INDIA STEPS UP COUNTERTRADE DEALS TO CUT TRADE GAP
India is searching for non-communist
countertrade partners to help it cut its trade deficit and
conserve foreign exchange.
    Wheat, tobacco, tea, coffee, jute, engineering and
electronic goods, as well as minerals including iron ore, are
all on offer in return for crude oil, petroleum products,
chemicals, steel and machinery, trade sources told Reuters.
    Most of the impetus behind countertrade, which began in
1984, comes from two state trading firms -- the State Trading
Corp (STC) and the Minerals and Metals Trading Corp (MMTC).
    "The two state trading corporations are free to use their
buying power in respect to bulk commodities to promote Indian
exports," a commerce ministry spokeswoman said, adding that
private firms are excluded from countertrading.
    One trade source said India has targetted countries that
depend on an Indian domestic market recently opened to foreign
imports.
    However, countertrade deals still make up only a small part
of India's total trading and are likely to account for less
than eight pct of the estimated 18.53 billion dlrs in trade
during the nine months ended December, the sources said.
    Countertrade accounted for just five pct of India's 25.65
billion dlrs in trade during fiscal 1985/86 ended March,
against almost nothing in 1984/85, official figures show.
    However, the figures exclude exchanges with the Eastern
Bloc paid in non-convertible Indian rupees, the sources said.
    Total trade with the Soviet Union, involving swaps of
agricultural produce and textiles for Soviet arms and crude
oil, is estimated at 3.04 billion dlrs in fiscal 1986/87,
against three billion in 1985/86.
    Indian countertrade, which is being promoted mainly to help
narrow the country's large trade deficit, is still
insignificant compared with agreements reached by Indonesia,
Venezuela and Brazil, the trade sources said.
    The trade deficit, which hit an estimated record 6.96
billion dlrs in 1985/86, is expected to decline to 5.6 billion
in the current fiscal year.
    But the push to include non-communist countries in
countertrade is also due to other factors, including the slow
growth of foreign reserves, a tight debt repayment schedule,
shrinking aid and trade protectionism, businessmen said.
    One source said India is showing more dynamism in promoting
countertrade deals than in the past, when the deals were made
discreetly because they break GATT rules. As a member of the
General Agreement on Tariffs and Trade (GATT), India cannot
officially support bartering.
    The MMTC's recent countertrade deals include iron ore
exports to Yugoslavia for steel structures and rails.
    "MMTC's recent global tenders now include a clause that
preference will be given to parties who accept payment in kind
for goods and services sold to India," a trade official said,
adding that the policy remains flexible.
    "We also take into account other factors such as prices at
which the goods and services are offered to India," the trade
official said.
    Early this year the commerce ministry quietly told foreign
companies interested in selling aircraft, ships, drilling rigs
and railway equipment to India that they stood a better chance
if they bought Indian goods or services in return, the trade
sources said.
    Illustrating the point, the official said a South Korean
firm recently agreed to sell a drilling platform worth 40 mln
dlrs to the state-run Oil and Natural Gas Commission.
    In return, the South Koreans gave a verbal assurance to buy
Indian goods worth 10 pct of the contract, against the 25 pct
sought by New Delhi, the trade official said.
    "We selected the Korean firm because its bid was the lowest,"
he added.
    Countertrade is helping African countries short of foreign
currency to import goods. India has signed a trade protocol to
buy up to 15,000 tonnes of asbestos fibre from Zimbabwe in
exchange for Indian goods, including jute bags and cars.
    But despite India's new drive, countertrade has some
inherent problems, they added.
    "It is not always easy to meet the basic requirement that
the trade should always be balanced," one trade source said. "The
other problem is it is often difficult to supply or buy
commodities which the other party wants."
    Another added, "Barter is also restrictive. We look upon it
as a temporary measure to get over the current balance of
payments difficulty.
    "This is why countertrade has not been made a law in India.
It does not even figure in the country's foreign trade policy."
 REUTER
