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Commerce and Industry Minister Piyush Goyal on June 17  said that India has achieved spectacular success at World Trade Organization (WTO)'s  12th ministerial conference (MC12) in in Geneva, Switzerland. Goyal had led India's delegation to the four-day global summit which was extended for two additional days after differences among member nations on key issues, led to intense negotiations.

"India is 100% satisfied with the outcome of WTO's MC12 conference. India was successful in ensuring the livelihood of its farmers and fishermen," Goyal said. He further added that India was successful in convincing all nations to ensure a patent waiver for the manufacturing of Covid vaccines.

Goyal was speaking to the press after the once-in-two-year mega meeting of trade ministers from all 162 WTO member nations concluded in the early hours of Friday.

MC12 finally ended with deals on a global intellectual property rights (IPR) waiver for Covid vaccines and fishing subsidies to protect ocean resources. Moneycontrol had reported on Thursday that both deals were expected to finally pass despite intense debate.

While India had pushed for more comprehensive measures in these areas, as well as for talks on agriculture, the final outcome has been backed by New Delhi as promising.

Everyone had written off this conference as a failed endeavour when it had begun. There had no decision, not even an outcome document at WTO since 2015. There were a lot of arguments against multilateralism and that globalization has no promise. This conference has reestablished the position of multilateral institutions by deciding on issues which were pending for decades," Goyal stressed.

Big wins

"The agreement on fisheries is currently limited to illegal, unreported, unregulated fishing. The discussion on extending this to all government subsidies will take place going forward. Currently, there are no restrictions on government subsidies," Goyal said.

Instead, the WTO has cognizance of India's demand that nations that have consistently supported illegal deepsea fishing be regulated, he added.

Goyal also said that there is no negative outcome for India's agriculture sector. India's public stockholding program for foodgrains will also continue unhindered, he added. On the issue of food security, Goyal said talks have progressed to a certain degree.

A proposed global declaration to not curb foodgrain exports to the World Food Programme (WFP), which seeks to fight hunger in places hit by conflicts, disasters, and climate change, passed in a modified form after being blocked by India.

Reduced scope

"The WTO has also decided to craft a significant response to the pandemic," Goyal said referring to the patent waiver for Covid vaccines. MC12 has also finally approved a temporary suspension of certain parts of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Suspending parts of the TRIPS agreement would allow countries to overcome the legal challenges posed by patents to ensure the timely provisioning of affordable medical products. However, the deal will only to cover vaccines and not related items.

While India had consistently pushed for keeping all therapeutics and diagnostic technologies part of the deal, the final deal will help developing and poor nations to access much needed vaccines Goyal said. "The WTO has approved the solution that came out of consistent discussions between India, South Africa, United States and European Union on the issue," he said.

Going forward

The WTO has also decided to extend yet again the moratorium on taxation on e-commerce transactions.

The WTO members had agreed to not impose customs duties on electronic transmissions since 1998 and the moratorium has been periodically extended at successive ministerial conferences. However, India has increasingly become a strict opponent of the move and initially blocked the continuation of the moratorium at MC12.

New Delhi had stressed that it is willing to tax electronic transactions in the near future, using Section 9(1)(i) of the Income Tax Act. It also wants to retain the policy space to grant preferential treatment of digital products created within India.

"The moratorium was extended but with a deadline. It was decided that there has to be clarity on this issue by March 2024," Goyal argued. The next ministerial conference (MC13) is set to be held then.

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India's merchandise exports in May rose by 20.55 per cent to USD 38.94 billion, while the trade deficit ballooned to a record USD 24.29 billion, according to the government data released on Wednesday.

Imports during May 2022 grew by 62.83 per cent to USD 63.22 billion, the data showed.

The trade deficit stood at USD 6.53 billion in the same month last year.

Cumulative exports in April-May 2022-23 rose by about 25 per cent to USD 78.72 billion.

Imports in April-May 2022-23 increased 45.42 per cent to USD 123.41 billion.

The trade deficit during the first two months of this fiscal widened to USD 44.69 billion against USD 21.82 billion in the year-ago period.

Petroleum and crude oil imports during May 2022 surged 102.72 per cent to USD 19.2 billion.

Coal, coke and briquettes imports jumped to USD 5.5 billion against USD 2 billion in May 2021.

Gold imports increased to USD 6 billion during the month under review from USD 677 million in May 2021.

Engineering goods exports in May increased by 12.65 per cent to USD 9.7 billion, while petroleum products exports grew by 60.87 per cent to USD 8.54 billion.

Gems and jewellery exports stood at USD 3.22 billion in May compared to USD 2.96 billion in the same month last year.

Exports of chemicals rose 17.35 per cent to USD 2.5 billion in May.

Similarly, shipments of pharma and ready-made garments of all textiles grew by 10.28 per cent and 27.85 per cent to USD 2 billion and USD 1.41 billion, respectively.

Export sectors that recorded negative growth in May include iron ore, cashew, handicrafts, plastics, carpet and spices.

The commerce ministry said the estimated value of services import for May is USD 14.43 billion, exhibiting a positive growth of 45.01 per cent compared to USD 9.95 billion in the same month last year.

"The estimated value of services imports for April-May 2022 is USD 28.48 billion exhibiting a positive growth of 45.52 per cent vis-a-vis April-May 2021 (USD 19.57 billion)," it added.

Also Read:- Oil prices fall as expected U.S. interest rate hike looms

Oil prices fell on Wednesday on concerns about fuel demand and global economic growth before an expected big hike in interest rates by the U.S. Federal Reserve.

Brent crude futures for August were down $1.27, or 1%, at $119.90 a barrel as of 1001 GMT, in volatile trading.

U.S. West Texas Intermediate crude for July fell $1.44, or 1.2%, to $117.49 a barrel.

"Oil markets are seeing uncertainty over what central banks do next and how that impacts oil demand," said UBS analyst Giovanni Staunovo.

Surging inflation has led investors and oil traders to brace for a big move by the Fed this week – a 75-basis-point increase, which would be the largest U.S. interest rate hike in 28 years.

And when you turn towards international markets, you have the options of investing in developed markets, emerging markets, and frontier markets.

For instance, developed nations usually have more advanced economies, better-developed infrastructure, and higher per capita income.

However, a high per capita GDP alone does not confer developed economy status without other non-economic factors such as the infant mortality rate and life expectancy.

Former Reserve Bank of India (RBI) deputy governor Viral Acharya has called on central bankers to not compromise while performing their duties and raise issues with the government even if it comes at the cost of losing their job.

"Sometimes, the tendency of technocrats in central banks is to think, 'Oh, I have to do my regular day job, I have to do a part of my legal mandate well. So, let me just not confront these issues in my day-to-day dealings with the government. Let me just strike compromises or turn a blind eye,'" Acharya said during a webinar hosted by the International Monetary Fund (IMF) on June 14 on the regulation, supervision, and handling of distress in public sector banks (PSBs).

"Of course, there are many technocrats who don't necessarily follow this approach. But I think that a string of technocrats each doing their job in a narrow space and making these compromises, actually leave their countries with a fairly bad outcome stitched together over periods of time."

"I see compromises by central bankers in India over long stretches of time as having given fairly compromised and terrible banking sector outcomes over the last five decades. Of course, if you raise a voice, if you push for advocacy or reform of public sector banks, if you push openly for legal reforms, that is going to be difficult. It can lead sometimes to (chuckles) you not having the right relationships with the finance ministry. In extreme cases it can lead to a loss of job. But my sense is technocrats should embrace these risks," Acharya said.

Acharya took charge as a deputy governor of the RBI in January 2017. However, he resigned in July 2019, around six months before the end of his three-year term, citing "unavoidable personal circumstances".

Acharya, who is the CV Starr Professor of Economics at New York University's Stern School of Business, enjoyed a fraught relationship with the government during his time at the RBI. In an October 2018 speech (external link), Acharya said governments that "do not respect central bank independence will sooner or later incur the wrath of financial markets". The speech, which came amid a tussle between the government and the RBI over the latter's reserves, created a furore.

Acharya’s resignation from the RBI was preceded by similar high-level exits.

Raghuram Rajan, who served a three-year term as the governor starting September 2013, faced repeated political attacks for his speeches regarding tolerance and central bank independence. In a letter to RBI staff in June 2016, Rajan wrote he would be returning to academia after his term ended.

Meanwhile, Urjit Patel — Rajan's successor as governor — resigned on December 10, 2018, two years and three months into the job. Patel, who cited "personal reasons" in a statement announcing his resignation, also had a turbulent relationship with the government.

In his book 'Overdraft', released in July 2020, Patel wrote that India's fledgling bankruptcy law was deliberately weakened in mid-2018 after the RBI released its famous February 12, 2018 circular that spelt out an amended framework for the resolution of banks' stressed assets. According to Patel, he and the then finance minister, the late Arun Jaitley, were "until then, for the most part...on the same page". However, the aforementioned circular led to a "legal onslaught" on the RBI, Patel wrote.

Patel was succeeded by Shaktikanta Das on December 12, 2018. Das, a former economic affairs secretary, has been widely credited with repairing the relationship between North Block and Mint Street.

Cost of PSU banks

In his comments at the IMF webinar on June 14, Acharya said the Indian banking sector and the taxpayer were suffering from government ownership of banks.

"…certain rules and regulations of the banking sector have to be uniform. For example, you can't have an accounting standard for banks which is different between public sector banks and private banks. Why has India not adopted the IFRS (International Financial Reporting Standards) accounting system? Why has India not adopted expected credit loss provisioning? Why has India not adopted accelerated provisioning standards, which don't backload provisions after defaults and NPAs (non-performing assets) have been recognised?"

Acharya said the source of these problems was the government's refusal to loosen its purse strings further to infuse more capital into PSBs. The non-implementation of these standards and PSBs' ability to "get away with certain kinds of extraordinarily delayed provisioning standards", according to Acharya, was resulting in a “race to the bottom for the entire banking sector”.

Calling the presence of PSBs in India a “historic accident”, Acharya said data and economic forces at play in India’s financial sector showed they were causing a huge loss to the taxpayer.

"Taxpayers in India are running a huge negative account because of the presence of public sector banks. And I think any gains that can be brought to the table, such as creation of bank accounts for financial inclusion…I am never able to attribute that success squarely at the doorstep of public sector banks," the former central banker said.

Fitch Ratings on Tuesday said the Reserve Bank is likely to raise interest rates further to 5.9 per cent by December 2022, on deteriorating inflation outlook.

In its update to Global Economic Outlook, Fitch said India's economy faces a worsening external environment, elevated commodity prices, and tighter global monetary policy.

"Given the deteriorating outlook for inflation, we now expect the RBI to lift rates further to 5.9 per cent by December 2022 and to 6.15 per cent by the end of 2023 (vs. previous forecast of 5 per cent) and to be unchanged in 2024," Fitch said.

Last month in an unscheduled policy announcement, the Reserve Bank of India (RBI) raised rates by 40 basis points to 4.4 per cent, and subsequently to 4.9 per cent last week.

The RBI has forecast inflation to be 6.7 per cent by the end of current fiscal. The retail inflation for May came in at 7.04 per cent.

"Inflation has risen to an eight-year high and broadens across more CPI categories, posing a severe challenge to consumers. In the past three months, food inflation has increased by an average of 7.3 per cent year-on-year, while healthcare bills are rising at a similar pace," Fitch said.

According to Fitch, the April-June quarter growth is likely to improve on a rebound in consumption as COVID-19 cases subsided towards end-March.

"GDP grew by 4.1 per cent year-on-year in 1Q22 (January-March) compared to our March forecast of 4.8 per cent. We now expect the economy to grow by 7.8 per cent this year (2022-2023), revised down from our previous forecast of 8.5 per cent," Fitch said.

Fitch had last week upped outlook on India's sovereign rating to 'stable' from 'negative' after two years citing diminishing downside risks to medium-term growth on rapid economic recovery. The rating was kept unchanged at 'BBB-'.

The Outlook revision reflects our view that downside risks to medium-term growth have diminished due to India's rapid economic recovery and easing financial sector weaknesses, despite near-term headwinds from the global commodity price shock," it said.

The Indian economy grew 8.7 per cent in the last fiscal and RBI expects growth to be 7.2 per cent this fiscal.