Daily News - Wednesday, 5 February 2025

FTA with EU: Compromise in Works Over ‘Origin’ of Goods (The Economic Times)

India is preparing a compromise proposal to resolve differences with the European Union on rules of origin in the ongoing Free Trade Agreement (FTA) negotiations, particularly for sectors like chemicals, by considering the value chain and precedents from recent FTAs such as with EFTA. These rules, which determine the origin of goods for tariff concessions and prevent circumvention, have become more complex, with the EU proposing stricter process-based criteria, especially in textiles, while India seeks greater flexibility. With India-EU trade reaching $180 billion in FY24 and the 10th round of FTA talks scheduled for March 10-15 in Brussels, both sides aim to bridge gaps on rules of origin and government procurement before EU Trade Commissioner Maros Sefcovic’s visit later this month. 

⁠New support schemes for small exporters on cards (Business Standard)

The Indian government is developing new support schemes under the ₹2,250 crore Export Promotion Mission to assist MSME exporters with collateral-free loans, compliance with non-tariff measures, and alternative financing instruments like cross-border factoring. With the discontinuation of the Interest Equalization Scheme (IES) after December 31, the focus is shifting to targeted export credit solutions, aiming to support one lakh small exporters and address challenges such as the EU’s carbon border tax and the U.S. turtle exclusion device. Additionally, a Trade Assistance Program (TAP) will be expanded with government-backed risk-sharing funds to help exporters access “risky markets,” while efforts to scale up export factoring services aim to reduce dependence on banks and align India’s usage with the global average of 3% of merchandise exports. 

⁠USAID funding to India on the decline since pandemic (Business Standard)

⁠U.S. foreign aid to India, particularly through USAID, has been steadily declining since 2022, with disbursements dropping from $228.18 million in 2022 to $151.8 million in 2024 (partial figures), following President Donald Trump’s decision to re-evaluate and pause foreign assistance for 90 days. While USAID has funded key health and education projects—such as $80 million for health programs in 2024, including $21 million for child health and family planning—India’s growing domestic budget for healthcare (₹89,155 crore in 2023-24) offsets the impact, making USAID’s contributions relatively small. The funding freeze, which has suspended ongoing projects, may cause short-term disruptions, but experts believe it will not significantly impact NGOs and education initiatives, as organizations like the Bill and Melinda Gates Foundation continue to provide financial support. 

⁠India to assess US exit from global tax deal (Financial Chronicle)

⁠India’s Revenue Secretary, Thin Kanta Pandey, stated that the country will assess the implications of the United States’ withdrawal from the global tax deal. The move follows former U.S. President Donald Trump’s decision to nullify the OECD-led agreement, which aimed to implement a minimum 15% tax on multinational corporations across 140 countries. Pandey highlighted that the U.S. is crucial to the deal’s success, and its exit creates significant uncertainty, potentially undermining the pact’s effectiveness. 

Cuts in I-T rates to boost growth (Financial Chronicle)

Moody’s Ratings stated that India’s income tax cuts in the Union Budget 2025 will boost middle-class spending, benefiting corporates and the financial sector, but could slow fiscal consolidation due to revenue losses. The government has effectively eliminated direct tax liabilities for workers earning less than ₹12 lakh ($13,860) annually, up from ₹7 lakh ($8,100), leading to an estimated revenue loss of ₹1 lakh crore (0.3% of GDP). Despite projecting an 11% rise in total tax receipts, Moody’s warned that any shortfall in income tax collection—expected to contribute one-third of gross tax revenue—could challenge the government’s optimistic revenue outlook, signalling a slowing pace of fiscal consolidation.