India should cut interest rates to help exporters take advantage of US-China trade war: FICCI chief
India should cut interest rates further and adopt consistent policies for the export of agricultural produce to enable Indian exporters to take advantage of the current US-China trade war, industry body Ficci's President Sandip Somany said Saturday.
Currently on a business trip to China, Somany also said the NDA government in its second term should focus on getting big ticket investments from China, specially in the capital goods sector, and motivate Chinese machinery manufacturers to set up plants in India.
The bruising US-China trade war, under which both countries have slapped billions of dollars worth of tariffs on each other's exports, offers a big opportunity for some category of Indian exports to make a dent in both the US and Chinese markets, Somany told PTI here.
Somany, who is the vice chairman and managing director of HSIL Limited, the second largest glass manufacturer India, also met the Indian Ambassador to China Vikram Misri and the Secretary of China's Boao Forum for Asia, Li Baodong.
If the US-China trade war continues, it offers good opportunities for Indian exports in certain areas, he said.
"If you are competitive, we can replace China in those areas. But the government has to be supportive because production costs are high which makes our goods not competitive.
"Our interest rates are at life time highs, which makes our goods not competitive. That is an issue. Our inflation rate is low, running around 3 per cent. What is the need for banks to lend at 10, 11 per cent? It is uncalled for," he said.
The interest rates need to come down by another 100 or 150 basis points, he said.
He also said the NDA government in its second term should make agricultural exports more competitive by adopting a consistent policy.
China has a huge potential for agricultural produce as it is a net importer. Now that the trade war is going on, India could step up its exports of soybean to China, replacing to an extent US shipments, he said.
Since last year's Wuhan summit between Prime Minister Narendra Modi and Chinese President Xi Jinping, China began importing some agricultural produce like rice and sugar. India is also trying to step up soybean exports to China.
The trade deficit in 2018, according to Chinese official data, climbed to USD 57.86 billion from USD 51.72 billion in 2017 in about USD 95.54 total bilateral trade.
India's exports to China went up to USD 18.84 billion in 2018, an increase of 15.2 per cent compared to 2017.
"Unfortunately, the Indian agriculture policy is not consistent. When the prices go up, the government bans exports. We should become large exporter of agri products with consistent policy. When the prices go up, the government should import instead of curtailing exports.
"Because the government interferes with exports and raises duties at the drop of the hat, agricultural exports in India have not done well," Somany said.
Now that the US-China trade war is going on, one of the things the government should do is to step up exports of soybeans to China.
"We don't have a great agricultural export policy and don't give it a priority, that is the problem," he said.
About India-China trade, he said Chinese machinery manufacturers should be invited to set up plants in India.
"We have huge trade deficit with China. Chinese companies should be motivated to set up investments in India, like the Chinese mobile phones being manufactured in India. The same should done for electronics and other categories," he said.
To boost Indian exports to China, which has become an important trade partner, India should start selling value added products to the country instead of raw materials and chemicals.
On India's demand for China to open its pharma sector, Somany said Indian pharma companies feel the Chinese market is not an easy place to invest in due to entry barriers.