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Hope incarnate. Disappointment incarnate. That is, perhaps, the best way to sum the present times. An eye for an eye makes the whole world blind is a saying attributed to our Father of the Nation whose 150 years’ birth celebrations began on 2 October 2018. This philosophical thought comes to my mind in the context of the trade wars sweeping the international trading system and as international institutions lower global growth and trade forecast for 2018 and 2019. Professor Kaushik Basu, former chief economic advisor to the government of India, says USA today has an ‘Argentina risk.’ This is because in the pre-WWI period, Argentina had seen 40 years of rapid growth, and was among the world’s ten richest nations. Then xenophobia took over resulting in high tariffs and neglect of higher education. After a short pick up, the Argentinean economy stalled and the rest is history.

Indeed, the ‘Trump Tariffs’ are, at present, improving growth rates in the USA, tightening the job market and forcing the US Federal Reserve to come out of Quantitative Easing and start raising interest rates. History is not new to such tactics and the medium-term prognosis is nothing to write home about. The US experience, post the Smooth Hawley Tariffs just before the Great Depression is, in itself, a pointer to the past existence of the ‘Argentina risk’ in their own economic history. In fact, the ‘Trump Tariffs’ are already resulting in trade diversions and India could well be one of the beneficiaries. EEPC India is closely working with the Department of Commerce to work out a strategy on how to face the challenges as also the opportunities that the global trade war may throw up and how to ensure that engineering exports continue its journey to sustained growth in volume and value.

This brings me to another emotive issue in India: the exchange rate of the Indian rupee. While the RBI does not target any particular level of the exchange rate, it is well known that the RBI tends to intervene in the forex market in order to reduce the volatility. There are unconfirmed reports that, may be, the RBI has turned less aggressive in defending the rupee. This could have also been prompted by an objective to allow the rupee to be closer to its Real Effective Exchange Rate. There is, however, no mystery in the recent fall of the rupee as it was predominantly triggered by global factors. India’s dependence on oil imports and significant propensity for gold and electronic imports are its Achilles heel. The Government of India is also in the process of implementing a strategy to revive our manufacturing in the electronics sector.

Despite the challenges of the global trading system, India’s latest ranking of 77 in the Ease of Doing Business, a huge improvement from last year’s rank by 23 points, has revitalised the economic agents and policymakers in the country. Indeed, the GST, in spite of its teething problems is now slowly settling down into a stable system. Member exporters point out that they are getting their refunds in three days and that is helping them manage their cash cycle better and depend less on bank funds. Further improvement in technical glitches and last year’s refund problems remain to be sorted out to make it a unique indirect tax system in the world.

Another area of hope is the focus of the government and the Prime Minister towards making MSME the principal segment of economic activity. As much as 93 percent of the GST revenues come from the MSMEs. At the time of writing, the Prime Minister presented what he called the ‘12 Diwali Gifts’ to the MSME sector. While the notifications are yet to come out, the move to raise the benefit of interest equalisation from 3 to 5 percent for packing credit and providing interest subvention of 2 percent for credit loans up to Rs1 crore (to be given in 59 minutes), are among the 12 major steps that have been announced.

EEPC India has been the vanguard of promoting MSME production and exporting activities and has participated in the MSME Abhiyan of the Government of India in the segments allotted to us by the Department of Commerce.

We are also working in tandem with our members to make the Swatchcha Pakhwada initiative of the Government of India, over 1-15 November, a success and will share in our next issue the highlights of the work done by some of our members.

We continued our visits to lands beyond our border. The Vice President of India, Mr Venkaiah Naidu visited the India Pavilion organised by EEPC India at the Global Expo in Botswana. We hosted an India Pavilion in Kenya Pharma in Nairobi; an India Pavilion in ITMA Asia in Shanghai, among others. Back home, I also took part in the two-day India Construction Festival, as construction equipment and machinery are becoming a major thrust area for both domestic production and exports.

Let me conclude by wishing all our readers a very happy Diwali and a new and happy Samvat.

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