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India levies higher customs duty on 28 US products

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India on Saturday announced a hike in customs duties on as many as 28 US products, including almond, pulses and walnut, in response to higher tariffs imposed by Washington on Indian products like steel and aluminium.

The increased customs duties will come into effect from Sunday, an official notification said.

The move will hurt American exporters of these 28 items as they will have to pay higher duties, making those items costlier in the Indian market.

Amending its June 30, 2017, notification, the Central Board of Indirect taxes and Customs (CBIC) said Saturday’s notification will “implement the imposition of retaliatory duties on 28 specified goods originating in or exported from USA and preserving the existing MFN rate for all these goods for all countries other than USA”.

Earlier, the list included 29 goods but India has removed artemia, a kind of shrimp, from the list.

The country would get about USD 217 million additional revenue from such imports.

The government had on June 21, 2018 decided to impose these duties in retaliation to the US decision of significantly hiking customs duties on certain steel and aluminium products.

America had in March last year imposed 25 per cent tariff on steel and a 10 per cent import duty on aluminium products. Earlier, there was no duty on these goods.

As India is one of the major exporters of these items to the US, the move has revenue implication of about USD 240 million on domestic steel and aluminium products.

India extended the deadline for imposition of these duties eight times in the hope that some solution would emerge during a negotiation between India and the US on a proposed trade package.

But those negotiations came to a halt following the decision of the US to withdraw export incentives to Indian exporters under its Generalised System of Preferences (GSP) programme. These benefits were rolled back from June 5. It will impact goods worth USD 5.5 billion from India to America.

As part of the imposition of higher import duties on US products, India has notified higher tariffs on several goods.

While import duty on walnut has been hiked to 120 per cent from 30 per cent, duty on chickpeas, Bengal gram (chana) and masur dal will be raised to 70 per cent, from 30 per cent currently. Levy on lentils will be increased to 40 per cent.

The duty on boric acid and binders for foundry moulds would be hiked to 7.5 per cent, while that on domestic reagents will be increased to 10 per cent.

The other products on which duties will be hiked include certain kind of nuts, iron and steel products, apples, pears, flat rolled products of stainless steel, other alloy steel, tube and pipe fittings, and screws, bolts and rivets.

India has also dragged the US to the World Trade Organisation’s (WTO) dispute settlement mechanism over the imposition of import duties on steel and aluminium.

India exports steel and aluminium products worth about USD 1.5 billion to the US every year.

India’s exports to the US in 2017-18 stood at USD 47.9 billion, while imports were at USD 26.7 billion. The trade balance is in favour of India.

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No need to strike trade deal with China before 2020 elections, says Donald Trump

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US President Donald Trump has said he does not feel the need to strike a trade agreement with China before the next year’s presidential elections, emphasizing that he is looking for a complete and not a “partial deal” with Beijing.

The world’s two largest economies have been locked in a bruising trade war since Trump in March last year imposed tariff hikes of up to 25 per cent on USD 250 billion of Chinese goods.

In response, China, the world’s second largest economy after the US, imposed tit-for-tat tariffs on USD 110 billion of American goods.

“No, I don’t think I need it before the election,” Trump told reporters on Friday at a joint news conference with Australian Prime Minister Scott Morrison when asked if he feels the need for a trade deal with China before the 2020 presidential elections.

Trump insisted that he was looking for a complete trade deal.

“We are looking for a complete deal. I am not looking for a partial deal,” he said.

“China has been starting to buy our agricultural product. If you noticed over the last week and actually some very big purchases but that is not what I am looking for. We are looking for the big deal. We have taken it to this level,” Trump said.

The trade dispute between the US and China widened in August, with each side imposing retaliatory tariffs on the other. But there have been signs of deescalation in recent days, and Trump has increasingly expressed optimism of reaching a deal with China. US and Chinese counterparts have resumed trade talks this month.

On September 19 and 20, deputy-level negotiators from the United States and China met here to continue discussions aimed at improving the trade relationship between the two countries, the United States Trade Representative said in a statement.

These discussions were productive, and the United States looks forward to welcoming a delegation from China for principal-level meetings in October, it said.

President Trump said the US was taking in billions and billions of dollars of tariffs from China as a result of his policies.

China has devalued their currency and they are putting in lot of money into their economy and they have a very bad economy right now, he said.

“I don’t want them to have a bad economy, but it is the worst they say 57 years,” he said.

“We have another tariff and a slightly smaller number on about USD 300 billion worth of goods and products so they would like to do something as you know we are talking a little bit this week talking about lot next week and then top people are going to be speaking the week following,” Trump said.

“We can do a very big deal with China and it could go very quickly as you know but it wouldn’t be the appropriate deal. We have to do it right and that’s a very complicated deal with intellectual property protection we have to do that and other things. I could leave lots out and have a deal very quickly but we want to do it right,” Trump said.

Morrison emphasised that it was always necessary for the deals to be fair.

“Deals have got to be a good deals, deals have got to be sustainable deals and one of the things we have seen is Australia benefits greatly from the economic growth of China,” he said.

“There are some real serious issues that have to be addressed in that deal, things like intellectual property. That is a big issue and it needs to be addressed. So we look forward to them achieving it and providing the broader certainty and stability to the global economy which all nations will benefit from,” the prime minister said.

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Sensex zooms past 1,900 points after finance minister’s tax booster

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Domestic equity benchmark BSE Sensex spiralled over 1,900 points in morning session on Friday after Finance Minister Nirmala Sitharaman announced a slew of measures to boost manufacturing and revive the sagging economy.

In a major booster to the market, the government has decided to not levy the enhanced surcharge introduced in the Budget on capital gain arising on sale of equity shares in a companies liable for securities transaction tax.

Also, the super-rich tax will not to apply on capital gains from sale of any security including derivatives in hands of foreign portfolio investors. In another relief, Sitharaman said listed companies which have announced buyback of shares prior to July 5 will not be charged with super rich tax.

Sitharaman told reporters that the new rates would be “comparable with the lowest tax rates in South Asian region and in South East Asia”.

Today’s announcement was the latest in a series of measures announced by the government in the past few weeks to provide a fillip to growth that has fallen to six-year low of 5% in June quarter. The Indian economy has been suffering from weak consumer demand with car sales in the world’s number four automobile market plunging 41 percent in August, the worst monthly fall on record.

Soon after the announcement, the 30-share index zoomed 1904.06 points, or 5.28 per cent, to 37,997.53 at 12 noon, while the broader Nifty rose 362.95 points, or 3.39 per cent, to 11,067.75.

Top gainers in the Sensex pack included Maruti, M&M, HDFC Bank, Tata Motors, Yes Bank, Tata Steel, L&T, ICICI Bank, Bajaj Auto and RIL, rallying up to 9 per cent.

On the other hand, TCS and NTPC were trading in the red. The rupee too appreciated 66 paise to 70.68 against US dollar following the finance minister’s announcements.

On Saturday, Sitharaman also announced mega shopping festivals on the lines of popular Dubai Shopping Festival to attract capital and tourists and boost economic activity. The government has also easing restrictions on foreign investment in four key sectors, including coal mining, in an effort to attract more capital from abroad.

Ashutosh Datar, an independent economist, told AFP that tax cuts were “long overdue as India has one of the highest tax rates in the world”.

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Inflation concerns resurface in India as oil drags assets lower

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India’s rupee halted a seven-day rally and bonds declined after a drone attack on Saudi Arabia’s oil facilities sent global crude prices soaring by the most on record.

The currency fell 0.8% to 71.48 per dollar and the benchmark 2029 bond yields rose six basis points to 6.70%. The S&P BSE Sensex gauge of equities declined 0.7%.

India buys more than two-thirds of its oil, mostly from the Middle East, making it one of the most vulnerable in the region to a surge in oil prices. The spike come even as benign inflation and a slowing economy has led traders to bet the central bank will add to four rate cuts this year at its meeting in October.

“If crude prices stay up, the Reserve Bank of India may not be able to deliver more than 25 basis points of cuts,” said Naveen Singh, head of fixed-income trading at ICICI Securities Primary Dealership Ltd. in Mumbai.

The increased geopolitical risk concerns overshadowed the measures Finance Minister Nirmala Sitharaman announced over the weekend to revive economic growth from a six-year low. The government’s third set of steps in four week include a tax refund program for exporters and a funding window for affordable housing to revive stalled projects.

Brent soared 10% and crude traded in New York added 9% after the world’s largest oil exporter lost about 5.7 million barrels a day of output following the attack. It is the single worst sudden disruption ever, surpassing the loss of Kuwaiti and Iraqi petroleum supply in August 1990, when Saddam Hussein invaded his neighbor.

Fund Flows

The shock comes when sentiment remains fragile in India’s $1.9 trillion stock market. While equities appear to have found a floor after suffering the worst three-month period since 2016, as foreigners turned net buyers last week, a series of steps by authorities to revive the economy have failed to spur a sustainable rally.

Global funds have pulled $4.5 billion from shares in the current quarter, and a weak rupee typically leads to a vicious cycle of capital outflows.

“Current-account deficit economies, which are oil importers, will fare worst,” said Khoon Goh, the Singapore-based head of Asia research at Australia & New Zealand Banking Group. “In this regard, INR, IDR and PHP are likely to underperform. USD/INR, after having fallen below 71 last week, is likely to test 72 again if oil prices stay elevated.”

–With assistance from Kartik Goyal.

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