The Government continues its efforts on improving important economic considerations as it seeks to amend the Special Economic Zones Act and the trade pact with ASEAN countries. The economic growth prospects for India have been stable for some time.
Moody’s Investor Service – Moody’s Investor Services recently retained India’s economic growth at 6.7% for 2023 (the earlier forecast was covered by Asia Law Portal), citing the country’s remarkable resilience amid a global slowdown buoyed by solid domestic demand. The rating agency, in its Global Macro Outlook 2024-25 report, said India along with other emerging market economies like Brazil, Mexico and Indonesia are well-positioned to capture a greater share of global trade flows due to the push from the West to diversify supply chains away from China amid geopolitical tensions. Moody’s expects India’s GDP (gross domestic product) to grow 6.7% in 2023, 6.1% in 2024 and 6.3% in 2025. “High-frequency indicators show that the economy’s strong Q2 momentum carried into Q3. Robust goods and services tax collections, surging auto sales, rising consumer optimism and double-digit credit growth suggest urban consumption demand will likely remain resilient amid the ongoing festive season,” the report said. “However, rural demand, which has shown nascent signs of improvement, remains vulnerable to uneven monsoons that could lower crop yields and farm income,” it added. Moody’s expects India’s exports to remain weak against the backdrop of an unfavourable global economy, though strong domestic demand will likely sustain growth in the near term.
Special Economic Zones – The Government is considering several measures to help revive special economic zones. The aim is to help revive special economic zones and facilitate business transactions between SEZ and domestic tariff area or the domestic market. The aim is to help revive SEZs and facilitate business transactions between SEZ and domestic tariff area (DTA) or the domestic market. SEZs are enclosures which are treated as foreign territories for trade and customs duties, with restrictions on duty-free sales outside these zones in the domestic market. To seek views of different Ministries on these measures, the Commerce Ministry has circulated a note on a draft SEZ (Special Economic Zone) Amendment Bill 2023. The inter-Ministerial consultation is going at a fast pace and the Bill is likely to be introduced in the forthcoming Winter session of Parliament which will commence on December 4 and continue till December 22. “This Amendment Bill will be introduced in place of the proposed Development of Enterprise and Service Hubs (DESH) Bill,” an official said. “The Amendment Bill is aimed to help revive SEZs and facilitate business transactions between SEZ and DTA. It proposes to allow sales from SEZ to DTA on duty foregone basis; permitting partial de-notification of zones; easier notification norms; streamlining of approval for SEZs units,” the official added. Recently, Commerce and Industry Minister Piyush Goyal said the government is looking at easing certain restrictions for units in SEZs to promote the sector’s growth.
ASEAN-India Trade in Goods Agreement – India and the 10-nation bloc ASEAN are likely to start their review exercise for the existing free trade agreement (FTA), including issues related to market access and making rules of origin comprehensive, an official said. The comprehensive rules of origin framework will help remove the scope for exporters from third countries to take advantage of concessional customs duties. The FTA was signed in 2009 and implemented in January 2010, and the current chapter on rules of origin (RoO) is not “very detailed” and was based on value addition in products only, the official said. The ‘rules of origin’ provision prescribes minimal processing that should happen in the FTA country, so that the final manufactured product may be called originating goods in that country. Under this provision, a country that has inked an FTA with India cannot dump goods from some third country in the Indian market by just putting a label on it. It has to undertake a prescribed value addition in that product to export to India. Rules of origin norms help contain the dumping of goods. In manufactured products, a domestic value addition of 35 per cent of FOB (the cost at the frontier of the exporting country) value was mandated. Another condition for availing concessional tariffs was that final processing is performed within the territory of the exporting country. The value addition requirements are different for each product, and these values cannot be the same for agriculture and manufactured products. India and ASEAN have agreed to fast-track negotiations for the review of the existing agreement in goods between the two regions and conclude the talks in 2025, which was reported by Asia Law Portal.
Indo-Pacific Economic Framework for Prosperity – The third Indo-Pacific Economic Framework for Prosperity (IPEF) Ministerial Meeting was held in San Francisco, California. IPEF has 14 partner countries including Australia, Brunei, Fiji, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, Vietnam & USA. It seeks to strengthen economic engagement among partner countries with the goal of advancing growth, peace and prosperity in the region. The framework is structured around four pillars relating to Trade (Pillar I); Supply Chains (Pillar II); Clean Economy (Pillar III); and Fair Economy (Pillar IV). India had joined Pillars II to IV of IPEF while it has an observer status in Pillar-I. At this Ministerial Meeting, negotiations under the IPEF Pillar-III (Clean Economy), Pillar IV (Fair Economy) and the Agreement on the Indo-Pacific Economic Framework for Prosperity (which seeks to establish a ministerial-level council and a commission) were substantially concluded. The earlier round of negotiations was held in India, as reported by Asia Law Portal.
