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India Blocks Several Alibaba Apps in Widening Chinese Blacklist

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India banned another 43 Chinese apps including some of Alibaba Group Holding Ltd.’s key shopping services, expanding its mobile blacklist to more than 200 applications.

The latest action encompassed a number of apps run by the e-commerce giant including Aliexpress, one of its largest malls for overseas shoppers, and Taobao Live, a fast-growing video-based marketplace. India also blocked more than a dozen dating and gaming platforms. They join some of China’s best-known apps from Tencent Holdings Ltd.’s WeChat to ByteDance Ltd.’s TikTok.

The government said the bans are in the interest of national security. But the steadily growing blacklist also underscores a broader Indian effort to reduce dependence on its neighbor’s products, and further hampers efforts by China’s largest corporations to expand beyond their own borders. Tensions between the two giant Asian economies have been escalating since 20 Indian soldiers and an unknown number of Chinese troops were killed in clashes along the Himalayan frontier earlier this year.

Leaders in India’s technology industry are urging the country to go even further to protect the interests of local companies against foreign rivals, or risk ceding the world’s fastest growing internet arena to Chinese and American giants. Most Chinese tech companies have yet to earn significant revenue from India, but the government’s moves threaten to cut off their access to one of the world’s fastest-growing internet economies.

India has also blocked apps run by the country’s No. 1 brand Xiaomi Corp., which relies on its Mi library of services to boost demand for smartphones. The government in June had already halted Alibaba’s UC Browser, which was the second-largest in the country with a 10.2% market share, according to industry portal Statcounter.

Read more: India Tech Moguls Urge Tougher Protectionism to Battle China

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Markets

India’s Record Highs Spark Talk of Further Upside

Record highs in Mumbai are stoking the enthusiasm of strategists calling for further upside for Indian stocks, with companies poised to take advantage of a post-pandemic economic recovery in Asia through next year and beyond.

Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Asset Management are among a number of prominent names talking up prospects for the country’s shares in recent days. India traders marked Diwali, the Hindu festival of lights, by watching the S&P BSE Sensex Index rally to record highs last week, helped in part by a solid third-quarter earnings season.

About 86% of reporting firms in the benchmark posted a sales beat while more than 70% topped earnings expectations, according to data compiled by Bloomberg. The benchmark is up 10% this month and has narrowed its year-to-date underperformance against the MSCI Asia Pacific Index to about 5 percentage points from over 10 percentage points earlier this year.

After World’s Biggest Lockdown, Profits in India Are Rebounding

“India’s earnings revisions trend has improved sharply and valuations are on the cheaper side of their historical relationship with Asia and emerging markets,” Morgan Stanley strategists including Jonathan Garner wrote in a Nov. 15 note. The firm upgraded its recommendation for the MSCI India Index to overweight, naming it one of the top trades for their 2021 outlook.

India’s economy will benefit from easy global financial conditions as well as increased foreign direct investment following broad structural reforms delivered through 2020, according to the strategists.

Catch Up Rally

Goldman Sachs strategists have also upgraded Indian stocks to overweight, with the market seen as the most sensitive to vaccine optimism. The firm had cut their recommendation to market weight in April amid a nationwide shutdown and rising infections.

“The investment case for India has improved now,” a team including Timothy Moe wrote in a note last week. “We expect a ‘catch up’ laggard rally given the positive newsflow on the vaccine front, which could spur a faster than expected recovery.”

Goldman forecasts real economic growth to bounce back strongly over the next two years, fueling a corporate profits rebound of 27% in 2021 that’s ahead of its projected 23% increase for the MSCI Asia Pacific ex-Japan Index.

The team expects the NSE Nifty 50 Index to hit 14,100 by the end of next year, implying about 10% upside from last week’s close.

Broad Potential

Looking further ahead, JPMorgan Asset Management projects strong long-term average annualized returns for Indian stocks of 8.9% over the next 10-to-15 years.

“We see broad potential in India from a macro perspective,” said Sylvia Sheng, global strategist with the firm’s multi-asset solutions team in a press briefing last week. Bullish factors include population growth as well as room for productivity to grow, she said.

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Business

Jobs: October has some bad news

Keeping the employment rate from slipping is challenging.
To merely keep the employment rate unchanged, the economy has to generate additional jobs.
It needs to run to stay where it is, points out Mahesh Vyas.
.

Labour market statistics derived from CMIE’s Consumer Pyramids Household Survey have been indicating a stagnation of India’s economic recovery process from its April 2020 shock.

The recovery was smart in May and spectacular in June.

It continued well into July.

Then, it stalled in August and September.

Now, it appears that the stagnation could extend or worsen in October.

We measure labour market conditions by the most apt summary measure for a developing country like India — the employment rate.

This is the proportion of working age population that is employed.

Fiscal 2019-2020 ended with an employment rate of 39.4 per cent.

It fell to 27.2 per cent in April 2020 but, it recovered 300 basis points to reach 30.2 per cent in May.

In June, the recovery was of a very impressive 600 basis points to 36.2 per cent.

In July, the employment rate climbed up another 140 basis points to 37.6 per cent.

The fatigue set in in August when the rate fell to 37.5 per cent. Then, there was a small recovery to 38 per cent in September.

Note that the fatigue set in well before recovering to the 2019-20 average employment rate.

October shows signs of continued stress.

All the first three weeks ending in the month pencilled employment rates lower than the 38 per cent recorded in September.

The rates, in sequence, were 37.6 per cent, 37.5 per cent and 37.9 per cent.

Keeping the employment rate from slipping is challenging.

To merely keep the employment rate unchanged, the economy has to generate additional jobs.

It needs to run to stay where it is.

This is because the denominator — the working age population — keeps rising naturally.

Employment has to rise in tandem to ensure that the ratio, the employment rate, remains constant.

In the past four years, the employment rate has fallen steadily in each year. This is because employment has been stagnant.

Fall of the employment rate revealed in the first three weeks of October 2020 is entirely because of a fall in the employment rate in rural India.

The employment rate in rural India was 39.8 per cent in September.

This was its highest level since the lockdown and was not too far from the 40.7 per cent clocked in 2019-2020.

However, it appears that rural India is not able to sustain an employment rate of 40 per cent or more.

The weekly employment rate had touched 39.9 per cent in the week ended September 6.

But it has slid since then.

In the week ended October 4, the rate was down to 39 per cent and then it slipped further to 38.8 per cent in the week ended October 11.

It recovered to 39.5 per cent in the week ended October 18.

But, it was still lower than the September average. The average of the first three weeks of October was 39.1 per cent.

The fall in the rural employment rate in October is somewhat surprising because this is the peak season for harvesting the kharif crop.

While sowing is spread over four months, most of the crop is harvested in October.

Different crops have different gestation periods but save for cotton and sugarcane, most of the kharif crop is harvested in October.

It is possible that employment under the MGNREGS has declined significantly in October.

Till October 19 this year, the scheme had provided 58.5 million person-days of employment compared to 138 million person-days of employment provided during the entire month of October 2019.

These numbers do get revised very substantially and therefore, it may be hazardous to draw inferences at this stage.

Yet, the fall evident so far is quite large.

The average person-days of employment per day in October 2019 was 4.47 million. In the first 19 days of October 2020 it was 3.08 million, a fall of 31 per cent.

Given that rural India has a much larger weight in all-India estimates, it is imperative that its employment rate stops falling any further.

In contrast to the falling trend seen in rural India, urban India has shown an improvement in the employment rate in October 2020.

The employment rate in urban India in September was 34.4 per cent.

The recovering trend in urban India in October is in contrast to the sharp fall in employment rate seen in September.

The urban employment rate at 34.4 per cent was a substantial 254 basis points lower than the average 36.9 per cent rate in 2019-20.

The average employment rate in urban India in the first three weeks of October was 34.8 per cent.

Even this was over 200 basis points lower than the 2019-2020 level.

The falling employment rate in rural India and the continued low employment rate in urban India are the weaknesses in India’s labour market recovery process.

The gap between the monthly employment rate in 2020-21 and the corresponding month of 2019-20 narrowed consistently till August 2020 when it was just 182 basis points.

It then rose to 254 basis points in September.

The gap could widen further in October.

Mahesh Vyas is MD and CEO, CMIE P Ltd.

Feature Presentation: Aslam Hunani/Rediff.com

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Business

Netflix Will Offer Free Trial Of Its Full Service For A Weekend, Starting In India

Netflix will offer a free trial of its full service to everyone in a country for one weekend, starting in India and going to other global territories.

The streaming giant revealed the plan during its third-quarter earnings interview, which followed the release of results that undershot subscriber and earnings estimates.

Chief Product Officer Greg Peters said the giveaway “could be a great way to expose a lot of people” to the service. He called it “an idea that we’re excited about and we’ll see how it goes.” No details were announced about the timing or details of the offer.

Netflix recently ended a 30-day free trial promotion. The company runs hundreds of “A/B” tests of a wide range of product features as well as promotional efforts. In terms of promotions, it has a wide range of different initiatives in different parts of the world. As COVID-19 kicked in, the company made a selection of documentary films and shows available free via YouTube as a way of helping schoolteachers.

Co-CEO Ted Sarandos said the company is “always looking at new, different ways for people to get a sample of the content that everyone’s talking about, including trying our service out in different ways.”

On a similar note, when asked by interview moderator Kannan Venkateshwar, a media analyst at Barclays, Sarandos said the company is not actively considering “reverse licensing” of its own originals to other platforms. Free streaming platforms like Pluto have set a number of deals recently with cable properties like The Walking Dead and recently Netflix drama Narcos. Sarandos said Gaumont owns Narcos and was able to make that deal.

“Mostly I think it’s important for us to keep our content on Netflix, so that people understand the value of Netflix,” Sarandos said.

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Business

Transgender people in Kashmir are leading an 'invisible life' as security crackdowns and discrimination come to a head

  • Transgender people in Kashmir face discrimination and harassment throughout their lives.
  • Many work as matchmakers or performers at weddings, but coronavirus restrictions mean they are now out of work.
  • Kashmir is not only in the grip of the virus, but also a security crisis since India removed the region's autonomy in 2019.
  • Trans expression is a taboo subject in Muslim-majority Kashmir, pushing members of the trans community into the shadows.
  • View more episodes of Business Insider Weekly on Facebook.

Now is not a good time to be transgender in Kashmir.

Members of the trans community are often rejected by their families, and by a conservative society that views them as an underclass.

To make matters worse, a security crackdown imposed by India since removing the region's autonomy last year — and now a coronavirus lockdown — means that they are without work and have been pushed to the brink.

Aijaz Ahmad Bund is an academic and rights activist for the LGBTQ community. From a small office in the regional capital Srinagar, he speaks out for those who have no voice.

"This society has pushed them to the wall. They are living an invisible life," he told Business Insider

"They face discrimination in every aspect of life. They are abused physically, verbally. They face a lot of street harassment. They face a lot of sexual abuse as well."

One of the few trans individuals to have made a name for herself in Kashmir is Abdul Rashid, otherwise known as Reshma. She is a well-known singer here, but even she is struggling to make ends meet.

She makes a little money from tailoring, sitting on the floor of her small apartment with an old sewing machine. Her experience growing up is similar to many among the trans community. 

"I wasn't allowed even out of our lane. I would be asked where I had been for so long and then beaten for being late. We would take the narrow side streets to avoid getting bullied on the main roads. Some would even spit on us," she told Business Insider Weekly.

From a small drawer, under lock and key, she takes out a small vial and applies mascara.

"Growing up, I wasn't interested in studying, but was into girlish things. I used to put chalk on my face as powder," she said.

Transgender people in Kashmir are living in the shadows.

Unlike in other parts of India and Pakistan, the transgender community here rarely dress in colourful clothing, afraid of ridicule — or worse.

Subhan, known as Shabnam, is luckier. Her family has always supported her.

"I used to get along well with ladies, not that much with men. That's because I had an affinity towards them and not towards men. As time passed by, I started dressing up like them, and then it became clear that I was a third gender," she said.

But a life of living in the shadows, combined with the present-day double crisis of pandemic and security crackdown, has taken its toll.

"I must say that we face so many issues that we can't even count them," she said.

Traditional patriarchal values mean that sex and sexual orientation in the Muslim-majority region is a taboo subject. And gender affirmation procedures are not seen as a viable option.

"Our Quran doesn't allow us to bring changes to our bodies that won't be good. How our Lord made us, we should remain that way. We are a third gender," Shabnam said.

With the region in political turmoil, the past year has been suffocating.

Already a shunned and invisible minority, Kashmir's trans community is now living in a land that has been turned upside down.

Last year, India abolished Article 370 of its constitution, which granted Kashmir a special status as an autonomous region.

The move stripped Kashmir of its flag and its lawmaking powers, and brought it under direct control of the government in New Delhi. Thousands were arrested and imprisoned — and all phone and internet services cut off.

Today, security forces continue to line the streets and man checkpoints.

For the trans community, with little acceptance from wider society and no means to communicate with the outside world, this last year has been suffocating.

Communications have only been partially restored but blackouts are still a regular occurrence.

Aijaz Ahmad says mental health issues are prevalent in the community — as are attempts at suicide. Those disowned by their families are even denied a proper burial.

And he said his research suggests around 15% of the transgender community is forced to work in the sex trade to make ends meet.

Wedding gigs are some of the only jobs transgender people can find — and those are drying up.

One of the only acceptable lines of work is matchmaking and performing at weddings. It's here that Kashmir's trans community are permitted to dress, and perform, as themselves.

Mohammad Aslam, known as Babloo is a matchmaker, playing the role of broker between two families in arranged marriages. She, like the others, is now without work.

"The situation deteriorated after the abrogation of Article 370," she said. "We can't go to people's houses because our work involves interacting with people in their homes. At the moment we are hesitant to meet people and are scared of getting infected and vice versa."

With weddings cancelled and an increasing number of people finding their own partners online, times are tough.

"People used to call us to dance and sing at marriages, and we used to get good money as well. Now there are DJs, and women sing too, so we don't get much business there," Shabnam told Business Insider.

To make matters worse, the Indian government has now made it possible for non residents of Kashmir to own property and work in the region, putting a further squeeze on job opportunities.

"We have people who are violated on a daily basis."

An irony of the abolition of Kashmir statehood was that the mountainous region inherited Indian laws on homosexuality, which was recently decriminalized.

Yet this, as well as a transgender rights bill passed in 2019, has made no real difference to the lives of Reshma, Shabnam or Babloo.

Aijaz Ahmad says the problem is not their legal status, rather acceptance by society.

"We have laws, and we have a lot of provisions in the Constitution of India which protect citizens irrespective of their gender, sex, sexuality, ethnicity, religion, blah, blah," he said.

"But still we see that such people are discriminated against. We have people who are violated on a daily basis, and we believe what is more important is the ideology that needs to change."

Every few weeks Shabnam, Babloo, Reshma, and other members of Kashmir's trans community gather with Ahmad to drink tea and share their stories, and their woes. For most of them, this is the only family they have.

Ahmad remains optimistic, in spite of the stark reality they face.

"We are very hopeful that there may be a day that you know we will be able to see a gender-inclusive society," he said.

Baboo added: "It's all up to God. God has to run the whole universe. God who will take care of each one of us."

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Business

RBI Maintains Status Quo; Signals Further Easing To Kick-Start Growth

The Reserve Bank of India maintained status quo as policymakers await inflationary pressures to ease ahead of loosening policy further to underpin the economy that is severely hit by the coronavirus pandemic.

The newly constituted Monetary Policy Committee, led by Governor Shaktikanta Das, voted unanimously to maintain the policy repo rate at 4.00 percent, as widely expected.

The Marginal Standing Facility or MSF rate, and the Bank rate remained unchanged at 4.25 percent. The reverse repo rate was retained at 3.35 percent.

The last change in the benchmark rate was a 40 basis point cut in May, taking the cumulative reduction to 250 basis points since February 2019.

The MPC will continue with the accommodative stance of monetary policy as long as necessary, at least during the current financial year and into the next year, the RBI chief said.

The bank said it will wait to see the easing of inflationary pressures to use the space available for supporting growth further.

The committee observed that the accommodative stance is needed to revive growth on a durable basis and mitigate the impact of the Covid-19 on the economy, while ensuring that inflation remains within the target.

The relatively dovish tone of the statement, along with the dire growth outlook, the easing cycle will resume before long, Shilan Shah, an economist at Capital Economics, said.

Real GDP growth was expected to be negative at -9.5 percent for the current financial year ending March 2021, with risks tilted to the downside. Economic growth for the first quarter of 2021-22 was placed at 20.6 percent.

CPI inflation was projected at 6.8 percent for the second quarter of 2020-21. The RBI aims to achieve inflation of 4 percent within a band of +/- 2 percent.

For 2021-22, assuming a normalization of supply chains with the availability of effective vaccines against Covid-19, inflation is set to move in a range of 4.1-4.4 percent and real GDP to grow 10.1 percent, the bank said in its Monetary Policy Report.

The governor said the bank stands ready to undertake more measures as required to ensure liquidity and easy financing conditions.

The RBI unveiled a range of measures to improve liquidity. The bank decided to conduct on tap TLTRO for a total amount of INR 1 trillion for banks to invest in corporate bonds and debt instruments of specific sectors.

The bank will also conduct open market operations in State Development Loans as a special case during the current financial year.

The latest MPC meeting was originally scheduled to be conducted on October 1, but was postponed after the government failed to appoint three governors to the board.

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Markets

Indian Stocks Extend Gains After Posting Best Week Since June

India’s equities benchmark advanced, extending last week’s gains, as investors appeared optimistic about the central bank’s support for Asia’s third-largest economy as it continues to reopen.

The S&P BSE Sensex climbed 0.6% to 40,759.10 as of 10:10 a.m. in Mumbai, while the NSE Nifty 50 Index rose by 0.5%. Both measures just completed their best week since early June and are close to erasing year-to-date losses.

While keeping the benchmark rate unchanged on Friday, the central bank signaled inflation is easing as it unveiled measures to ease a cash crunch among retail borrowers by relaxing lending rules for individuals and small businesses. The steps may help accelerate a revival, with a Jefferies Financial Group Inc. model tracking economic recovery showing activity in India is already at 93% of pre-coronavirus levels.

The policy response, strong corporate action through the pandemic and a starting point of attractive relative valuations have helped India’s stock market performance, Morgan Stanley strategists led by Ridham Desai wrote in a note. However, “we expect heightened volatility as the market deals with fuller valuations and extended sentiment indicators,” they added.

The Sensex index is currently trading at 22 times forecast earnings, more than two standard deviations above its five-year average.

Shares of Vedanta Ltd. fell as much as 15% to the lowest since June after the Indian commodities giant failed to get approval from minority shareholders to delist. Meanwhile, with the earnings season underway, information technology firms Wipro Ltd. and Infosys Ltd. may give some guidance on their outlooks when they report results this week.

Sovereign bonds were little changed, with the yield on 10-year bond holding at 5.94%, while the rupee also traded steady at 73.1175 per dollar.

The Numbers

  • Thirteen of the 19 sector indexes compiled by BSE Ltd. rose, led by a gauge of consumer goods companies
  • Infosys added 1.7% and contributed the most to the Sensex advance, while HDFC Bank Ltd. was the biggest drag, dipping 0.4%

Market-related stories

  • Vedanta’s Dollar Bonds Plunge After Unit Delisting Offer Fails
  • Reopenings Lend Fresh Impetus to Indian Shares: Taking Stock
  • Covid and Taxes Eat Away at Diesel’s Edge Over Gasoline in India

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Markets

Reopening Economy Lends Fresh Impetus to Indian Shares

Stock investors are taking heart from India’s efforts to re-open its economy, even as the nation continues on a trajectory to overtake the U.S. as the country with the most coronavirus cases.

The S&P BSE Sensex’s has rallied almost 11% since hitting a more than two-month low on Sept. 24, the best performance among the world’s national equity benchmarks, according to data compiled by Bloomberg. It is less than 2% away from wiping out its losses for the year.

A Jefferies Financial Group Inc. model tracking economic recovery this week showed activity in India is already at 93% of pre-Covid levels. The nation is set to further relax restrictions on gatherings of people and allow schools, multiplexes and entertainment parks to reopen in some areas from Oct. 15.

“A higher-than-expected level of economic reopening, coupled with various steps from policy makers, creates an upside risk for GDP and earnings estimates, said Sameer Kalra, a strategist at Mumbai-based Target Investing. “There is a good chance that third-quarter GDP shows a recovery and then the Sensex hits a record by December,” he said.

The Sensex capped its best week since early June on Friday as the central bank signaled more policy easing ahead and announced a slew of liquidity steps to support the economy. In the past few days, data showing a mild improvement in some economic indicators and optimism over earnings results from a few major firms have also helped boost investor sentiment.

India’s biggest carmaker Maruti Suzuki India Ltd. posted its highest monthly sales in two years in September, as an end to a nationwide lockdown prompted dealerships to stock up ahead of a festive season. Asia’s third largest economy is set to announce third-quarter growth at the end of November. That number will be closely watched after the economy contracted by a record in the second quarter.

“The Indian government has pursued a gradual re-opening and the Covid peak seems to be behind now,” Jefferies strategists Mahesh Nandurkar and Abhinav Sinha wrote in a note last week as they upgraded the nation’s financial stocks to overweight from neutral.

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Business

Rise in exports helps India nearly halve trade gap with China

Exports to China saw sustained double-digit growth for the fourth straight month in August, led by eightfold rise in iron and steel shipments.

India’s robust double-digit exports growth to China, coupled with sharp contraction in imports, nearly halved the trade gap between the two trading partners in the first five months of the current fiscal year (2020-21, or FY21) over the same period of 2019-20 (FY20).

The restriction on imports from China, along with the Atmanirbhar Bharat campaign, has shrunk India’s trade deficit with the neighbouring country to $12.6 billion between April and August of FY21, from $22.6 billion in the year-ago period.

India’s trade deficit with China stood at $23.5 billion in the corresponding period of 2018-19 and at $26.33 billion in 2017-18.

Exports to China saw sustained double-digit growth for the fourth straight month in August, led by eightfold rise in iron and steel shipments.

In the April-August period, outbound shipments to Beijing expanded 27 per cent, compared to 9.5-per cent expansion in the same period last year.

Imports contracted 27 per cent in the first five months to $21.5 billion and shrunk 21 per cent in August alone.

India’s exports to China grew 15 per cent in August, with shipments worth $1.68 billion, revealed the data by the Department of Commerce.

Exports growth to Beijing peaked in June at 78 per cent and expanded 48 per cent in May and 23 per cent in July.

India’s exports basket to China mainly accounted for iron and steel, which rose 833 per cent to $1.8 billion till August this year, compared with $192 million last year.

China accounted for 35 per cent of India’s iron and steel outbound shipments in the first five months of the fiscal year, against 5.3 per cent in the corresponding period last year.

China also made up for 90 per cent of India’s exports of iron ore worth $1.6 billion, a fourth of exports of organic chemicals worth $809 million, and 16 per cent of exports of marine products worth $351 million during the five months.

The import basket is largely dominated by telecom instruments, organic chemicals, and industrial equipment for dairy, etc.

Biswajit Dhar, professor, Jawaharlal Nehru University, said that exports to China have grown on account of two reasons.

First, it is the only economy that is growing, while others are contracting.

Second, there will be some diversion of exports from other destinations to China.

Dhar said this narrowing of trade deficit may not be sustainable.

Domestic demand is currently squeezed, which explains the lower imports.

“Doing away with the dependence on China for critical items like active pharmaceutical ingredients may not happen overnight, but will take years and require medium-term strategy,” he added.

In FY20, exports to China were down 0.83 per cent at $16.6 billion, accounting for 5.3 per cent of total outbound shipments.

For this fiscal year, China accounts for 9.1 per cent of India’s total exports till August, behind US at 17 per cent.

The United Arab Emirates (UAE) has been displaced to the third largest export destination for India this fiscal year, accounting for 5.29 per cent of total outbound shipments.

Arpita Mukherjee, professor, Indian Council for Research on International Economic Relations, also pointed out that the artificial import restrictions may not really work – it simply results in rerouting of items from other markets like Hong Kong or the Association of Southeast Asian Nations.

She, however, added that China has also been putting in efforts to narrow the trade deficit gap with India and buying ayurvedic products and health supplements.

“China is trying to be accommodative to India to narrow the trade deficit. It seems to be directly sourcing items from India,” said Mukherjee.

Among India’s top five export partners, China is the only destination showing growth.

Exports to the US are down 24.6 per cent. In the case of UAE, they are down 59.2 per cent.

Shipments to Singapore also contracted 24.2 per cent and 26.7 per cent, respectively.

Incidentally, China’s exports continued to expand in August, growing 9.5 per cent.

In absolute terms, it was at the third-highest level ever exported by the country in a month at $235.3 billion on account of sustained demand for medical equipment and electronic items.

Photograph: Tyrone Siu/Reuters

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Business

Rise in exports helps India nearly halve trade gap with China

Exports to China saw sustained double-digit growth for the fourth straight month in August, led by eightfold rise in iron and steel shipments.

India’s robust double-digit exports growth to China, coupled with sharp contraction in imports, nearly halved the trade gap between the two trading partners in the first five months of the current fiscal year (2020-21, or FY21) over the same period of 2019-20 (FY20).

The restriction on imports from China, along with the Atmanirbhar Bharat campaign, has shrunk India’s trade deficit with the neighbouring country to $12.6 billion between April and August of FY21, from $22.6 billion in the year-ago period.

India’s trade deficit with China stood at $23.5 billion in the corresponding period of 2018-19 and at $26.33 billion in 2017-18.

Exports to China saw sustained double-digit growth for the fourth straight month in August, led by eightfold rise in iron and steel shipments.

In the April-August period, outbound shipments to Beijing expanded 27 per cent, compared to 9.5-per cent expansion in the same period last year.

Imports contracted 27 per cent in the first five months to $21.5 billion and shrunk 21 per cent in August alone.

India’s exports to China grew 15 per cent in August, with shipments worth $1.68 billion, revealed the data by the Department of Commerce.

Exports growth to Beijing peaked in June at 78 per cent and expanded 48 per cent in May and 23 per cent in July.

India’s exports basket to China mainly accounted for iron and steel, which rose 833 per cent to $1.8 billion till August this year, compared with $192 million last year.

China accounted for 35 per cent of India’s iron and steel outbound shipments in the first five months of the fiscal year, against 5.3 per cent in the corresponding period last year.

China also made up for 90 per cent of India’s exports of iron ore worth $1.6 billion, a fourth of exports of organic chemicals worth $809 million, and 16 per cent of exports of marine products worth $351 million during the five months.

The import basket is largely dominated by telecom instruments, organic chemicals, and industrial equipment for dairy, etc.

Biswajit Dhar, professor, Jawaharlal Nehru University, said that exports to China have grown on account of two reasons.

First, it is the only economy that is growing, while others are contracting.

Second, there will be some diversion of exports from other destinations to China.

Dhar said this narrowing of trade deficit may not be sustainable.

Domestic demand is currently squeezed, which explains the lower imports.

“Doing away with the dependence on China for critical items like active pharmaceutical ingredients may not happen overnight, but will take years and require medium-term strategy,” he added.

In FY20, exports to China were down 0.83 per cent at $16.6 billion, accounting for 5.3 per cent of total outbound shipments.

For this fiscal year, China accounts for 9.1 per cent of India’s total exports till August, behind US at 17 per cent.

The United Arab Emirates (UAE) has been displaced to the third largest export destination for India this fiscal year, accounting for 5.29 per cent of total outbound shipments.

Arpita Mukherjee, professor, Indian Council for Research on International Economic Relations, also pointed out that the artificial import restrictions may not really work – it simply results in rerouting of items from other markets like Hong Kong or the Association of Southeast Asian Nations.

She, however, added that China has also been putting in efforts to narrow the trade deficit gap with India and buying ayurvedic products and health supplements.

“China is trying to be accommodative to India to narrow the trade deficit. It seems to be directly sourcing items from India,” said Mukherjee.

Among India’s top five export partners, China is the only destination showing growth.

Exports to the US are down 24.6 per cent. In the case of UAE, they are down 59.2 per cent.

Shipments to Singapore also contracted 24.2 per cent and 26.7 per cent, respectively.

Incidentally, China’s exports continued to expand in August, growing 9.5 per cent.

In absolute terms, it was at the third-highest level ever exported by the country in a month at $235.3 billion on account of sustained demand for medical equipment and electronic items.

Photograph: Tyrone Siu/Reuters

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