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."
  

