Union Budget 2018-19 A DAMP SQUIB

www.thedollarbusiness.com Vol.5 Issue 02 February 2018 100 $2
Right after the Union Budget 2018-19 was announced,
stock markets went on a free fall. That was the first
manifestation of how India’s business community
perceived the Budget to be. Apparently, the manufacturing
and exports communities have taken to heart the lack of
big ticket announcements to boost the performance of
‘Made in India’ products on foreign soil.
Will the Budget prove a damp squib indeed?
UNION BUDGET 2018-19
A DAMP
SQUIB?
H.E. CHITRANGANEE WAGISWARA
High Commissioner of Sri Lanka to India
DR. JITENDRA SINGH
Minister of State (IC), Ministry of
Development of North Eastern Region
RAJEEV KAPOOR
MD, Steelbird Hi-Tech India Ltd.
VASUDEV TUMBE
Chairman, Indian Chamber of
Commerce in Korea
DR. SUBODH JINDAL
President,
All India Food Processors’ Association
...AND MANY MORE!
EXCLUSIVE INTERVIEWS
Pistachios
Going nuts over nuts
Changing lifestyles are driving imports
Activated Carbon
Profits activated!
In demand across international markets

FEBRUARY 2018 II THE DOLLAR BUSINESS 3
LETTER FROM THE EDITOR–IN–CHIEF
T
o tempt men to buy diamonds for women, advertisements of dia-
mond companies attempt to tickle their “blinded” hearts and gen-
tly knock in the nail of emotions that overemphasises the impact
of the sparkling stone's power of "surprise". Sometimes though, the
companies fall for their own advertisements. Blinded by the sparkle of greed
and easy money, they end up surprising their bankers and lenders, while
leaving another small crowd of 1.3 billion men and women in shock!
Recently, a few big nationalised banks were caught on the wrong foot,
having allowed a few traders and exporters over a stretch of years to get
away with loans won through fraudulent means. These borrowings included
high-valued credit facilities obtained through corrupt practices. If you are
reading this and are an Indian, you would have by now, heard about how a
few so-assumed crony capitalists got away with nation looting! And while
everyone – from CXOs to garbage collectors – must be wondering how
lucky or unlucky the accused now are, what many aren’t bothered about is
how this makes “India” – yes, the entire nation including you and me – look
shabby and corrupt in the eyes of four-fifths of world population.
As an outsider, when you analyse a nation for the purpose of doing busi-
ness with it – whether it be decision-makers on FDI at an MNC or a small-
time foreign buyer who wishes to import from India – you view the system
as a whole. So that means, a financial system that couldn’t auto-highlight
theft or anomaly amounting to over $2 billion at some of India’s largest PSBs
is bound to be downgraded perception-wise. And with that the entire busi-
ness culture alongwith infinite versions of it, get downgraded.
Reputation is hard to build. But in a matter of a few weeks, a couple of
billions dollars reported in loan default and bank fraud, pulled down many
notches the reputation of a nation whose GDP last year was nearly 1000
times that. Reputation is also that easy to destroy.
Many-a-time, when the question of a nation’s reputation (in terms of being
corruption-free and the strengths of both its financial and ethical systems)
affecting exports and even imports have been raised, people dismiss it as
“hardly anything” worthy worrying over. “Should Indian exporters be wor-
ried about US government’s temporary shutdown?” is probably a question
they feel has a similar weight. Reason – they often miss what lost reputation
adds up to. Just like lost time. Every negative physical indulgence in your life
(could be high sugar intake, smoking, excessive alcoholism, etc.) adds up to
ageing. And we ignore it to begin with. But it’s not long before “premature”
old age strikes. And then old age usually has its way of demanding attention
for being invited early. The case could be the same with India’s reputation.
Such incidents add up and before we realise, for our exporters, dealing
with foreign buyers may become tougher than imagined. Why wouldn’t a
foreign buyer want a sustainable relationship with a “trustworthy” Indian
supplier. But for all that he may know, that Indian exporter may have ob-
www.thedollarbusiness/blogs/steven
The Nirav Modi, Dwarka
Das Seth International,
Rotomac and Simbhaoli
Sugars incidences only
define the tip of the iceberg.
There are more betrayals in
the books of our banks.
WHO CARES
ABOUT REPUTATION?
@SPWarner www.tumblr.com/blog/steven-p-warner
Steven Philip Warner
President (VMPL) & Editor-in-Chief,
The Dollar Business
steven@thedollarbusiness.com

4 THE DOLLAR BUSINESS II FEBRUARY 2018
LETTER FROM THE EDITOR–IN–CHIEF
www.thedollarbusiness/blogs/steven @SPWarner www.tumblr.com/blog/steven-p-warner
tained funds from the banking channels through inap-
propriate means. And when trouble strikes the Indian
exporter, the foreign buyer may be at the losing end too!
A nation’s reputation matters in foreign trade. Rep-
utation could come in many forms. It could be about
how foreign investors are treated. Or it could have any-
thing to do with its banking vigilance system, quality
of ports and infrastructure, quality of produce or even
how bribe-free its system is. But far bigger than the
question of how much of India’s reputation is at stake
due to recent events is whether the dirt was just as pub-
licised. Here’s the answer. The Nirav Modi, Dwarka Das
Seth International, Rotomac, and Simbhaoli Sugars
incidences only define the tip of the iceberg. There are
more betrayals lying in the books of our banks. In an
RTI response, Reserve Bank of India (RBI) data stated
that our PSBs had accumulated (reported or not) about
8,670 loan or fraud cases totalling nearly $10 billion un-
til FY2017. (That figure of course doesn’t include much
of the recently exposed scam of $2 billion.)
You can debate that much importance is being given
to recent bank-fraud or default cases due to them being
widely reported and debated. (I’m not sure how many
reading this would be aware of the Rs.7,000 crore plus
fraud that had affected over 14 banks in India by anoth-
er diamond jeweller Jatin Mehta of Winsome Diamonds
and Jewellery – formerly known as Su-Raj Diamonds
and Jewellery; the case had surfaced four years back.)
But such incidences do affect even Indian banks’ atti-
tude towards lending to MSMEs, especially to exporters
in the diamond and jewellery business, which has been
under the scanner of late owing to incidences of wide-
spread multi-nation ‘round-tripping’ of consignments
by exporters to inflate their balance sheets. Credibili-
ty issues will hurt exporters at both the borrowing and
sales fronts, especially if banks decide to make their ap-
proval processes for MSME units excessively rigorous.
Another area where such damage to reputation will
hurt India is reduced FDI, especially across sectors
where such discrepancies are reported. “The worst ef-
fect of financial frauds is on FDI inflows into India”
states an Assocham report titled ‘Current fraud trends
in the financial sector’.
India is already vastly unpopular across the world as
many studies show.
The Reputation Institute (often heralded as the world’s
leading reputation-based research advisory firm), in its
2017 report has categorised India as a market with “weak
and vulnerable reputation”.
As per The Global Corruption Barometer for the Asia
Pacific Region released by Transparency International (a
globally-renowned, anti-corruption global civil society
organisation),Indiahadthehighestbriberyrateamongst
16 APAC nations surveyed. 70% of those surveyed in In-
dia had reported having gained access to public services
by paying a bribe. In fact, Transparency International’s
Corruption Perception Index 2017 released in Febru-
ary this year (which ranks 180 countries based on the
level of public sector corruption in 2017, according to
businesspeople, journalists and civic organisations) has
a significant point to make. As per the study, India is
more corrupt than Serbia, China, Lesotho, Burkina Faso
or even Sub-Saharan Africa. And compared to recent
years, India was “more corrupt” as a nation in 2017. That
for you is the world community's perception of India, its
policy system and indirectly, the way businesses operate
in our country.
Kroll Inc., a US-based intelligence and investigation
firm, in its 2018 Global Fraud & Risk Report stated that
in India, given the "relatively close nexus between com-
panies, politicians, and bureaucracy in India, businesses
often get pushed into practices which are potentially in-
appropriate". And this makes foreign and inside inves-
tors unsure about "whether the costs and performance
of a project reflect its true health" and that the wide
"difference between what is reported versus the actual
performance of the project casts doubt on the overall
integrity of the quality and financials of a project". For
those who still wonder whether a country’s reputation
really matters to an outside investor or importer, you
have your answer there.
For those who may even be questioning how bad
news in one sector cannot affect perception of foreign
buyers (and investors) about another sector in the same
country, there is plenty of research to counter this view.
According to a Harvard-Chicago combined study titled,
‘Collective Reputation in Trade’, “Understanding how
reputation spreads within an industry or a geographic
area is important for informing development and trade
policy. Quality shocks about one firm’s products could
affect the demand for related products from the same
origin country.” Not just a particular occurrence, per-
ception of a certain nation’s exports quality is also trans-
ferable from one industry to another. More so, countries
with higher perceived corruption levels and lower repu-
It's not easy to do away with the negative
effect of your country's bad reputation
in exports. Reason − your market's
reputation can significantly impact your
negotiation power on the pricing front.

www.thedollarbusiness/blogs/steven @SPWarner www.tumblr.com/blog/steven-p-warner
tation are expected to have a higher default risk, which
is a key factor to consider while signing up with a buyer
in foreign trade.
It's not easy to altogether do away with the nega-
tive effects of bad reputation even if you do manage to
make your way into the initial supplier list of a foreign
importer. Reason − your market's reputation can sig-
nificantly impact your negotiation power on the value
front. There is a big effect of reputation of a market on
the final prices its exports can command. In a joint re-
search paper by Leuven-based LICOS Centre for Insti-
tutions and Economic Performance and Paris-based Le
Groupe d'Economie Mondiale de Sciences Po, it has been
concluded empirically that, “a shock to (a country's
trade) reputation has a downgrading effect, reduc-
ing the (exporters') capacity to participate and benefit
from trade”.
Shocks therefore don’t help our exporters.
On the contrary however, we need to understand that
news is about what happens and not what doesn’t. And
whatisreported,is“often”negative;it'spurelymeanttofeed
the irrational pessimism and interests of those who
want to hear what has gone wrong. You will never read
a headline about a company or an exporter having made
timely payments of even thousands of crores of bank
loans. Even if you do, the excitement about the news is
subdued.
World buyers have shown no immovable loyalty to
Indian exporters. Even today, the only differentials for
the foreign buyers are quality and price, backed perhaps
by some growing reputation of Made in India. We can
avoid incidences that scare them away. We should. And
that will happen if incidences like Nirav Modi, Dwarka
Das Seth, Rotomac and Simbhaoli Sugars are treated as
reminders of problems in our financial and economic
systems and we implement effective measures to solve
them for the better good of the ordinary Indian citizen
and exporter. Believe me or not, but the world does care
about India’s reputation. As for foreign buyers, when it
comes to dealing with Indian exporters, we’d like them
to be careful, not doubtful.
They care about our reputation. And we will never
achieve a trading world with India at its centre with
poor reputation. Just because you can swim doesn't
guarantee your survival in the oceans. Similarly, an
identity of being non-corrupt doesn't guarantee a coun-
try's exporters success in foreign trade. But it gives them
a better chance at it.
India's reputation is a strategic compulsion for its
exporters. Period.

President (VMPL) : Steven Philip Warner
& Editor-in-Chief
EDITORIAL & RESEARCH
Editor : Manish K. Pandey
Executive Editor : Indranil Das
Senior Editor : Praveen Kumar
Assistant Editors : Ahmad Shariq Khan, Anishaa Kumar,
Aamir Hussain Kaki
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Publisher : Avnish Goyal
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INBOX
LETTERS TO THE EDITOR
Readers’ feedback that
hit our mailbox in January.
MONOLOGUE
PEOPLE SPEAK
Trump on trade, Jack Ma on
trade wars and more.
TRADE WRAP
The world at Davos, US tariffs
on solar panels and more.
EXCLUSIVE INTERVIEW
VASUDEV TUMBE
Chairman, Indian Chamber of
Commerce in Korea (ICCK)
IMPORT’ONOMICS
PISTACHIO
This healthy nut from Iran is
winning hearts across India.
RENDEZVOUS
DR. JITENDRA SINGH
MoS (IC), Ministry of Develop-
ment of North Eastern Region.
SECRET INGREDIENT
ACTIVATED CARBON
Indian activated carbon is fast
finding an international market.
TDB FORUM
Questions about foreign trade
that hit our mail box in Jan. 2018.
BORDERLINE
Editor’s Column
H.E. CHITRANGANEE WAGISWARA
HIGH COMMISSIONER OF SRI LANKA TO INDIA
Discusses the current status of Indo-Sri Lankan
relationship and ways to strengthen it further.
COVER STORY16
RAJEEV KAPUR
MD, STEELBIRD HI-TECH INDIA LTD.
Talks about the company’s legacy and the future
of helmet and biking accessories market.
08
30
38
10
40
42
46
50
12
34
Since it was the last full Budget of the
present government and the first since
the implementation of GST, much was
anticipated both by the industry and
the general public. The Dollar Business
analyses the various schemes that were
announced to find what this Budget has
in store for the EXIM community.
JUST ANOTHER
PATCH JOB?

CELEBRATING
50 GLORIOUS
YEARS OF
SERVING THE
INDIAN EXIM
COMMUNITY!
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MEIS
SEIS
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BUY&SELLMEIS,SEISANDOTHERTRANSFERABLESCRIPSONLINE

WE VALUE YOUR FEEDBACK, WHETHER CRITICISM OR APPRECIATION.
AND HERE ARE A FEW THAT HIT OUR MAILBOXES IN JANUARY 2018
Ever since I got my hands on an issue of
The Dollar Business magazine, at an in-
dustry event, I must say, I have become an
avid reader of your publication.
In my view, true to its punchline, India’s
only magazine on foreign trade, this pub-
lication fills a crucial gap in the business
news space – and that includes catering to
the informational needs of the SEZs/EOU
fraternity as well! Talking of its content, I
am particularly impressed with the quality
analysis of its product-based stories that
demonstrate how and why a product is
worth importing or exporting. Equally
good is the magazine’s in-depth anal-
ysis of various foreign trade-related policies
and their relevant pros and cons. I wish your publication
all the very best.
VINAY SHARMA
Chairman, Export Promotion Council for EoUs & SEZs
+91-11-2332976XXX, epcesho@gmail.com
Let me first acknowledge the fact that besides maga-
zine I really like the content available on your website.
The magazine itself is quite informative and makes for a
valuable read, not just for beginners in the trade but for
established players too. And since we import a wide range
of materials and items from China, I really liked your spe-
cial issue on China’s trade fair – that really opened many
vistas for me.
The textile industry is facing many issues at present.
Could you please do a story on the industry?
SHIV GOEL
CEO & Director, Triumph Garments Pvt. Ltd.
+91-22-40980XXX, india@triumph.com
The Dollar Business is the most apt, one-stop platform
for the country’s foreign trade fraternity. Each month,
the magazine comes up with unique and insightful arti-
cles on wide-ranging subjects pertaining to global trade. I
really admire the methodical efforts that must have gone
behind this excellent publication. The website is equally
good too.
Great job Team TDB! Navigating through the rough
inbox editorial@thedollarbusiness.com
SMS your views to +91-7680-80-7111
and tumble of business, you are my sav-
iour in many ways!
M. MODY
Director, R. F. international
+91-9811067XXX
rfinternational2003@gmail.com
Ihad the good luck of coming across The
Dollar Business magazine in a flight. Since
then, I have been a regular reader of your
publication. I really like the magazine as it
offers excellent and quality content on indus-
try-wide trends and developments. Covering
my sector extensively, the magazine provides
useful information to a large number of industry
stakeholders. I hope to see even more articles
on my industry in the future.
HABIBUL HASAN
Managing Director, Ethnic Craftart
+91-11- 29991XXX, enthniccrafttart@vsnl.com
The story on Foreign Trade Policy by The Dollar Busi-
ness was quite informative and well presented. I like
the fact that you have taken pains to talk to industry insiders
before forming your opinion. The magazines serves as an
excellent platform for referring to foreign trade related is-
sues. The highlighting of issues concerning the exporters
and importers, supported by facts and data, is quite impres-
sive. We want the publication to also give more coverage to
the issues related to the pharmaceutical industry.
PAWAN K. GOEL
CEO, Chemical Resources (CHERESO)
+91-172-5022XXX, admin@chemicalresources.net
The import and export product stories in your maga-
zine are quite unique. The information and content is
well-researched and up-to-date, which makes the mag-
azine stand apart from other publications. Referring to it
each month provides a holistic view of the trends and op-
portunities in foreign trade.
ANIL AGARWAL
Owner, Trupti Dal & Flour Mill
+91-9437049XXX

America has also finally turned the page
on decades of unfair trade deals that
sacrificed our prosperity and shipped away
our companies, our jobs, and our wealth. Our
nation has lost its wealth and we’re getting it
back. The era of economic surrender is over.
Donald J. Trump
US President
During his State of the Union address
Source: U.S. Department of State
monologue
Our path to progress is reform,
perform and transform. This is
why investing in India, travelling to
India, manufacturing in India has
become much easier than before.
Narendra Modi
Indian Prime Minister,
On India’s ease of doing busi-
ness during his WEF address
Source: www.mea.gov.in
The level of public debt means
that the ammunition to fight
another recession is not as strong
as before, so world leaders must
make sure to adopt the best poli-
cies now and make hay while the
sun shines.
Christine Lagarde
Managing Director, IMF
On the global economy
Source: PTI
Globalisation is a growing pain. It
is so easy to launch a trade war,
but it is so difficult to stop a trade war
and I’m scared and concerned.
Jack Ma
CEO, Alibaba
On trade wars and globalisation
Source: CNBC
For the first time in 40 years,
the UK is preparing for its
own independent trade policy,
and expanding our bilateral trade
and investment with India will be
central to that task.
Liam Fox
British Trade Minister
On India-UK partnership
Source: www.gov.uk
We want to work in China and
we want China to invest
here, but the level playing field
is not there. We haven’t seen
anything concrete in our trade
relationship.
Cecilia Malmström
EU Trade Commissioner
On Europe’s trade relationship
with China
Source: Reuters

L
eaders from across the world came together for the annual meeting of
the World Economic Forum held in Davos. The Summit was attended
by more than 3,000 participants from various sectors and over a 119
economies. The largest contingent was from US with over 780 participants,
followed by UK (266), Switzerland (233) and India (129). With the presence
of leaders of state from across the world, the platform hoped to initiate ma-
jor newsworthy discussions. Most leaders though stuck to their oft-repeat-
ed rhetoric. They made the usual speeches on globalisation, terrorism and
growing economies. The discussions that followed also did not offer anything
new. Indian Prime Minister Narendra Modi and German Chancellor Angela
Merkel spoke about the importance of globalisation and inclusion. Represen-
tatives from Mexico and Canada expressed satisfaction in developments on
the NAFTA deal. Mexico’s Economy Minister Ildefonso Guajardo was quoted
as saying that the deal was currently in a much better position than earlier. US
President Donald Trump invited world leaders and companies to invest in the
US while simultaneously espousing protectionist policies at a forum for free
trade, without an ounce of irony. In the east, Chinese media reported on how
many of the leaders present at the event were looking towards China’s ambi-
tious One Belt One Road initiative as a means for economic development and
cooperation in the coming days.
WORLD ECONOMIC FORUM
When the world unites...
SOLAR ENERGY
Trumped up taxes
Solar-powered devices and washing machines are expected to become a lot
dearer for American consumers in the near future. And the reason is simple.
US has announced a 30% import tax on the import of crystalline-silicon solar
cells, while for washing machines tariffs will start at 20%. This move is expect-
ed to have a major impact on the profits of exporters from Asia, South and
Central America, which in turn will affect the American consumers.
According to the US Solar Energy Association, as of 2016, nearly 260,000
US workers were employed in the solar industry which is more than double
the number of workers in 2012. According to a media report, this new duty
is expected to add an additional $650 to the installation cost of a residential
solar-based system. “This move will put as many as 63,000 US solar industry
workers at risk of losing their jobs and also have a detrimental effect on the
environment,” says the Solar Energy Industries Association. The Trump ad-
ministration claims that the new duties are in line with the current adminis-
tration’s focus on reducing imports and promoting domestic production.
AUSTRALIA
Banking on defence
In a move intended to increase defence
exports, the Australian government has
announced the creation of a $3.1 billion
(3.8 billion Australian dollar) fund that
will provide loans to defence exporters
who are not able to get loans from con-
ventional banks. With this move, the
Australian government hopes to enter
the top 10 global defence exporters’ club.
According to a research from Stockholm
International Peace Research Institute,
an independent international institute
focussed on conflict, arms and disar-
mament, the annual export of global
defence equipment from Australia rang-
es from Australian $1.5 billion to $2.5
billion, making it the 20th
largest arms
exporter in the world. Australian Prime
Minister Malcolm Turnbull believes that
his country should be able to do much
better than this.
The US is of course the largest arms
exporter in the world with arms exports
of over $5.4 billion (CY2016). Australia
has a lot of catching up to do.
MEXICO-SPAIN
Say cheese!
TheMexico-EUtradedealisunderthreat
of disintegration over the naming of a
particular type of cheese, the Manchego.
Spain exported $453.2 million in cheese
and curd products in CY2016. Manchego
cheese, being a high-value product, is a
big part of this pie for Spanish manufac-
turers. Spain says that the Mexican prod-
uct, which is a far cry from the Spanish
original, is eating into their profits as it is
sold at a more competitive price. Cheese
is a major part of both Spanish and Mex-
ican cultures and hence the situation is
not as trivial as it may seem from afar.
This, however, is not the first internation-
al stand-off on the topic. In 90s Greece
faced off against Denmark, Germany and
France to claim Feta cheese as their own.
Negotiations on the issue continued for
almost a decade and all parties left the ta-
ble unhappy. Let’s hope the Mexicans and
Spanish have better luck.

ECONOMIC SURVEY
Better days ahead?
The Economic Survey 2017-2018
painted the Indian economy in a
positive light. It credited govern-
ment-backed reforms in helping
strengthen the economy in the pre-
vious year. According to the Survey,
the Indian GDP for the year FY2018
is expected to be stable at 6.75%. It’s
a slight decline from 7.1% reported
the previous year, but is predicted to
rise to 7-7.5% in 2019. Good news
on all fronts as exports are up and
the fiscal deficit is down. Similarly,
forex reserves in the country are up
by approximately 10.6%. The Sur-
vey adds that policy vigilance will
be a necessary step going forward if
we are to adequately address grow-
ing “microeconomic concerns”. The
agenda for the year ahead, according
to the Survey, will be stabilising the
GST and overcoming the twin bal-
ance sheet problem. The survey will
hopefully inspire a new wave of opti-
mism in investors about India.
FTA-SWITZERLAND
Finding opportunities
On the sidelines of the World Eco-
nomic Forum Annual Summit, held
in Davos recently, Indian Prime
Minister Narendra Modi and Swiss
President Alain Berset discussed the
possibility of a trade and economic
partnership between the two coun-
tries. This is not the first time that
the two countries are discussing the
possibility of a bilateral trade, invest-
ment and cooperation agreement.
In September 2017, during a visit
by the then Swiss President Doris
Leuthard to India, the two leaders
had discussed expanding trade and
cooperation through an agreement.
Although the total bilateral trade
saw a decline over the last five years,
both countries are hopeful for a re-
vival in the coming days. Currently,
India accounts for 6.6% of all Swiss
exports, making us Switzerland’s
fourth-largest export market.
INDIA-UAE
Trade made easier
In a move to help strengthen India and
UAE ties, the two countries are expected
to soon eliminate the use of dollar and in-
stead trade in the local currency – Indian
rupee and UAE dirhams. The move is ex-
pected to not only help ease trade but also
help traders on both sides save money as
they will be able to avoid loss in currency
during conversion. This deal is in addition
to five other MoUs that were signed be-
tween the countries, during Indian Prime
Minister Narendra Modi’s trip to UAE.
An MoU for the financial swap was
signed between central banks of both
countries in 2016. India and UAE have
been actively working towards strength-
ening trade and tackling financial chal-
lenges in the recent years. As of FY2017,
the bilateral trade stood at $53 billion.
LOGISTICS
A win-win game
In an attempt to give a boost to the In-
dian logistics sector, Dubai-based DP
World and India’s National Investment
and Infrastructure Fund (NIIF) have
tied up to create a $3 billion fund which
will be used to develop ports and other
logistics infrastructure in India. The in-
vestment fund will not only provide for
expanding infrastructure at sea ports but
also freight corridors, inland container
terminals and logistics infrastructure.
According to reports, the first close
of the fund, which took place in Octo-
ber 2017, saw investments from domes-
tic investors such as ICICI Bank, HDFC
Bank, Axis Bank and Kotak Mahindra
Bank. International investment came in
the form of funding from a subsidiary of
the Abu Dhabi Investment Authority.
T
he Ministry of Commerce, GoI, in a recently released notification, an-
nounced that two additional ports would now provide for the import of
non-prime steel and steel products. Previously, imports of non-prime
steel (seconds/defective steel) was permitted only through Mumbai, Chennai
and Kolkata. This facility has now been expanded to two additional ports,
namely JNPT in Mumbai and ICD-Tughlakabad in New Delhi.
India is amongst the top 10 importers of steel in the world. In order to pro-
mote and protect the domestic industry from the growing influx of cheaper
steel into the country, the Indian government has in the past and even recent-
ly imposed anti-dumping duties. While most local producers are happy with
these policies, the secondary steel industry is not. In January this year, the All
India Furnace Manufacturers Association requested the government to re-
move the 2.5% import duty on scrap steel. Two new ports being able to handle
non-prime steel imports is a sign that the government is paying attention, to
an extent, to the issues raised by industry.
STEEL IMPORT
Adding shine to steel

BY TDB INTELLIGENCE UNIT
The last full Budget of NDA government's current tenure and the opener in the
GST regime was an anticipated one. Now that the Budget is out, it is appropriate
to declare that the government, in a bid to amuse one and all, did make an
attempt to address all major aspects of the economy – from agriculture to rural
development, employment to health, MSMEs to infrastructure. But the attempt was
not appreciated by India's manufacturing and exports communities at large. So
while the government believes its announcements will give catalyse our exports,
exporters continue to doubt the efficacy of Modi-camp's Budget treatment.
COVER STORY UNION BUDGET 2018-19
FOR THE SAKE
OF 'JUST' A
BALANCING,
PUBLIC ACT?

I
t happens every year. Expectations
and apprehensions around the
Union Budget reach a crescendo
just before the Indian Union Fi-
nance Minister takes guard and be-
gins his proof of what 'freedom of speech'
is. Then it all begins... It was no different
this year on February 1, 2018.
This year's Budget was special because
it was the last full Budget of the present
government before the country goes
to polls in 2019. This Budget, the sec-
ond Budget under the new scheme after
merging the plan and non-plan aspects,
is also the first since the implementation
of new tax regime of Goods and Services
Tax (GST). Would the government stick
to what most governments do when
faced with a election and announce a
populist Budget, or would this govern-
ment try and break the rule by announc-
ing a truly developmental Budget, was
the question on every lip. While the Fi-
nance Minister played to the gallery by
announcing a host of populist (or to use
the politically correct terminology, "in-
clusive") measures, he did allocate funds
and announced schemes that could help
ease pains that businesses have felt over
the last couple of years.
The question that we seek to answer
though, for readers of The Dollar Busi-
ness, is whether the Union Budget was
able to allay fears of India's foreign trade
fraternity about losing competitiveness in
the global market and easing deep-seated
infrastructural and policy inadequacies.
Some may say that for the EXIM com-
munity, the Budget might not be the best
tool to provide a holistic guideline and
the Foreign Trade Policy (FTP), the mid-
term review of which was released in De-
cember, is a better instrument. But, the
fact that the Union Budget spells out the
thrust of the government's agenda, re-
mains. Unquestionably, the foreign trade
fraternity looks forward to the Budget to
provide allocations and policies that can
make or break their fortunes.
THE HEADLINERS
However before we get into what the
Union Budget had in it for the foreign
trade fraternity, let us look at headline
messages that the Budget espoused. The
Budget,accordingtothefinanceministry,
was guided by the government’s mission
to strengthen agriculture, employment,
rural development, health, education,
MSME and infrastructure sectors.
While presenting the Union Budget
2018-19 in the Parliament, Union Fi-
nance Minister Arun Jaitley said, “This
year’s Budget will particularly focus
on strengthening agriculture and rural
economy, provision of good health care
to the economically less privileged, tak-
ing care of senior citizens, infrastructure
creation and working with the States to
provide more resources for improving
the quality of education in the country.”
Withthemajorfocusbeing onagricul-
ture and MSMEs, Jaitley said that India’s
agriculture exports potential is as high as
$100 billion against the current exports
of $30 billion and to realise this potential,
export of agricultural commodities will
be liberalised. The minimum support
price (MSP) for all unannounced kharif
crops will be one and half times of their
production cost and allocation towards
GOVERNMENT
SETS ANNUAL AGRI
EXPORTS TARGET
AT $100 BILLION

institutional farm credit will be Rs.11
lakh crore in FY2019.
Other announcements that caught at-
tention of the industry were: setting up
of two new funds of Rs.10,000 crore for
fisheries and animal husbandry sectors,
Rs.1,290 crore for restructured Nation-
al Bamboo Mission, proposal to extend
the reduced tax rate of 25% to compa-
nies reporting a turnover of up to Rs.250
crore, etc. Of course, the other major an-
nouncement that grabbed headlines was
the National Health Protection Scheme
(NHPS), quickly nicknamed Modicare,
which would provide health cover to
about 50 crore of India's underprivileged
citizens.
The Finance Minister too proposed
changes in customs duty, including an
increase in duty on mobile phones, some
electronics, etc., to promote creation of
more jobs in the country as well as Make
in India initiative. The Budget also in-
creased the allocations made under the
Special Package for the textile industry.
In addition, he also proposed a tax
on Long Term Capital Gains (LTCG)
exceeding Rs.1 lakh at the rate of 10%,
without allowing any indexation benefit
and tax on distributed income by equity
oriented mutual funds at the rate of 10%.
THE SHOW STOPPERS
While explicit announcements for the
foreign trade community were not ev-
ident, many experts have seen a silver
lining for the community in the head-
line messages the Union Budget has put
forth. Reacting on the Budget, Ajay Sa-
hai, CEO, Federation of Indian Export
Organisations (FIEO), says, “The Budget
puts focus on the rural economy as ru-
ral India will be the driver of the Indian
economy in the years to come. The key
concerns the Budget has tried to address
have been rising unemployment and de-
clining farmers’ income. Both of these
issues can be addressed through a focus
on exports. Luckily for us, global trade is
on an upward trajectory, and since Indi-
an exports have been ahead of the curve,
we can look forward to robust growth
in exports." Sahai also believes that the
increased focus on logistics and infra-
structure will help boost India's export
competitiveness. “The Budget has also
provided a boost to the logistics sector,
which will help exports. Increasing allo-
cation for railways, roads, shipping and
coastal navigation, electronic payment
facility at all toll gates, single logistics
portal to meet all logistics requirement
coupled with GST and E-way bill will go
a long way in reducing the logistics cost
of exports,” he explains.
Commenting on the emphasis placed
on agriculture and food processing in
the Budget, Milind Kothari, Managing
Partner and Head – Tax and Regulatory
Services, BDO India, states, “The Budget
also announced measures to promote
exports of agricultural commodities, in
a bid to realise its true potential as well
as insulate farmers from vagaries of mar-
ket-driven pricing. The proposed set up
of state-of-the-art testing facilities in
mega food parks will enable farmers to
get a premium price for their quality test-
ed products. While minimum support
price (MSP) would alleviate immediate
BUDGET 2018-19: HIGHLIGHTS
Customs duty on raw cashew decreased from 5% to 2.5%.
Customs duty on mobile phones increased to 20% from 15%, duty on some
of their parts and accessories and on certain parts of TV increased to 15%.
Abolished the education cess and secondary and higher education cess on
imported goods. In its place, it has proposed to impose a Social Welfare Sur
charge at 10% of the aggregate duties of customs on certain imported goods.
Central Board of Excise and Customs (CBEC) renamed as Central Board of
Indirect Taxes and Customs.
National logistics portal as a single window online market place to be developed.
On the lines of 'Operation Flood', a new scheme 'Operation Greens' has been
announced with an outlay of Rs.500 crore to address the challenge of price
volatility of perishable commodities like tomatoes, onions and potatoes.
Two new funds of Rs.10,000 crore each for fisheries and animal husbandry
sectors; Re-structured National Bamboo Mission gets Rs.1,290 crore.
Disinvestment target of Rs.80,000 crore for FY2019.
Comprehensive Gold Policy on the anvil to develop the yellow metal as an
asset class.
100% deduction to companies registered as Farmer Producer Companies with
an annual turnover upto Rs.100 crore on profit derived from such activities, for
five years starting FY2019.
Proposal to extend reduced corporate tax rate of 25%, currently available to
companies with annual turnover of less than Rs.50 crore, to companies having
an annual turnover of up to Rs.250 crore.
Minimum support price (MSP) for all unannounced kharif crops will be one and
a half times of their production cost as is the case with a majority of rabi crops.
Institutional Farm Credit raised to Rs.11 lakh crore for FY2018-19 from Rs.8.5
lakh crore in FY2014-15.
Allocation of Ministry of Food Processing has been doubled from Rs.715 crore
for FY2018 to Rs.1,400 crore in FY2019.
To boost employment and growth in MSMEs, a sum of Rs.3,794 crore
has been provided for credit support, capital and interest subsidy and for
innovations.
An outlay of Rs.7,148 crore for the textile sector has been announced for
FY2019 as against Rs.6,000 crore in FY2018.
Benefits under section 80-JJAA of the Income Tax Act extended to footwear
and leather industry to help employment generation.
Increase of budgetary allocation on infrastructure for FY2019 to Rs.5.97 lakh
crore against estimated expenditure of Rs.4.94 lakh crore in FY2018.
Railways Capital Expenditure for the year 2018-19 has been pegged at
Rs.1,48,528 crore.

TDB: Farmers are the core of Indian society. Do you think
the Union Budget 2018-19 has done a fair job to help them
access the food processing industry?
Dr. Subodh Jindal (SJ): The Union Budget 2018-19 has pro-
vided for the improvement of agricultural production in the
country. In my view, the Union Budget clearly outlines the
government’s intent to strengthen agriculture as much as pos-
sible through various hand holding mechanisms for farmers
including support for obtaining seeds, soil testing, fertilisers,
pesticides, irrigation, procurement, electricity, infrastructure
and technology. There is a focus on food processing, specifical-
ly the inclusion of farmers in post-harvest activities like han-
dling, storage, processing of produce. The government hopes
to kill two birds with one stone with this move. They hope that
this move will both increase farmers' incomes and also save
agri-produce from wastage.
The key problem faced by farmers is that most crops are
seasonal and there is a glut phenomenon when the produce
is in excess. Farmers are forced to make distress sales during a
season or even to simply throw away their produce. They suf-
fer huge losses owing to lack of post-harvest mechanisms. The
government has realised that this issue requires urgent atten-
tion and that saving the glut produce will also save the farmers.
Doubling the income of farmers is a laudable cause, and we
should focus all energies to achieve this objective.
To do this, the Union Budget proposes that farmers be in-
volved in post-harvest handling, i.e. cleaning, sorting, grading,
cutting and packing of the produce. If provided with ambient
control storage, refrigerated cold storage and other process-
ing facilities, farmers could reduce the wastage of agricultural
produce by a significant amount. The idea is to save perishable
agri-produce and protect farmers from being exploited in the
glut season by providing them with more options.
The Union Budget proposes to mobilise Farmer Produc-
er Organisations (FPOs) under a scheme named ‘Operation
Greens’ taking inspiration from the milk revolution under
the project ‘Operation Flood’. The government has provided
Rs.500 crore to support FPOs. It had earlier initiated Pradhan
Mantri Kisan Sampada Yojana for Mega Food Parks which also
endeavours to mobilise farmers for the same cause.
The main aim of this operation is to help farmers extend the
shelf life of their agri-produce. Implementing proper storage
mechanisms and processing methods is the way to do this. For
example, cut fruits and vegetables can be stored in a salt solu-
tion or as pulps, purees or pastes, that can be used throughout
the year by secondary or tertiary level units to manufacture
consumer products.
TDB: In recent times, many food processing firms have
raised concerns with respect to issues arising out of Goods
and Services Tax (GST) compliance. Has the Union Budget
been able to ease some of the pressure?
SJ: Most of GST's teething problems are related to operational
issues and fixation of tax rates. The government has been quite
active in interacting with trade and industry throughout the
country to understand and address the issues involved. It can
be said that most of the operational and teething issues have
been resolved, but there are still some concerns regarding tax
rates. I believe low GST rates on food products will benefit both
farmers and consumers.
TDB: What has the government done to address the issues
faced by food processing industry specifically and also the
agricultural sector in general?
SJ: On the policy front, the provisions made under the Nation-
al Mission on Food Processing in the Union budget are very
encouraging. The scheme for developing Food Parks will be
helpful in setting up new processing units. However, there are
some operational challenges which need to be addressed. To
make a significant impact, it is important to simplify the reg-
ulatory requirements of different central and state government
departments. Prime Minister Narendra Modi's famed Ease-of-
Doing-Business spirit must play a role here. India has the po-
tential to play an important global role in this sector, provided
that an integrated approach is followed.
TDB: After the World Food India 2017 Summit, Food Pro-
cessing Minister Harsimrat Kaur Badal had said that the
sector would attract an investment of $14 billion over the
next 2-3 years. Do you think the Summit was fruitful?
SJ: The government is making serious efforts to turnaround
the status of the food processing sector by boosting processing
levels in each segment. In this context, domestic and foreign
investors were mobilised during the World Food India 2017
Summit. The expected investment figure mentioned by the
Hon’ble Minister was on the basis of investors’ response during
the Summit. Companies from various countries participated
in the Summit. Officials from central and state governments,
industry members and investors, both foreign and domestic,
took part in detailed discussions about India's potential in this
sector. The Summit was very encouraging. We look forward to
good results emerging from this meet.
“GOVERNMENT IS TRYING TO TURN-
AROUND THE FOOD PROCESSING SECTOR”
DR. SUBODH JINDAL, PRESIDENT, ALL INDIA FOOD PROCESSORS’ASSOCIATION
InterviewbyAhmadShariqKhan

challenge of sub-optimal pricing, what
needs to be addressed is ensuring that
the farmers are able to fetch market-driv-
en pricing that keeps them solvent and
profitable.”
Welcoming the announcements made
in the Budget with regards to apparel in-
dustry,H.K.L.Magu,Chairman,Apparel
Export Promotion Council (AEPC), says,
“We are happy that the Special Package
has been increased from Rs.6,000 crore
to Rs.7,148 crore, especially the budget-
ary provision of Rs.2,163.85 crore to-
wards Rebate of State Levies (RoSL).”
The increase in customs duty on
footwear has also found appreciation in
the leather industry. Mukhtarul Amin,
Chairman, Council for Leather Export
(CLE), states that the Budget has an-
nounced an increase in basic customs
duty (BCD) on footwear from 10% to
20%. This move will help certainly en-
hance the competitiveness of domestic
footwear industry and will promote the
Make in India programme.
On the hike in customs duty on mobile
phones to 20% in the Budget, Rajoo Goel,
Secretary General, ELCINA, says that the
Finance Minister has levied customs du-
ties extensively on a number of finished
goods with an eye on driving manufac-
turing growth and to realise the “Make
in India” dream. However, whether this
can improve the competitiveness of our
electronics manufacturing sector in the
global marketplace is questionable.
The cashew processing fraternity's re-
sponse towards the reduction of customs
duty on cashews has been lukewarm. Re-
acting to the Budget, S. Kannan, Execu-
tive Director & Secretary, Cashew Export
Promotion Council of India (CEPCI),
says, “CEPCI very much welcomes the
decision of the government to reduce the
import duty on raw cashew nuts from 5%
to 2.5%. The cashew fraternity was in fact
expecting the complete withdrawal of
import duty and CEPCI had made it the
first point on its strategic plan submitted
to the government. Since it is a partial
relief, we will request the government to
withdraw the duty fully.”
The other big announcement that has
been welcomed by all has been the re-
duction in corporate tax rate from 30%
to 25% for companies with an annual
turnover of Rs.250 crore. Rajeev Kapur,
MD, Steelbird HiTech Ltd., commenting
on the reduction in corporate tax rates
says, “It is good that the government has
reduced corporate tax by 5% for MSMEs.
Most Indian companies fall under this
category and are responsible for a large
amount of employment generation. This
reduction should allow these compa-
nies to expand and employ more people
thereby raising the living standards of
many. This will also have a trickle down
effect on the economy as a whole.”
THE DAMPENERS
Although the foreign trade community
has welcomed and applauded these mea-
sures, they believe that the government
had the opportunity to do much more
for the manufacturing sector as a whole
and the exporting fraternity in specific.
What has been particularly disappoint-
ing is that at a time when Indian manu-
facturers are trying to move up the value
chain there has been no focus on research
& development (R&D). Sahai from FIEO
says, “I am disappointed with the lack of
support given to R&D as our spending
THE FINANCE
MINISTER HAS
PROPOSED THE
OPENING OF 42
MEGA FOOD PARKS
The footwear industry was expecting that the Rebate on State Levies ( RoSL) scheme would be extended to them too. But it didn't happen.
Experts feel that an extension would have helped the industry in pricing its products more competitively in the global markets.

TDB: What are the key focusses of this year's Union Budget
with regards to the exports sector?
Ajay Sahai (AS): The Budget puts focus on the rural economy
as rural India will be the driver of the Indian economy in the
years to come. The key concerns the Budget has tried to ad-
dress have been rising unemployment and declining farmers’
income. Both of these issues can be addressed through a focus
on exports. Luckily for us, global trade is on an upward trajec-
tory, and since Indian exports have been ahead of the curve, we
can look forward to robust growth in exports. Exports create
massive employment opportunities, particularly in labour-in-
tensive sectors. The fixed term employment facility for all sec-
tors will benefit exports the most, particularly where demand
is seasonal in nature or augmented at Christmas or New Year.
The focus on skilling, coupled with the gigantic target under
National Skill Development Mission, will add to the produc-
tivity of manufacturing sector exports. The Budget has also
provided a boost to the logistics sector. Increasing allocation
for railways, roads, shipping and coastal navigation, electronic
payment facility at all toll gates, single logistics portal to meet
logistics requirement coupled with GST and E-way bill will go
a long way in reducing the logistics cost of exports.
The reduction in corporate tax rate would also indirectly
help our exports as many US-based Indian subsidiaries and
Indian companies with major markets in US were considering
moving to US in view of the sharp cut in American corporate
tax rates and tax deductions on expenditure on equipment and
machinery there. We hope the cut in corporate tax would help
them revisit the issue and push exports with greater zeal. I am,
however, disappointed with the lack of support to R&D. Inno-
vation, product development and environmentally sustainable
manufacturing require huge investments.
TDB: The government hopes to increase agri-exports from
$30 billion to $100 billion. How should the government go
about realising this target?
AS: The government has fixed an ambitious agri-export target
of$100billion.Suchatargetrequiresastable,supportiveexport
policy if it is to be achieved. The sector will require some fiscal
support to bridge the gap between the minimum support price
and international price of products. Since prices of most of
agri-commodities are moving northward, the support required
will be moderate. Proper logistics and supply chain manage-
ment will play a crucial role in meeting the set target. The 42
Mega Food Parks will provide the world-class services required
by the sector. To promote horticulture crops, which have huge
export potential, the Budget proposed a cluster-based ap-
proach. Different clusters will be developed for specific crops
in districts known for them. Organic exports have not been ex-
plored to their fullest extent. Like Sikkim, many North Eastern
and some other states could get themselves certified as organic
states by internationally certified agencies to get a price ad-
vantage of over 50% on organic products. The policies are well
thought out, but it is the implementation that is the real test.
TDB: Some feel that the hike in customs duties may spark
trade disputes at WTO. Please comment.
AS: I agree that Union budget has given some ammunition for
trade disputes due to the proposed hikes in customs duties on
mobile phones and other IT products. However, we have al-
ways maintained that IT and telecom have evolved. We now
employ new applications and equipment which not only did
not exist but were not even conceived of at the time of signing
of the ITA-I in December 1996, at the WTO’s trade ministerial
meeting in Singapore. Therefore, the new IT products includ-
ing the latest iPhones and other smart products do not strictly
fall under the scope of the ITA-I agreement. Moreover, we have
not agreed to any fresh commitments under ITA-II.
TDB: To what extent are you satisfied with the measures in-
troduced to address concerns regarding embedded taxes and
products with inverted duty structures? The government has
been provided with many solutions to these problems, when
will we see these changes?
AS: The rebating of embedded tax on products, which are
outside the GST net or which are subject to nil GST rate, was
expected to impart competitiveness to exports. Unfortunately,
this has not had the desired effect. The increased allocation of
Rebate on State Levies (RoSL) for textile sector will help the ap-
parel and garments sector get some relief from embedded tax-
es. However, other sectors have received minimal benefit. We
are following this up with the government. We hope to reach an
agreement soon. The incidence of embedded taxes may be fac-
tored into duty drawbacks or other export promotion schemes.
I was a member of the group on GST Law which recommended
a host of measures for simplification of GST Act for the benefit
of trade and industry. For example, a comprehensive drawback
to cover GST and customs duty could provide one stage refund
for all indirect taxes at the time of shipment thus benefitting
MSMEs. These changes will require the approval of GST Coun-
cil before the amending the GST Act. So, it may be a while be-
fore they are implemented.
“THE BUDGET’S THRUST IS RIGHTFULLY
ON THE RURAL ECONOMY”
AJAY SAHAI, DIRECTOR GENERAL & CEO, FEDERATION OF INDIAN EXPORT ORGANISATIONS (FIEO)

on R&D is much lower than our com-
petitors. Innovation, product develop-
ment and environmentally sustainable
manufacturing are important factors for
exporters and require huge investment
in research, which should be encouraged
through tax concessions.”
Apart from this, the Budget has not
touched upon the concerns of some in-
dustries. While expecting a lot, the phar-
maceutical industry, a significant con-
tributor to the country’s foreign currency
reserve, has not got any direct benefits in
the Budget. “When it comes to the phar-
maceutical industry, this year’s Budget
has not been encouraging at all. No di-
rect benefits have been announced for
the industry. One could say that there
is only one benefit – reduction of 5% in
income tax for companies with less than
Rs.250 crore turnover. But that is for all
industries,” says Madan Mohan Reddy,
Chairman, Pharmexcil.
“Going into the Budget, we had ex-
pected a lot, especially in the backdrop of
the Make in India concept that the gov-
ernment has been promoting. But, they
have not put in any consideration for the
pharmaceutical industry,” adds Reddy.
Expressing dismay at the lack of men-
tion of any concrete measure in the Bud-
get to push SEZ/EOUs-led growth in
the country, Vinay Sharma, Officiating
Chairman, Export Promotion Council
for EOUs and SEZs (EPCES), says that
the Union Budget failed to excite the
SEZ/EOUs this time around. “It’s really
surprising that despite flagging the key
issues affecting this beleaguered sector to
TDB: Did the Union Budget meet your expectations? Is the
$20-billion garment exports target achievable?
H. K. L. Magu (HKLM): We believe that the Union Budget
has only partially addressed the industry’s need for financial
stability. Still, there are some reasons to be happy. We are glad
that the special package for the textile and apparel sector has
been increased from Rs.6,000 crore to Rs.7,148 crore, the bud-
getary provision of Rs.2,163.85 crore towards Rebate of State
Levies (RoSL) will be extremely helpful. But the industry was
expecting a higher allocation on account of RoSL backlogs.
We were expecting increased drawback and RoSL rates to fully
compensate for the embedded and blocked taxes that account
for around 5% of free-on-board (FOB) prices presently. The
industry is happy about the policy support received in the last
few months like the exemption of GST on air and sea freight till
September 30, 2018, higher rates under MEIS and for interest
subvention, but we expected more.
The export target of $20 billion is achievable if GST transi-
tion issues like delays in refunds and procedural challenges are
smoothed out.
TDB: GST hit the apparel industry hard. Have the
government's allocation of funds lived up to the
expectations of the industry?
HKLM: It may be noted that the apparel industry was one of
the worst hit after demonetisation and GST rollout, as a huge
part of the supply chain was outside the tax regime before GST.
The industry is presently grappling with a severe financial
crunch due to non-receipt of GST and RoSL refunds, besides
other procedural issues regarding GST. Thus, the industry was
certainly hoping for some support to mitigate the effects of this
financial crunch, especially when there is a severe reduction in
drawback and RoSL benefits.
As per industry estimates, the allocation of Rs.2,163.85 crore
in this year's Union Budget may not be enough to clear the
backlog of RoSL refunds. AEPC estimates that at least Rs.2,900
crore is required to clear the backlog up to March 2018. We
have already requested the Ministry for an immediate release
of all pending RoSL and GST refunds as the industry is facing
acute financial constraints.
TDB: What are some of the policy changes introduced in
the Union Budget that you are happy to see?
HKLM: Around 70% of the workforce in the apparel sector
are women, and the government’s decision to reduce women's
contribution to their provident fund from 12% to 8% is an ex-
tremely positive step and will encourage higher participation of
women in the apparel sector. However, the amendment need-
ed to make this effective should be introduced at the earliest.
Also, in my view, an increased allotment for skill development
augurs well for the entire sector and it will also help further
employment generation.
Moreover, worth highlighting here is the issue of high in-
terest rate in India compared to our neighbouring countries
which poses a challenge for our firms while establishing new
units. The proposed increase in interest subvention can help
mitigate this to an extent.
Further, AEPC feels if the free trade agreements with US and
EU get ratified, they will help significantly boost apparel ex-
ports from the country.
H. K. L. MAGU, CHAIRMAN, APPAREL EXPORT PROMOTION COUNCIL (AEPC)
“THE NEED FOR FINANCIAL STABILITY
HAS NOT BEEN FULLY ADDRESSED”

theconcernedministryinourpre-budget
memorandum, the Union Budget 2018-
19 failed to suitably address sectoral is-
sues such as those relating to MAT, DDT
and the Sunset Clause,” he adds.
Goel from ELCINA, representing the
electronics industry, while welcoming
the enhanced protection to some prod-
ucts, says, “There is a need to take addi-
tional steps to promote manufacturing of
ITA-1 items and their components. Man-
ufacturing these products require huge
investments and state-of-the-art technol-
ogies. The Budget has not allocated any
funds for the Electronic System Design
and Manufacturing (ESDM) sector and
we can only hope that the National Pol-
icy on Electronics Version 2.0, which is
under preparation, would be adequately
funded so that its industry promotion
schemes can be implemented successful-
ly to attract investments.”
THE BIG STORY
With all the hits and misses, the Budget
has majorly focused on strengthening ag-
riculture sector, in order to boost exports
from the sector and to meet the target of
doubling farmers’ income by FY2022.
The Finance Minister in his Budget
speech stated, “India’s agri exports po-
tential is as high as $100 billion against
the current export of $30 billion. To re-
alise this potential, exports of agriculture
commodities will be liberalised. The gov-
ernment will take steps to boost exports
of agriculture commodities."
While most experts agree that promot-
ing agri exports is the correct way to al-
TDB: How has the Union Budget 2018-19 treated the phar-
maceutical industry?
Madan Mohan Reddy (MMR): When it comes to the Indi-
an pharmaceutical industry, this year’s Budget has not been
encouraging at all. No direct benefits have been announced
for the industry. One could say that there is only one bene-
fit – reduction of 5% in income tax for companies with less
than Rs.250 crore turnover, but that is for all industries. Going
into the Budget 2018-19, our industry had expected a lot more
when it came to manufacturing, especially in the backdrop
of the 'Make in India' concept that the government has been
promoting. But, they have not put in any consideration for the
pharmaceutical industry.
TDB: Which area were you expecting an announcement in?
MMR: One area in which we were expecting a big announce-
ment from Mr. Jaitley during the Union Budget speech was the
manufacturing of import substitutes. We were hoping that the
government could provide some kind of benefit to start-ups
and companies involved in import substitutes production. A
proposal on this matter would be a huge step towards develop-
ing the domestic pharma industry .
TDB: How do you see the growth of Indian pharmaceutical
industry? Is the industry facing any constraints with regards
to imports and exports?
MMR: There is a strong possibility that growth will improve
in the pharmaceutical industry. But first, there are some gaps
that we must take care of. We have recently observed increasing
import prices, especially from places like China. But this is a
kind of risk mitigation. It is difficult to say if the increase in im-
port prices is going to have an impact on our exports. We don’t
know if this is short-term or long-term but until there is a sub-
stitute, there is always going to be a risk. This is why we need a
robust import substitute segment within the pharma industry.
Definitely, in the present situation, there are a lot of opportu-
nities for an increase in business from India as many approvals
are now coming through for the industry in the export market.
Many new companies are coming up that are employing new
technologies to make the domestic industry more competitive.
The government has to take a more structured and efficient
route while dealing with the industry's issues. There must be
a committee to look into this. Only then will there be some
sustainability. Once this happens, there is going to be huge op-
portunity for pharma industry. Out of the total $1200 billion
market, we have captured on $26 billion which is a tiny piece of
the pie. It is only around 2-3%. There is huge opportunity if the
government proactively works on this.
TDB: While the Budget fails to include any aspects directly
related to the pharmaceutical industry, the government has
stressed a lot on improving access to healthcare. Do you ex-
pect this to impact the industry?
MMR: The government has mentioned that there are going to
be some kind of insurance benefits when it comes to health-
care, but I don’t think there will be a huge change because of
this. The government is only going to take care of certain as-
pects of an individual's health. The consumption of the people
may increase as spending power increases, but not much is ex-
pected to change.
“THE BUDGET WAS NOT ENCOURAGING
FOR THE PHARMACEUTICAL SECTOR”
MADAN MOHAN REDDY, CHAIRMAN, PHARMEXCIL
InterviewbyAnishaaKumar

leviate the pain of farmers and that there
is a lot of untapped potential in this seg-
ment, the target of $100 billion will not
be easy to achieve. Such a target requires
a stable, supportive Agri Export Policy
based on digitised current stock position,
scientific forecasting of crop prospects,
current demand coupled with fiscal sup-
port to bridge the gap between the min-
imum support price and international
price. Since prices of most of agri-com-
modities are moving in the northward
direction, the support required would be
a moderate one.
Dr. Biswajit Dhar, Professor, Centre
for Economic Studies & Planning, Jawa-
harlal Nehru University, too agrees that
agri-exports have enormous potential.
However, he adds, “Without appropriate
investmentsaimedatimprovingthequal-
ity of agri-commodities and processed
items, there is little chance for Indian
producers to augment their presence in
highly-competitive overseas markets."
What makes the target even more
challenging is the fact that agricultural
exports have declined in recent years.
And while exports declined to $33.87
billion in FY2017 from $43.23 billion in
FY2014, farm imports have risen from
$15.03 billion in FY2014 to $25.09 bil-
lion in FY2017. In fact, as recently as in
December last year, out of 13 agriculture
commodities that are being tracked by
the Ministry of Commerce, five including
cashew, oil seeds, oil meals, fruits & vege-
tables and other cereals recorded negative
export growths. What's more? The share
of agriculture in India’s total exports has
steadily declined over the years – from
13.79% in FY2014 to 12.26% in FY2017.
With India punching way below its
weight in agriculture exports, it is less
than likely that the target of $100 billion
canbeachievedunlessmajorinvestments
TDB: What are your thoughts on the Union Budget? Will
the policy changes help exports from your sector?
Rajoo Goel (RG): The Budget proposals this year have not
addressed the concern about export competitiveness direct-
ly. In fact, the increase in customs duty on a number of items
as well as the introduction of social welfare surcharge is likely
to impact imports. Exports from high-tech sector like elec-
tronics can be promoted through financial incentives such
as MEIS, which was increased by 2% just two months before
the Budget was announced. This scheme is likely to have im-
mediate impact but it has no link with the Budget. Secondly,
export competitiveness is enhanced by improving the overall
eco-system in the country and increasing efficiency of man-
ufacturing and trade. Several steps announced in the Budget
for improving infrastructure and logistics, promoting better
fiscal management through GST and easing access to finance
for small and medium enterprises (SMEs), should help make
our industry more competitive in export markets.
TDB: What impact will the increase in customs duty on
mobile phones, electronic equipment and components etc.,
have on your industry?
RG: Increase in customs duty will encourage domestic assem-
bly of these products. There may be some shift from import of
completely built units (CBUs) to semi knocked down (SKD)
and completely knocked down (CKD) kits and assembly will
take place in India. This will result in some reduction in im-
ports to the extent that value addition happens locally.
For increase in basic customs duty to have a significant im-
pact on imports and boost ‘Make in India’, the Phased Man-
ufacturing Programme (PMP) announced for mobile phones
needs to be taken to the next level. PMPs must be introduced
for more products of mass consumption such as LED lighting,
set-top boxes, security products, etc. This will boost PCB as-
sembly and components manufacturing, incentivised through
PMP. This then will result in investment to increase manufac-
turing capacities of these inputs.
TDB: Experts say that the hike in duty on mobile phones
could land India in trouble with the WTO. Please comment.
RG: This is a highly technical and legal issue. However, the
opinion of the industry and legal experts from the government
is that mobile phones are not part of the ITA-1 agreement of
WTO because they did not exist when the ITA-1 was signed
around 1996-97. There is a possibility that some countries may
take the issue to the WTO Arbitration Panel, but India has a
strong case in its favour.
TDB: How will the reduction of corporate income tax for
MSMEs impact the entire value chain?
RG: It was announced two years ago that the government in-
tended to reduce corporate tax by 1% every year and take it
down to 25%. The reduction in corporate tax from 30% to 25%
for MSMEs with annual turnover up to Rs.250 crore is a step in
that direction. It is hoped that this will incentivise manufactur-
ing and strengthen the viability of MSMEs.
RAJOO GOEL, SECRETARY GENERAL, ELCINA
“THE BUDGET HAS NOT ADDRESSED THE
ISSUES AFFECTING EXPORTS DIRECTLY”
InterviewbyAamirH.Kaki

are made in cold chains and warehouses,
and policies are drafted to support the
farming community.
The gap in policy and the budgetary
announcement remains a sore point for
agricultural commodity exporters. India
has often put caps on exports of agri-
culture items, citing concerns regarding
food security. Over the years, the gov-
ernment has also imposed minimum ex-
port price (MEP) on commodities such
as onion, potato, rice, wheat and edible
oils to discourage exports and enhance
domestic availability and regulate prices.
How the government plans to balance
the need to keep domestic prices under
control while promoting agri exports is a
question that remains unanswered.
As a part of this strategy for improv-
ing agri exports, the Finance Minister
proposed the opening of 42 mega food
parks all across the country; a network
of processing and collection centres in-
tended to create a link from farm to con-
sumer market. However, the scheme for
creation of mega food parks has been in
place for a number of years, but most of
these parks are yet to see the light of day.
Nevertheless, Sahai believes that the
proposed mega food parks have the po-
tential to provide an impetus to the agri
sector. “Backward and forward linkages
in agriculture through logistics and sup-
ply chain is necessary to meet the ambi-
tious target. The 42 mega food parks will
provide world-class common services re-
quired by the agri-sector,” he adds.
'TAX'IING FORWARD
Apart from the agriculture sector, the
other major focus of the Budget was on
MSMEs and employment generation.
MSMEs, an important pillar of the In-
dian economy and a major employment
generator, contribute about 45% to man-
TDB: How will the leather industry be affected by the Union
Budget 2018-19? Have government policies been friendly
towards the industry?
Mukhtarul Amin (MA): The government had already an-
nounced reduction of GST for several leather industry-relat-
ed items prior to the Budget. Besides that, the Union Cabi-
net approved a Rs.2,600 crore special package for leather and
footwear sector in December 2017. The package encompasses
support measures covering all core areas namely modernisa-
tion and technological upgradation of production units (IDLS
sub-scheme), skill development and employment generation
(HRD sub-scheme), environment management (Leather Tech-
nology, Innovation and Environmental Issues sub-scheme),
brand promotion, creation of integrated production clusters
[Mega Leather, Footwear and Accessories Cluster (MLFAC)
sub-scheme], additional incentive for employment generation
and also flexibility in labour laws. The substantial increase in
government funding laid out under the special package will be
a major catalyst to the industry in expanding its share in the
fiercely-competitive global market and in promoting domestic
production under the Make in India programme.
Thus, the government has taken up several measures for
overall development of the leather sector, for which we are
grateful. The leather industry would also have liked it if the
Rebate of State Levies (RoSL) Scheme was extended to us too.
This would have helped the industry in offsetting state levies
which are not subsumed under the GST.
The leather industry had earlier requested the government to
consider extending the additional 30% Income Tax deduction
for eligible new employees in the leather and footwear sector,
by relaxing the minimum period of employment from 240 days
to 150 days. This request was also favourably considered in the
special package announced for leather and footwear industry.
Besides this, extending the 12% government contribution
on Employee Provident Fund (EPF) for new employees for all
sectors for the first three years and reducing EPF employee
contribution for women from existing 12%/10% to 8% for the
first three years of employment will result in generation of sub-
stantial employment opportunities.

TDB: The government has also announced an increase in
customs duty across the board. How will this impact the
leather and footwear industry?
MA: The Union Budget 2018-19 has announced enhancement
of basic customs duty (BCD) on footwear from 10% to 20%.
This move is welcomed by industry participants as it will en-
hance competitiveness of the domestic footwear industry.

TDB: The Budget announced a reduction in corporate tax
rate for micro, small and medium enterprises (MSMEs). Is
this a good move?
MA: Yes, of course. The extension of 25% reduced corporate
tax to all MSME units having turnover of up to Rs.250 crore
will be immensely be beneficial for the leather and footwear
industry as about 90% of the industry is concentrated in the
MSME segment.
MUKHTARUL AMIN, CHAIRMAN, COUNCIL FOR LEATHER EXPORTS (CLE)
“INCREASE IN FUNDING UNDER SPECIAL
PACKAGE WILL BOOST EXPORTS”

ufacturing output and around 40% to
exports, directly and indirectly. In the
Budget, the Finance Minister proposed
a reduced tax rate of 25% for companies
that have an annual turnover of up to
Rs.250 crore. “This will benefit the entire
class of micro, small and medium enter-
prises which accounts for almost 99% of
companies filing tax returns,” the Finance
Minister said while presenting the Bud-
get. However, he accepted that this may
lead to a revenue loss of Rs.7,000 crore
during the financial year 2018-19.
This measure was positively taken by
most of the industries where MSMEs are
a dominant force. Magu from AEPC says,
“Reduction in corporate tax for MSMEs
is indeed an extremely positive step and
will benefit the apparel industry as it's
comprised mainly of MSMEs.”
An equally welcome move in this re-
lation has been the change in criteria for
classifying MSMEs – from investment in
plant and machinery to annual turnover.
"This not only makes the assessment of
the eligibility of MSMEs easier, more
transparent, but simpler too,” adds Magu.
Kothari, from BDO India, also wel-
comed the announcement of reducing
tax for MSMEs. “The proposal has taken
care of about 99% of companies, irre-
spective of the industry they belong to.
This will improve the competitiveness of
Indian companies. The lower tax outflow
will leave more funds at their disposal,
which in turn will promote investments
and expansion in businesses,” he says.
Sahai, from FIEO, looks at this an-
nouncement from exports perspective.
“The reduction in corporate tax rate to
25% would indirectly help our exports,
as many Indian subsidiaries of US com-
panies and Indian companies with major
markets in US were weighing the option
to move to US in view of the sharp cut in
corporate rates and announcement of tax
deduction on expenditure on equipment
and machinery in US,” says Sahai.
The reduction in tax rate has no doubt
come as a relief to the already strug-
gling MSME sector after the twin shock
of demonetisation and GST. But then,
the major problem faced by the sector is
availability of credit and the government
has taken no concrete step to address
this issue. As per latest Economic Survey,
the MSME sector faces a major problem
in terms of getting adequate credit for
expansion of business activities. Latest
data on credit disbursed by banks shows
that out of a total outstanding credit of
Rs.26,041 billion, as in November 2017,
82.6% of the amount was lent to large en-
terprises. The MSME sector received only
17.4% of the total credit outstanding.
Experts believe that more needs to
be done to address these concerns of
MSME sector. According to Prof. Dhar,
“The most serious bottlenecks faced by
the MSME sector are non-availability of
credit and lack of proper infrastructure.
A coordinated policy that addresses these
issues in a comprehensive manner is what
is required. But instead, each year the
Budget takes grossly inadequate steps.”
DUTIES & WTO
Another key Budget announcement that
has a direct bearing on EXIM communi-
ty is the change in customs duty of sever-
al items in a bid to further help domes-
tic manufacturers, discourage imports,
specifically from China, and promote the
Make in India programme.
The Budget has proposed higher cus-
toms duty on several goods including
mobile phones, electronics, completely
THE DECISION TO
INCREASE IMPORT
DUTY COULD LAND
INDIA IN A WTO
TRADE DISPUTE
The Budget announces an increase in customs duties of several products, including mobile phones and electronic components. The move is
expected to boost domestic manufacturing and promote innovation as well as improve price competitiveness of Indian products.

TDB: Has the government been able to cover all its bases
with the Union Budget? Where has it fallen short?
Milind Kothari (MK): If one were to go by the challenges
enumerated in the Economic Survey, then the Budget has ad-
dressed all the key challenges. However, there are many things
not mentioned within the Survey that might prove to be road-
blocks to growth. For instance, the slow pace of disinvestment
with no over-arching strategy is a large missing piece in the
policy framework. The Budget has been conceived in light of
the impending elections and therefore it hasn’t been aggressive
on reforms. The other large disappointment was not aligning
headline corporate tax rates with the rest of the world, this
could have significant long-term implications for the econo-
my as businesses may relocate outside India to minimise tax
payments. This does not bode well for employment. The rein-
troduction of long-term capital gains tax is another dampener.
Too frequent changes in the tax regime for gains from invest-
ment is a deterrent to investors.
TDB: The Budget is often focused on manufacturing and the
service sector has been traditionally ignored. Has this been
the case this time as well?
MK: One of the startling successes post-independence has
been growth of the service sector, largely due to private enter-
prises where government intervention has been the least. The
service sector continues to be the largest contributor to India’s
GDP and employs millions of Indians. It is also the largest for-
eign exchange earner for the country. We did not expect much
from the Budget this year. The government is playing a silent
but important role in the growth of the service sector.
TDB: The Budget includes a reduction in corporate tax rate
to 25%. What impact will this have on businesses?
MK: The proposal has taken care of about 99% of companies,
irrespective of the industry they belong to. This will improve
the competitiveness of Indian companies. The lower tax out-
flow will leave more funds at their disposal, this in turn will
promote investments and expansion in businesses. This an-
nouncement was expected, keeping in mind the worldwide
trends. The move was necessary to ensure foreign inflows into
the country and promote businesses to invest locally. Leaving
out 1% of corporates, that exceed the turnover ceiling, also en-
sures the government a large tax contribution. Unfortunately, it
is this set of taxpayers that make largest investment in the econ-
omy to propel growth. The tax cut though well-intentioned
might not work out as expected.
TDB: Goods and Services Tax (GST) has been one of the ma-
jor topics of discussion over the last few months, but very
little in the Budget actually addresses the issues that arose
after the implementation of GST. Comments.
MK: It is in line with the overall expectations. GST being a con-
current dual tax levied by the Union and State governments,
framework changes as well as GST rate change can be imple-
mented only on the basis of the recommendations of the GST
Council, which has representatives from both central and state
governments. Based on the recommendations of the Council,
the government at the centre and states have already rolled-
out many changes in the past 6-7 months. Further changes are
expected in the coming days. The Budget 2018-19 has ceased
to be of importance to navigate changes in the GST as key de-
cisions can be made without legislative changes which is the
mandate of the Budget.
TDB: Agriculture was a major focus area for this Budget.
How would you rate the agriculture-related initiatives in-
cluded in the Budget, such as MSP?
MK: Adequate remuneration for the produce, strengthening of
markets, logistics support, irrigation facilities form part of var-
ious agricultural reforms put forth. It intends to reduce the dis-
tress in the agriculture sector, the backbone of our country. The
Budget also announced measures to promote export of agricul-
tural commodities in a bid to realise the sector's full potential
as well as insulate farmers from the vagaries of market-driven
pricing. The proposed set up of state-of-the-art testing facil-
ities in mega food parks will enable farmers to get premium
prices for their quality tested products. While minimum sup-
port price (MSP) would alleviate the immediate challenge of
sub-optimal pricing, what needs to be ensured is that farmers
are able to fetch market-driven pricing.
TDB: How important is the increase in customs duty when
it comes to encouraging more domestic production? Is a sig-
nificant price rise on the horizon?
MK: This move is in line with the government policy to en-
courage domestic manufacturing. The increase in import duty
could have been a double whammy for cellphone and electron-
ic companies that are already reeling under low consumer sen-
timent. But since a large portion of the cellphones and other
consumer goods which are subjected to the duty are already
manufactured in India, the change is not likely to hit every
brand but only a few international brands. We estimate that the
price increase would range from 1.50% to 7%.
“NOT ALIGNING CORPORATE TAX RATES
WITH GLOBAL TRENDS IS DISAPPOINTING”
MILIND KOTHARI, MANAGING PARTNER, HEAD-TAX AND REGULATORY SERVICES, BDO INDIA

or semi-knocked down automobile parts,
capital goods, edible oils, footwear, imita-
tion jewellery and juices, whose imports
in the first seven months of this fiscal was
valued at more than $38.30 billion.
The customs duty on auto components
such as engine and transmission parts,
suspensions, brakes, airbags and gear
boxes has been raised to 15% from 7.5%
in the case of some items and from 10%
for some others. These products make up
for over 50% of the $43.5 billion-Indian
auto component industry and more than
30% of the industry’s $11 billion exports.
In the context of electronics items, India
imported products worth $4.6 billion in
the month of December 2017 alone, re-
cording a 20% increase year-on-year.
Overall, basic customs duty has been
raised on around 40 product categories.
The incidence of hike in duty is between
30% and 100% on most items. If experts
are to be believed, nearly 25% of the
country’s total imports could be affected
by this increase in basic customs duties.
It's worth noting that in FY2017, imports
in these 40 product categories totalled
about $85 billion, accounting for 22% of
the overall imports of $384 billion.
Having said that, there are doubts as
to whether the increase in customs duties
on these products can help the govern-
ment achieve its goals of promoting do-
mestic value addition under the ‘Make in
India’ mission and in creating more jobs
in the country as the duties may signifi-
cantly impact the downstream industries
that use these products.
The other problem with the decision
to increase import duty on certain prod-
ucts like mobile phones is that it can land
India in a trade dispute at WTO because
under the WTO Information Technol-
ogy Agreement (ITA), countries which
are signatories to the Agreement cannot
impose import duties on several IT prod-
ucts including mobile phones.
Agreeing to this, Prof. Dhar from JNU,
says, “The proposed increase in customs
duty on mobile phones violates the com-
mitments India has taken under WTO’s
Information Technology Agreement. I
have no doubt that India will be dragged
to the Dispute Settlement Body.”
IN BALANCE
This time around, Jaitley had the unen-
viable job of righting the ship after the
twin shocks of demonetisation and GST
to the Indian economy. These two events
have hurt economic growth, impacted
employment in unorganised sectors and
adversely affected the agricultural sector.
Though the Budget has tried to address
these issues, it has not been able to do so
without hurting the government’s reve-
TDB: What is your take on the Union Budget 2018-19?
Has the government been able to address the issues plaguing
the economy?
Dr. Biswajit Dhar (BD): I am disappointed with the Union
Budget 2018-19 as it does little to address the deep-seated
problems affecting the Indian economy. Data from the recent
quarters have shown that domestic investment rate is slowing
down to unacceptable levels, but this issue has not been ad-
dressed. It is surprising that the government is expecting a 7%
plus GDP growth rate on a sustained basis when it is doing
little to uplift investor sentiment in the country.
TDB: There remains huge untapped potential when it comes
to agricultural exports, as pointed out by Finance Minister.
How can this potential be realised at a time when the sector
is witnessing the lowest growth in the last few years?
BD: Agri-exports do have a huge potential, but again without
the appropriate investments aimed at improving the quality of
agricultural commodities and processed products, there is little
chance for Indian producers to increase their presence in inter-
national markets. Further, investments in rural infrastructure
and logistics are urgently required to reduce wastage, especially
of perishable horticultural products from which farmers and
processors can earn high profit margins.
TDB: What should be done to facilitate the growth of the
MSME sector? Is the government moving in the right direc-
tion with regard to this sector?
BD: The most serious bottlenecks faced by the MSME sector
are the availability of credit and infrastructure. A coordinated
policy that addresses the needs of the MSMEs in a compre-
hensive manner is what is required. But instead, each year the
Budget takes grossly inadequate steps.
TDB: Experts say that a hike in customs duty on mobile
phones, etc, could land India in trouble with the WTO. Are
the import duties in line with WTO rules?
BD: The proposed increase in customs duty on mobile phones
that has been announced in the Budget violates the commit-
ments India has made under WTO’s Information Technology
Agreement. I have no doubt that India will be dragged to the
Dispute Settlement Body.
DR. BISWAJIT DHAR, PROFESSOR, CENTRE FOR ECONOMIC STUDIES & PLANNING, JNU
“LITTLE TO ADDRESS DEEP-SEATED
PROBLEMS AFFECTING THE ECONOMY”

nues. The 2017-18 fiscal deficit target of
3.2% has been surpassed and is now at
3.5% of the GDP. More importantly, for
the foreign trade community, despite a
better global economic climate, exports
have failed to show robust growth.
No doubt, through this year's Budget,
the government has made an honest ef-
fort to address issues including unem-
ployment and capital outflows in the
wake of cuts in US corporate tax rate,
among others that cropped up last year.
Even the thrust on agri exports, MS-
MEs and logistics seems to bode well
with India's exporting community. But
then, sceptics warn that it is not intent
but implementation that decides a poli-
cy's fate. Hence, only time will tell if the
Finance Minister's balancing act pays off
– to the economy, the foreign trade com-
munity, and of course, to his very own
NDA government!
Mega food parks are expected to
significantly reduce wastage of
perishable agro products and boost
their exports from India.
TDB: What is your take on the Union Budget 2018-19? Are
the announcements made in line with the handicraft indus-
try’s expectations?
Rakesh Kumar (RK): EPCH had submitted a pre-Budget
memorandum to the Ministry of Finance which included allo-
cation of funds for opening warehouses, funds for introduction
of new technology in the handicrafts sector, enhancement of
the list of items under duty free import certification, inclusion
of merchant exporters in interest equalisation scheme, etc.
None of the proposals specific to the handicrafts sector have
been considered in the Union Budget. However, we under-
stand that the package granted to the textiles sector would also
include assistance for the handicrafts sector.
TDB: In the Budget, MSMEs have been provided with
Rs.3,794 crore for credit support and innovation. Are these
funds enough to provide relief to them?
RK: The number of MSMEs in the country is very large and
as such whether the provision of Rs.3,794 crore in the Budget
for credit support and innovation is enough or not can only be
ascertained with the passage of time. It is difficult to comment
on the same at this stage. The modus operandi of the utilisation
of this amount is also not clear at present.
TDB: How will the reduction of corporate tax for MSMEs
affect the handicrafts industry?
RK: The concessional rate of 25% is for companies. The con-
cession is not applicable to firms that are sole proprietorships
and partnerships. The proportion of incorporated bodies en-
gaged in exports of handicrafts is small as compared to the
units which are considered SMEs. Therefore, only a fraction of
handicrafts exporters will be benefitted.
TDB: You seem to be a little disappointing with the Budget.
What more could the government have done?
RK: Yes, we are a little disappointed because the Budget does
not contain any direct or specific proposals for growth of the
handicrafts sector. However, the provisions made in the Bud-
get for MSMEs and some other provisions will naturally help
the handicrafts sector too. But we would have been in a better
position to grow our exports if the government had made some
concessions for our sector.
RAKESH KUMAR, EXECUTIVE DIRECTOR, EXPORT PROMOTION COUNCIL FOR HANDICRAFTS (EPCH)
“ONLY A FRACTION OF HANDICRAFT
EXPORTERS WILL BENEFIT FROM BUDGET”

OVERSEAS
TALK H.E. CHITRANGANEE WAGISWARA, HIGH COMMISSIONER OF SRI LANKA TO INDIA
TDB: How has the relationship
between India and Sri Lanka evolved
over the centuries?
H.E. Chitranganee Wagiswara (CW):
The two countries share a legacy of
intellectual, cultural, religious and lin-
guistic interactions. Historically and
culturally, the two nations have been
considerably close, with over 70% Sri
Lankans continuing to follow Therava-
da Buddhism which was introduced in
Sri Lanka in the 4th
Century BC by Ma-
hinda, the son of Indian emperor Asho-
ka. From that time, both countries have
worked towards strengthening bilateral
ties and today we share a broad under-
standing on major bilateral, regional
and international issues.
TDB: How do you envision the future
of Indo-Sri Lankan economic ties?
CW: Economic engagements form the
core of Indo-Sri Lankan ties. Trade be-
tween the two nations has grown rapid-
ly, particularly after the India-Sri Lanka
Free Trade Agreement (ISFTA).Leaders
of both countries have proactively tak-
en steps to bolster trade and investment
ties. According to Sri Lankan Customs,
bilateral trade in CY2015 amounted
to $4.9 billion. Imports from India in
CY2015 were $4.3 billion (up by 7.4%),
while exports from Sri Lanka to India
were $645 million (up by 3.2%). In
CY2016, the bilateral trade was $4.4
billion; Imports from India to Sri Lanka
were $3.8 billion while exports from Sri
Lanka to India were $551 million.
India has always been rated amongst
INTERVIEW BY AHMAD SHARIQ KHAN
“THE ETCA NEEDS TO
BE FINALISED SOON”
Historical and cultural ties between India and Sri Lanka can be traced back to the
4th
Century BC. Despite this, bilateral trade between the two nations is yet reach its
potential. The Dollar Business caught up with the High Commissioner of Sri Lanka
to India, H.E. Chitranganee Wagiswara, to understand the state of affairs of Indo-Sri
Lankan trade ties and how the neighbours can do bigger, better things together.

the top four investors in Sri Lanka. We
have many Indian players operating in
diverse areas such as real estate, tele-
communication, hospitality, etc. Under
the new leadership in New Delhi and
Colombo, both sides have taken con-
crete steps aimed at increasing bilateral
trade across various sectors. Today, you
can see a number of new investments
from Indian companies dotted all
across our country.
The last few years have also wit-
nessed an increasing trend of Sri Lank-
an investments in India. There are quite
a few success stories here. Major ex-
amples include the investment by Sri
Lankan apparel conglomerate Brandix
Lanka in Brandix India Apparel City
(BIAC) at Vishakhapatnam, which em-
ploys more than 17,000 people.
From the BIAC facility, the company
now exports huge volumes of garments
to numerous worldwide destinations.
This is in addition to significant invest-
ments in the freight and logistics sector.
These investments will only bring more
win-wins for both sides in the future.
TDB: What are the two countries do-
ing to strengthen their relationship?
CW: The Sri Lankan leadership appre-
ciates its relationship with Indian Prime
Minister Narendra Modi. During his
last visit, PM Modi attended Vesak Day
celebrations in Sri Lanka. He along
with our Prime Minister Ranil Wick-
remesinghe, visited the Gangaramaya
Buddhist temple in Colombo. There
was a feeling of bonhomie and goodwill
about the trip. That was the time when
Prime Minister Modi also announced
a direct flight by Air India between
Colombo and Varanasi. This bolstered
people to people interaction between
the countries. We look forward to more
such measures aimed at reinforcing the
links between the two countries.
TDB: Despite a strong economic foun-
dation, bilateral trade has not yet re-
alised its full potential. Do you agree?
CW: There is some truth to that. How-
ever, of late, the two sides have been
working on this. The ISFTA, in effect
since 2000, allows Sri Lanka to export
over 4,000 items to India at zero duty
with a negative list and quota systems
in place to manage the inequality in the
size of the economies. Since the agree-
ment was enacted, the results have
been positive. Sri Lanka’s total exports
to India has grown from $70.1 million
in 2001 to $551 million in 2016. While
India’s exports to Sri Lanka in 2001
was $601.5 million, in 2016 it was re-
corded at $3.8 billion. Bilateral trade,
in terms of volume, has also increased.
Having said that, there exists a signif-
icant imbalance in terms of balance of
trade. Discussions under the Economic
Technology Cooperation Agreement
(ECTA) are aimed at addressing such
anomalies.
Besides, quantitative restrictions,
stringent standards and labelling re-
quirements, trade and licensing regula-
tions are matters of concern to us. Joint
Expert committees are working to ad-
dress these concerns.
TDB: Are you happy with ISFTA as it
currently stands?
CW: Though post-implementation of
ISFTA the bilateral trade has increased
manifold, the balance of trade contin-
ues to be in favour of India. But Sri Lan-
ka has been taking steps to change this
situation. We are trying to diversify our
export basket. And now, taking a cue
from the past, we plan to go beyond the
existing FTA so that the two sides could
soon attain the next level of growth
when it comes trade and investments.
With this in mind, the two countries
have commenced discussions to expand
the existing ISFTA to an Economic and
Technology Co-operation Agreement
(ETCA). The ETCA will expand the
scope of existing ISFTA by inclusion of
services, investment, capacity building
initiatives and technical collaboration
betweeen the two nations. Six rounds of
talks have already taken place. Sri Lan-
ka is looking for greater market access
for products such as readymade gar-
ments, pepper, tea, coconut products
and industrial products among others.
We are keen to finalise it at the earliest.
TDB: Due to its strategic location, Co-
lombo can act as an excellent service
hub for Indian investments into Sri
Lanka and beyond. Your thoughts.
CW: If you look at the map of the sub-
continent, we are between Singapore
and Dubai, which are currently major
commercial hubs catering to this part
of the world. So, geographically, we are
very well placed and want to capital-
ise on this advantage. We are working
on hub status for Sri Lanka. Our focus
is not only on the ocean front, we are
also strengthening aviation facilities.
Projects are coming up to transform
Colombo into a major commercial hub.
Several government-to-government
MoUs are currently being signed that
include collaboration in railways too.
We value all our trading and logistics
partners who have shown a willingness
to develop infrastructure and connec-
tivity projects in the the Bay of Bengal
region. We also laud India’s engagement
inBayofBengalInitiativeforMulti-Sec-
toral Technical and Economic Cooper-
ation (BIMSTEC) in which we are also
a member. I am confident that these
developments will result in numerous
win-win situations for all stakeholders
in the near future.
TDB: Which sectors can reap rich div-
idends for companies on both sides?
CW: Hospitality and tourism is one
sector that has huge growth potential.
In fact, Indian conglomerate ITC Ltd.
is coming up with a venture in Sri Lan-
ka and a luxury apartment complex
is being built by WelcomeHotels Lan-
ka, a 100% subsidiary of ITC. Many
other Indian tourism and hospitality
companies too have started explor-
ing opportunities not just in Colombo
but across the country. It’s important
to note that India remains Sri Lanka’s
top source of tourists – India is home
to a large middle-class population with
huge disposable income and we offer
them the best leisure experience at an
affordable price.
INDIA HAS ALWAYS
BEEN AMONGST THE
TOP INVESTORS IN
SRI LANKA

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