introduced in India two years ago through the third amendment to Patent Act. The question is about ascribing a commercial value (by way of grant of patent or its denial) to new forms, derivatives and delivery systems of existing drugs.

The domestic pharmaceutical industry welcomed the Madras HC judgement. “If Section 3(d) had been removed, a large number of frivolous patents would have been granted, denying patients access to affordable generic medicines,” said secretary general of Indian Pharmaceutical Alliance (IPA), Dilip G Shah. “At least 2,000 out of the 10,000-odd patent applications in India will be disqualified under Section 3(d),” he added.

Ranbaxy echoed IPA’s view. “Ranbaxy has consistently been of the view that the TRIPS agreement can and should be interpreted and implemented in a manner supportive of the rights of the WTO members, to protect public health, and in particular, to promote access to medicines for all,” said executive director - global corporate affairs of Ranbaxy Laboratories, Ramesh Adige.

While Section 3(d) remains unique to the Indian patent law, other countries are considering incorporating a similar provision in their patent law. “Philippines adopted a similar provision a few month ago, and more Asia-Pacific countries such as Malaysia, Bangladesh and Indonesia were waiting for this ruling to amend their patent law,” said Mr Shah.

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Novartis warns India of losing R&D biz to China

NEW DELHI: Multinational drug makers would prefer China for investments in pharmaceutical research so long as India keeps the bar for patenting a drug so high, warned drug major Novartis on Monday after the Madras High Court turned down the company’s challenge to the country’s patent law.

Novartis India vice-chairman and managing director Ranjit Shahani, who also heads a body that represents MNC companies, told ET that most of the drug majors have invested in China in the last two years in pharma research , while India did not attract any investments. “No company will go on setting up research centres on an yearly basis. Once it is set up in country , it may not look for further investments for some time,” said Mr Shahani .

A crucial patent law provision that describes what is patentable is set for more heated debates and divergent interpretations as Novartis’ appeal against the government’s denial of patent to Glivec is still pending. The provision stipulates that new forms of older drugs merits patents only if they vary significantly in terms of properties with respect to efficacy.

MNCs say that there are many inventions that may not be entirely new chemical entities but are very useful to the patients. “These have utility and value not just therapeutically, but also in terms of patient safety and compliance , cost of production and ease in transport in a country of extreme climatic conditions,” said Mr Shahani. “A large number of incremental innovations have significant practical advantages for the patient over the existing medicine, although they may not qualify as scientific breakthroughs.

Companies will invest in such improvements only if there is an assurance of ownership at the end of costly and tedious research ,” Novartis international corporate research head Paul Herrling had told ET during a recent visit.

The domestic pharma industry disagrees : “Why should a product be in the market if it cannot claim these essential qualities? And how could a company come up with another product at the end of the 20-year patent life and say the new product is more stable,” asks D G Shah, the representative of big domestic drug makers.

While lawyers would battle it out as Novartis’ appeal continues, the government is working on a new patents manual that is expected to reduce subjectivity in deciding what is ‘significantly more effective that the already known’ . “Any sort of guidelines would leave some subjectivity in deciding the newness and usefulness of an ‘invention.’ We would like the government to bring the manual in public domain for transparency ,” said Mr Shah.

THIS PILL WON’T KILL

The court decision should not have any significant impact on the company’s financial performance, analysts said Drug makers such as Ranbaxy, Sun Pharmaceuticals, Cipla, Natco Pharma and Camlin Pharma were already selling generic versions of Glivec in India Even an eventual denial of patent on Glivec would not change the current situation

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Friday, August 3, 2007

INDIA’S FOREIGN TRADE DATA: APRIL-JUNE 2007

India’s exports during June, 2007 were valued at US $ 11867.11 million which was 14.05 % higher than the level of US $ 10405.07 million during June, 2006. In rupee terms, exports touched Rs.48386.49 crore, which was 0.97% higher than the value of exports during June, 2006. Cumulative value of exports for the period April-June, 2007 was US $ 34303.50 million (Rs.141330.65 Crore) as against US $ 29044.58 million (Rs.132164.90 Crore) during the same period last year.

India’s imports during June, 2007 were valued at US $ 19195.69 million representing an increase of 36.68 % over the level of imports valued at US $ 14044.43 million in June, 2006. In Rupee terms, imports increased by 21.00 %. Cumulative value of imports for the period April-June, 2007 was US$ 54908.83 million (Rs.226321.35 Crore) as against US$ 40885.73 million (Rs.185987.92 Crore) during the same period last year

Oil imports during June, 2007 were valued at US $ 5664.99 million which was 9.85% higher than oil imports valued at US $ 5157.19 million in the corresponding period last year. Oil imports during April-June, 2007 were valued at US$ 14830.19 million which was 4.21% higher than the oil imports of US$ 14230.81 million in the corresponding period last year.

Non-oil imports during June, 2007 were estimated at US $ 13530.70 million which was 52.25 % higher than growth on non oil imports of US$ 8887.25 million in June, 2006. Non-oil imports during April-June, 2007 were valued at US$ 40078.64 million which was 50.36% higher than the level of such imports valued at US$ 26654.92 million in April-June, 2006.

The trade deficit for April-June, 2007 was estimated at US $ 20605.33 million which was higher than the deficit at US $ 11841.15 million during April-June, 2006.

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Spices exports to be hit by strong rupee

KOCHI: The Indian rupee has appreciated by nine per cent in July 2007 as compared with March 2007. This will have an impact on our competitive edge over other producing countries, which may result in some drop in the export of spices and spice products in the coming months, says a press release from Spices Board here.

During the first quarter of this financial year we exported 52,000 tonnes of Chilli valued Rs.288.50 crore against 2,3715 tonnes valued Rs.104.76 crore last year. The demand from the traditional buyers like Malaysia and Sri Lanka are on the rise. India is the main source of red chilli in the international market. After the lean production last year, the new Chinese crop will reach the market only by October. Pakistan, the other producer, may require a large portion of their September crops for domestic consumption. It is reported that the stocks held at different levels are minimal and hence any significant decline in the Chinese crop will put pressure on chilli prices in the next few months.
Seed spices

Among the seed spices, coriander, fennel and fenugreek performed better than last year. During the period April-June 2007, 6,100 tonnes of coriander valued Rs.22.48 crore were exported against 4900 tonnes valued Rs.17.98 crore last year. It is reported that the East European countries like Romania and Bulgaria, where coriander is produced, suffered drought condition and this may have some impact.

During the year, 2100 tonnes of fennel valued Rs.11.99 crore were exported against 1500 tonnes valued Rs.8.95 crore last year. In the same period, export of fenugreek increased to 4850 tonnes valued Rs.12.63 crore against 1940 tonnes valued at Rs.5.96 crore last year.

In the case of cumin seed, there is a decline in export. It came down form 8190 tonnes to 4000 tonnes. However, it is expected that the export of cumin is likely to pick up in the next few months. This is so as there are reports indicating crop loss in Syria due to rain. The export of value added spices like curry powder and spice oils and oleoresins have shown an increase of 6 per cent and 9 per cent respectively in terms of quantity. During the year, 2625 tonnes of curry powder valued Rs.24.17 crore were exported from India as against 2465 tonnes valued Rs.20.05 crore last year. It is significant to note that the unit value has increased from Rs.81 a kg to Rs.92 a kg. In the case of oils and oleoresins the quantity exported has increased from 1445 tonnes to 1575 tonnes and value realisation from Rs.121 crore to Rs.127 crore.
Spices imports

Import of some of the sensitive spices like pepper, cardamom (small) and turmeric has come down during the first quarter of 2006-07. Cardamom (small) import has come down by 44 per cent, pepper import by 8 per cent and turmeric by 22 per cent during the year. Import of other spices like clove, cassia, star anise, etc has almost remained the same as last year. These items are mainly imported for domestic consumption.

The Government has restricted the export obligation period to 120 days from the date of first import consignment cleared by customs under advance authorisation scheme for import and re-export of spices after value addition.

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