GTR spoke with Rajnish Kumar, chairman of the State Bank of India, to discuss the government’s trade policy and how it is performing on the global markets.
GTR: How has the Indian government’s policy towards trade and export affected the market?
Kumar: The foreign trade policy 2015-20 which is currently in force has introduced a number of measures to increase our exports. The policy tries to diversify our export markets towards Africa and Latin America. A number of measures have also been taken to make it easier to do business and to encourage exports, particularly with regard to port infrastructure. In the year 2016-17, the total turnaround time in Indian ports came down to 3.44 days as against 3.64 days during the previous year. Likewise, the average output per ship berth day has gone up to 14,583 tonnes, compared to 13,748 tonnes during the previous year.
The government’s new berthing policy came into effect in August 2016. This policy provides a standardised framework for the calculation of norms, specific to the commodity handled and infrastructure available on the ships’ berths. This will improve the efficiency at ports and the productivity norms across ports.
Another very important initiative has been the goods and services tax (GST), which was introduced in July 2017. By amalgamating a large number of central and state taxes into a single tax, the GST will mitigate cascading or double taxation in a major way and pave the way for a common national market. The GST will thus help in the realisation of the government’s stated objective of “one nation, one tax”, and improve the ease of doing business in the country. It will also indirectly benefit consumers by reducing the tax burden on daily consumer items.
The introduction of the GST will also help to make Indian products competitive in the domestic and international markets, due to a reduction in the taxes paid on goods and services. This will amount to a reduction of around 15-20% in the logistical costs of non-bulk goods. The GST is expected to increase the investment rate in the economy, which is predicted to contribute 0.5% to the national GDP.
GTR: How do you see Indian corporates performing on the international stage?
Kumar: India has emerged as one of the strongest performers on the global markets. With rising M&A activity, companies are gaining direct access to newer and more extensive markets, and better technologies, which enables them to increase their customer base.
In the last decade, there has been a perceptible shift in outbound investment from Indian companies. In the first half of 2017, overseas investments were directed to resource-rich countries such as Australia, the UAE and Sudan, while in the latter half, it was channelled into countries providing higher tax benefits such as Mauritius, Singapore, the British Virgin Islands and the Netherlands. We will see major overseas investments by some Indian companies in the future. Reliance Industries Ltd (RIL), is going to invest US$25mn in Israel-based Jerusalem Innovation Incubator, while Sun Pharmaceutical Industries has entered into an agreement with Switzerland-based Novartis to acquire the latter’s branded cancer drug Odomzo for around US$175mn.
GTR: How would you assess the previous year in India’s trade sector, and how is it looking for 2018?
Kumar: World trade volume (goods and services) is expected to increase by 4% in 2017 compared to 2.3% in 2016. This will impact India’s trade volume. India’s exports grew by 4.7% to US$275bn in 2017 while imports declined by 0.2%, to US$380bn. However, Indian exports are expected to increase by 9-10% in 2018 and imports by 15-20%.This increase in trade volume will impact our bank’s trade finance offerings and products.