Surge in imports from Singapore under lens

An unusual 118 per cent spurt in India’s merchandise imports from Singapore to a record $16.3 billion in 2018-19 has alarmed customs officials and puzzled the Commerce Ministry, which has asked for a closer scrutiny of the inflows, a senior government official told.

The move comes amid growing fears that Chinese exporters may be diverting supplies to India through Singapore, taking undue advantage of New Delhi’s duty concessions to the island city-state under a free trade agreement (FTA), as Beijing’s trade war with Washington continues unabated. New Delhi, too, has been mounting pressure on Beijing to trim the massive trade imbalance.

“The scrutiny of any potential violation of the rules of origin (of the imported products) is being tightened,” said another source.

This level of annual spike in imports from Singapore has been unheard of despite the existence of the FTA for around 14 years now. In fact, at 64 per cent , the highest annual surge in imports from Singapore in recent memory was witnessed in 2006-07, a year after the FTA- formally called the Comprehensive Economic Co-operation Agreement — was signed on June 29, 2005.

Although the imports from Singapore have dropped 6.4 per cent year-on-year in the April-October period of the current fiscal to $8.7 billion, they were still more than a double of what India imported from the city-state in the same period in 2017-18 and way above the usual trend in recent years. Interestingly, in addition to Singapore, India’s trade balance with Hong Kong — widely considered a proxy for Beijing — went haywire last fiscal and turned negative for the first time in at least two decades even as its trade deficit with China eased by $9.5 billion to $53.6 billion. This has raised questions about the actual reduction in India’s effective trade deficit with China.

India, last month, pulled out of the China-backed Regional Comprehensive Economic Partnership (RCEP) deal, as it feared, among other things, massive dumping by China and some others. So it wanted effective safeguard mechanisms and strict rules of origin to protect its industry but couldn’t get others to agree.

In fact, New Delhi was pushing for “sufficient value addition” of at least 35 per cent in the country of exports for a product to be eligible for its tariff concession under RCEP pact, while others wanted to settle for just minimal value addition. India’s existing FTAs with Asean, Singapore, Japan and South Korea already link duty concession to a 35 per cent value addition to prevent unscrupulous elements in other countries from taking advantage of the low or zero-duty regimes, as per analysts.

Imports of some petroleum products jumped 209 per cent to $1.6 billion, while those of organic chemicals rose 20 per cent to $1.8 billion and plastics and products by 32 per cent to $1.2 billion. Imports of iron and steel and such articles from Singapore witnessed an over three fold rise to $638 million and rubber and articles by 263 per cent to $306 million. China is the dominant exporter of most of these products.