CAD is manageable as India is doing well in services exports: Piyush Goyal

Commerce and Industry Minister Piyush Goyal on Tuesday said that India's current account deficit (CAD) is manageable as it is doing well in services exports.

He said that the import numbers of the country are correlated with exports as much of the imported goods are shipped back after value addition.

"Our services exports are significant. It is an increasingly growing surplus. So if I have a trade deficit of $250-300 billion, almost $175-200 billion get made up by services exports. So the net CAD is still in the one per cent of GDP category, which I do not think is a matter of serious enough to be concerned about," he said at an event here.

 

The country's CAD widened marginally to $9.7 billion or 1.1 per cent of the GDP in April-June 2024 against $8.9 billion or 1 per cent in the year-ago period.

A current account deficit occurs when the value of goods and services imported and other payments exceed the value of the export of goods and services and other receipts by a country in a particular period.

"A lot of our imports are directly co-related to our exports. So when you look at the number of months of imports, you need to calibrate that," he said.

Citing examples, he said if India is importing $ 30 billion worth of gems and jewels, it is directly adding value and being exported worth about $ 37 billion.

Similarly, the $15-17 billion of mobile phones that India is going to export, $10-12 billion of imported components are coming.

There are only 3-4 things that India is really import-dependent  edible oil, crude oil, coking coal required for the huge amount of steel that India produces, and a little bit of thermal coal for the port-based coal plants.

"Though I think we have enough coal in India, at some stage we can even do away with that," he said.

Goyal also said that India is the world's largest recipient of remittances and last year, it was about $ 125 billion and is growing every year.

"Even during Covid, when one could have thought remittances would fall, it continued to grow. So that's a very stable pool of money coming into the country, irrespective of anything else, he said while talking about the strong forex reserve of the country.

On a question that it takes about 6-8 months for FIIs to bring in money into India, the minister said India has benefitted from being a cautious country in attracting foreign investment.

"There has never been a charge on India that we have got bad money into the country. We are also very conscious that we have a little bit of a liberalised way to move money out. A company I think can move out four times its net worth out of the country to invest in other countries or projects," he said.

India has also made it sure that money coming into the country is not hot money or being round-tripped.

He, however, added that there could be some bureaucratic hurdles, which if flagged can be taken up with the finance ministry and regulators "to see how we can bring that time down".

He added that the way it can happen is "if you can influence the American SEC and the European regulators to accept Indian companies who are cleared by Sebi to invest in the US, we could look at aA (mutual recognition agreement) or a mutual arrangement by which both sides can accept each others licences.

"It cannot be a one-way traffic," he said adding gone are those days when one used to accept that the American systems were good and the Indian system was open to scrutiny.

That is history and now India works on reciprocity, he said.

Without elaborating, he added that Europe was asking for an unfair kind of situation which India did not accept.

"Our focus is going to continue to remain on equality or reciprocity but maintain the sanctity of money coming into the country. But still I am happy to look to cut the KYC process or eliminate some of the unnecessary stuff which delays money coming in," Goyal said.

Further, he said that Indian firms find it "very" difficult to do business in Europe.

Sometimes if a business wants to restructure or close down, "it's near impossible" to do in that part of the world, the minister said adding people talk about ease of doing business in India, "I think their biggest stress is the problems of doing business in Europe or in many parts of the developed world".

He added that companies like ArcelorMittal were struggling in many parts of Europe and Tatas have also gone through severe stress in the UK in the investments they made over there.

"In fact, they pull down Tata Motors and Tata Steel after the Corus and Jaguar buyouts," he said adding "Indians have become a little vary of investing in these geographies".  Goyal on e-commerce  The country's foreign direct investment (FDI) norms are clear for the e-commerce retail and the companies in this segment should respect the law of the land, said Goyal.

Recently, the minister stated that these firms violate FDI norms and follow predatory pricing.

He had questioned Amazon's announcement of a $1 billion investment in India, saying the US retailer was not doing any great service to the Indian economy but filling up for the losses it had suffered in the country.

Addressing an event in Mumbai, Goyal said e-commerce companies should stick to the rule of the law.

"The law of the land is very clear about foreign direct investment...I have been repeatedly talking about the subject that every ecommerce company should respect the law of the land both the letter and spirit," he added.

"If you read today's papers, it opens up a lot of people to question," he said.

Earlier this month, the Enforcement Directorate conducted searches against some of the "main vendors" operating on platforms of e-commerce giants Amazon and Flipkart as part of a foreign direct investment "violation" investigation.

A total of 19 premises of these "preferred" vendors located in Delhi, Gurugram and Panchkula (Haryana), Hyderabad (Telangana) and Bengaluru (Karnataka) were covered as part of the action.

The Confederation of All India Traders (CAIT) too has time and again claimed that these companies violate FDI rules and hurt small retail stores.

As per existing rules, 100 per cent FDI is allowed through an automatic route in the marketplace model of e-commerce. However, overseas investment is not permitted in an inventory-based model.

In the market place model, e-commerce entities can only provide a platform for third-party sellers and they cannot own the inventory. They also cannot directly or indirectly influence the price of the goods.

It has been reported in the past that the CCI, which works to ensure fair business practices across sectors in the marketplace, is already looking into alleged anti-competitive ways of e-commerce companies.