US likely to be India’s top trading partner for 2nd year

New Delhi, Feb. 23: Senior officials of the telecom department and other key ministries met on Sunday to discuss urgent relief measures that can be extended to the telecom industry, which is battling an unprecedented crisis on account of massive statutory dues it owes the government.

The meeting, held at the Department of Telecom, lasted for over an hour and is said to have deliberated on options before the government to provide muchneeded lifeline to the AGRhit industry.

Telecom czar and Chairman of Bharti Airtel Sunil Mittal had last week made an appeal to the government for cut in levies and taxes to pull the sector out of what he had described as an “unprecedented crisis”.

Telecom department officials remained tight-lipped after high-level government meeting on Sunday, where officials from Niti Aayog and finance ministry are said to have been present.

DoT Secretary Anshu Prakash remained unavailable for comments.

The crucial meeting comes at a time when the telecom companies are staring at `1.47 lakh crore in unpaid dues — `92,642 crore in unpaid licence fee and another `55,054 crore in outstanding spectrum usage charges.

Of the estimated dues that include interest and penalty for late payments, Airtel and Vodafone Idea owe about 60 per cent.

While Airtel has raised $3 billion in last few months and is expected to have sufficient funds to tide over the AGR crisis, Vodafone Idea — that has only paid just seven per cent of its total `53,000 crore statutory dues — remains vulnerable.

The government, meanwhile, is looking to strike a balance between complying with the Supreme Court order on AGR dues, ensuring health of the sector and safeguarding consumer interest.

Both Mittal and VIL Chairman Kumar Mangalam Birla continued to meet top government functionaries throughout last week to seek prompt measures that would offer a breather to the sector.

A top government official had said recently that attempts are being made to balance the need for health of the sector, consumer interest while complying with the Supreme Court order on statutory dues.

Although the official had not elaborated, sector watchers had said the statement alludes to the government keen on ensuring adequate competition by retaining the present three-plus-one model of competition (three private players and one public sector company).

Come March 1, lotteries will be levied a 28 per cent GST. The move comes after revenue department notified the GST rate on supply of lotteries and amended its earlier central tax rate.

With the demand from all quarters, the GST Council in December

2019 had decided to impose a single rate of

28 per cent on lotteries. According to a notification by the revenue department, the central tax rate for supply of lotteries has been amended to 14 per cent and a similar percentage will be levied by the states. “This will take the total GST incidence on lotteries to 28 per cent. The notification shall come into force on the 1st day of March,

2020,” the revenue department said.

At present, a state-run lottery attracts 12 per cent GST, while a stateauthorised lottery attracts 28 per cent tax. There were demands that a uniform tax rate should be imposed on lotteries.

The US is expected to be India’s largest merchandise trade partner for the second straight year in

FY20. While Indo-US trade continues to grow, Chinese trade has shrunk even before coronavirus started affecting the shipments. This is going to be beneficial for India’s overall trade balance as India has a trade surplus with the US against a trade deficit with China.

Till the end of December quarter, at $68 billion, India’s bilateral trade with the US has gone up above

$64 billion with China. While both exports and imports to the US have been growing in the past few years, imports from China have been showing a declining trend.

In 2018-19, the US had become India’s largest partner with a total bilateral trade of $87.9 billion, leaving behind China with a trade of $87 billion in the second position. Until 201718, China has been India’s largest trade partner.

The trade with China is likely to get further affected in the March quarter owing to the Coronavirus infection that has hit shipments between both the countries.

“Since the trade war started between the US and China, demand for Indian products has gone up in the US. There are multiple product categories for which our exports to US have increased whilst the increase in imports is mostly due to oil products and raw diamonds,’ said Pawan Gupta, founder of Connect2India.

“Overall withdrawal of Generalised System of Preferences and higher tariffs on steel products did not have major impact on exports,’ said Ajay Sahai, director general and CEO of Federation of Indian Export Organisations.

While exports to the US grew from $47 billion FY18 to $52 billion in FY19, imports grew faster from

$26 billion to $35 billion. This narrowed down the trade surplus from $21 billion to $16 billion. Till December, exports stood at

$40 billion and imports at

$27 billion.

“The import of defence equipments and aircrafts from the US is likely to grow in the coming years. We have grown our exports in several categories, especially those in which there is tariff war with China. However, capacity is an issue as far as Indian export growth is concerned,’ said Sahai. However, he does not see the trade surplus with US turning into deficit at least in next five years.

In case of China, imports to India shrunk from $76 billion to $70 billion while exports grew from $13 billion to $16 billion. The trade deficit narrowed down from $63 billion to $53 billion. In the first three quarters of the current fiscal, the exports have already crossed $13 billion and imports stood at $51 billion. “Trade war and coronavirus is an opportunity for India to increase its production and capacity. Though we have seen some investments happening in sectors like electronics, India is still awaiting large investments,” added Sahai.