Both India and Bangladesh face exceedingly high tariffs from the US – 27% and 37%, respectively – which led some to hope the South Asian giants would band together and strengthen their trade ties. Instead, the relationship is souring, potentially disrupting trade and shipping routes in the entire region.

On 13 April, Bangladesh stopped all land imports of yarn from India, ostensibly to protect domestic producers from foreign competition. The restriction effectively acts as an expensive tariff for Indian imports, as all yarn must now travel via sea or air routes, which is far more costly and may lead to delays as sea routes become backed up due to the excess traffic. 

After the restriction was announced, India withdrew transshipment facilities for Bangladesh on 8 April, citing “congestion”. Since 2020, Bangladesh had been transporting goods, especially clothing, to India by road and using Indian ports, stations, and airports to get them to their final destination in Europe or the US. 

This made exporting much faster for Bangladeshi producers, cutting down transit times from eight weeks to one. Bangladeshi shipment hubs are not equipped to handle the massive volumes of exports that local producers send abroad; shipping routes are made more dangerous by piracy incidents, which have been on the rise since last year. 

At the moment, the effects of the reciprocal restrictions seem to be limited: trade relations between the two countries “are still underway and form a significant part of our bilateral commerce,” said Sudhanshu Das, a regional minister in Tripura, an Indian region on the border with Bangladesh. 

The relationship between India and Bangladesh, marred by a turbulent partition in 1947, has improved significantly over the past decade, with the resolution of long-standing border disputes and the establishment of treaties and credit lines. When Bangladeshi Prime Minister Sheikh Hasina was forced to resign after months of unrest, she took refuge in India; the new Bangladeshi government demanded her extradition, which the Indian government is refusing while accusing Bangladesh of “systematically persecuting” Hindu minorities.

India and Bangladesh are important trade partners. India is Bangladesh’s second-largest source of imports, responsible for 17% of all imports; most of Bangladesh’s exports go to the US and Europe, in large part because of the country’s second-largest clothing export industry. Bangladesh is India’s biggest trading partner in the subcontinent, but the trade balance is heavily in India’s favour, with a £6.93 billion trade surplus for the Asian giant. 

The restrictions and likely disruption they will cause serve as a powerful example of the way internal politics and even relatively minor diplomatic spats can have a broad-ranging effect on global trade. This is also a sign that the weaponisation of trade is becoming normalised across the world, and that its tools have expanded beyond tariffs to affect trade routes, deep-tier supply chains, and long-standing trade agreements. 

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Just weeks after the two countries resumed talks, Nidhi Tripathi, economic minister in India’s High Commission in London, reported on Thursday 20 March that the UK and India are “very close” to agreeing on an FTA. This agreement will bring a degree of stability, as both countries look to reroute around tariffs from key trading partners, in particular the US.

Bilateral trade between the UK and India was valued at £40.9 billion in 2024, an increase of 8.6% from the previous year. In this period, India was the UK’s 11th largest trading partner; the UK was India’s 16th largest trading partner.

The negotiations with New Zealand, while smaller in scale, are equally strategic.

After a decade-long impasse, New Zealand Prime Minister Christopher Luxon launched a five-day diplomatic tour in Delhi and held bilateral talks with Indian Prime Minister Narendra Modi on 16 March.

The two nations have agreed to commence the first round of negotiations next month, with Luxon describing the restart as a “major breakthrough” that could potentially double New Zealand’s exports within a decade. 

Currently, bilateral trade between the two countries stands at under $2 billion, but both sides see significant potential for expansion across multiple sectors. It provides India with enhanced access to agricultural and dairy markets while offering New Zealand improved entry into India’s burgeoning technology and services.

The negotiations, which originally began in 2010 but stalled over market access issues—particularly New Zealand’s desire to enter India’s traditionally protected dairy market—reflect India’s recent shift towards more open bilateral trade agreements, particularly in the context of countering China’s influence in the Indian Ocean region and diversifying its international economic partnerships.

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The amendment, introduced on 9 August 2024 and passed on 10 March 2025, strengthens two crucial aspects: it clarifies that all contractual rights contained within a bill of lading are automatically transferred to the consignee or lawful endorsee, and confirms that, in the hands of a bona fide holder, a bill of lading is conclusive evidence that goods have been loaded.

“This amendment marks a critical milestone for catapulting India’s digital trade ecosystem, embedding legal certainty and modernisation into the heart of maritime commerce,” said Imran Khan, Executive Director of ICC India. “It sends a clear signal that India is very committed to removing the paper trapped in global trade and harmonising with global best practices, which will benefit businesses and supply chains alike.” 

This reform addresses legal certainty in shipping documentation and is a notable development in India’s progress towards digitising trade flows. The amendment complements India’s broader efforts to enable the adoption of electronic transferable records (ETRs), aligning with the UNCITRAL Model Law on Electronic Transferable Records (MLETR). According to the MLETR tracker, India has currently achieved the first stage of “MLETR Socialisation”, and is moving towards the “Political Support” stage.

In parallel, India is taking steps to encourage the use of electronic bills of lading (eBLs) in its maritime sector. The Ministry of Shipping has promoted the development of eBLs under the Electronic Port Community System (ePCS) to enhance operational efficiency and reduce paperwork.

In a regional context, India has also piloted cross-border eBL transfers with South Korea, allowing customs authorities to exchange digital documents. This sits alongside the growing adoption of technology-driven supply chain tools, such as RFID tagging and IoT-enabled container tracking, by Indian startups aiming to digitise the end-to-end logistics ecosystem.

Ketan Gaikwad, CEO of Receivables Exchange of India Ltd (RXIL), said, “This development is a step ahead towards the digitization of international trade for India and a long-awaited one, considering India has made significant progress in the supply chain financing of the local supply chain via digital TReDS and other payment mechanisms.”

“The transport & logistics space has much to gain from eBLs and UNCITRAL’s MLETR. The legislative progress achieved by India over the last decade offers an example to the world across digital payments, financing for small and medium-sized enterprises (SMEs), and digital trade,” said Andre Casterman, Board Member at ITFA.

The 2025 Bills of Lading Bill, introduced by the Union Minister of Ports, Shipping & Waterways, Shri Sarbananda Sonowal, is set to replace the 1856 Act entirely. The original bill was established at the advent of British colonial rule, and provides a legal framework for imperial benefit; the new draft bill simplifies legal language, removes colonial-era provisions, and grants the Central Government the power to issue directives supporting implementation.

Speaking at the Lok Sabha, Sarbananda Sonowal, India’s Minister of Ports, Shipping and Waterways, said, “The passing of the Bills of Lading Bill, 2025, in Parliament is a significant step in fulfilling Prime Minister Narendra Modi’s vision of modernising India’s legal framework, making it more relevant, modern, accessible, and free from colonial legacies that have long hindered our progress.”

This updated framework is expected to reduce litigation risk and simplify contract enforcement for carriers, shippers, and endorsee holders. 

The bill will now proceed to the Rajya Sabha, the upper house of India’s parliament, and is subject to Presidential assent before entering into force, and should strengthen the legal foundation in India’s journey towards trade digitalisation.

For more on digital trade and legislative reform, listen to our latest podcast on ETDA and the future of cross-border trade.

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This comes amid worries about domestic currencies’ positions compared to a strong dollar in the face of tariffs. 

In China, foreign reserves rose by $40 billion in January thanks to increasing private and corporate foreign reserves purchases – likely connected to fears of a yuan depreciation. This was the biggest rise since April 2021, bolstered by both individuals and non-financial institutions.

In Indonesia and India, central banks are shoring up domestic currencies by shorting the dollar through derivatives, pointing to worries about the knock-on effects of tariffs against China on the region.  

The Asian economic giants have been on edge ever since the first round of US tariffs was announced, fearing a drop in exports could harm domestic economies and devalue currencies. The US is the biggest single importer of Chinese goods; Trump’s wide-ranging tariff regime, including a 10% tariff on all goods and specific measures targeting shipments from low-cost Chinese retail giants, could significantly impact the foreign exchange rate in the next months. 

The Chinese economy has been faltering in the last year, with frequent rate cuts by the Chinese central bank struggling to revive it. Amid low interest rates and fears of a recession, exacerbated by the potential effects of US tariffs, Chinese investors will be looking towards foreign currencies—especially the dollar—for higher yields and more security. 

Elsewhere in Asia, central banks are using derivatives, like net dollar short forward positions, to protect their own currencies against a strengthening dollar. The Reserve Bank of India has recently increased its net dollar short forward position to an all time high, while the Indonesian central bank’s net short book reached a 10-year high this month. 

Some see this as an attempt to temporarily strengthen currencies by making commitments that may be hard to keep in the future. However, it could also signal confidence from Asian banks that the current tensions between Asian giants and the US are only temporary and will not have a wide-ranging effect on the region. 

Already, the limited nature of the tariffs that have been announced – a far cry from the 60% discussed during Trump’s campaign – could reassure investors. Growth in the Chinese tech sector, driven by the launch of the Chinese AI app DeepSeek, a low-cost alternative to ChatGPT, could also boost the economy. 

These currency trends could have a knock-on effect on the type and magnitude of tariffs the Trump administration sets on Asian exporters. Trump has accused China of currency manipulation as far back as 2018, and US Treasury Secretary Scott Bessent has recently announced an investigation into currency manipulation as a way to lower the impact of tariffs, expected to produce results by 1 April.  

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“We require policy consistency to justify increased investment in pulse cultivation,” said Njla Souza. Brazil exported 70,000 tonnes of urad (black gram) to India last year, establishing itself as the second-largest supplier after Myanmar.

India’s imports of pulses reached a six-year high of 6.63 million tonnes in 2024, double the previous year’s volume, as the world’s largest consumer of protein-rich legumes sought to tame domestic inflation.

The surge in imports (led by yellow peas, which accounted for 45% of total purchases) has prompted Brazil to position itself as a reliable alternative supplier to traditional pulse exporters to India such as Canada, Myanmar, Australia, Mozambique, and Tanzania.

However, Brazilian exporters – who represent agricultural small- and medium-sized enterprises (SMEs) and farmers – are seeking long-term trade assurances before committing to expanded production.

India’s strategy to liberalise imports through duty removals has led to record purchases. Chana (chickpea) imports quadrupled after duty elimination in May 2024, whilst masur (red lentil) imports rose 53% following similar measures.

However, the surge has sparked concerns within India’s domestic industry. “For the first time, protein-rich yellow peas have become cheaper than wheat,” said Bimal Kothari, president of the Indian Pulses and Grains Association, calling for measures to prevent “cheap dumping” in the market.

Brazil’s agricultural strategy involves crop rotation between soybean, corn, and pulses to maintain soil health. IBRAFE is actively promoting Brazilian varieties, including the protein-rich Carioca bean, to Indian households as part of its market diversification efforts.

Suresh K Reddy, India’s ambassador to Brazil, supports the partnership, suggesting that “enhanced sourcing would introduce competition and better pricing” in India’s domestic market, where imports constitute 15% of pulse consumption.

India is also aiming to import the likes of sunflower oil and Carioca beans from its South American partner. Simultaneously, Luis Rua, Brazil’s trade secretary, stated that Brazil is working with India to finalise a phytosanitary agreement for supplying pulses and edible oils.

Brazil imported Indian zebu breeds in the late 19th and early 20th centuries, later crossbreeding Gir with Holstein cattle to create the Girolando breed. This now accounts for 80% of Brazil’s milk production, yielding 30 to 40 litres per day compared to India’s 15 to 16 litres.

Rua proposed collaborating between the Brazilian Zebu Breeders Association (ABCZ) and Indian firms to improve cattle genetics; India’s milk productivity remains low due to small herd sizes and limited innovation advancements.

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This is one of the most consequential US elections in history, which has been mainly determined by what’s at stake in an ideological or geopolitical domain.

But we at TFG think it’s essential to fully explore what Donald Trump’s second presidential victory may mean for the world of trade, treasury, and payments. It’s with this regard that President Trump can redefine the world.

We recorded an emergency livestream with four industry heavyweights:

◾ Dr Rebecca Harding, Independent Trade Economist, REBECCANOMICS LIMITED
◾ Dr Robert Besseling, CEO, PANGEA-RISK
◾ Simon Evenett, Professor of Geopolitics & Strategy, IMD Business School, Co-Chair, World Economic Forum Global Future Council on Trade & Investment
◾ Dr Alisa DiCaprio, Former Chief Economist, R3

What was covered:

• How Trump’s trade policy differs from Biden’s (if at all).
• US-China trade relations and economic wargaming – how increasing tariffs on 818 categories of Chinese goods impacts 2025 policy.
• How a second Trump presidency could impact trade relations between the US and Africa and the Middle East.
• What does the decline of multilateral trade agreements mean for ongoing negotiations and existing trade pacts (think: withdrawal from the Trans-Pacific Partnership and replacing NAFTA with the USMCA agreement)?
• Money markets: with US stocks surging and European renewable stocks falling, how Trump’s stance on climate change and energy policy might impact global commodity markets and trade flows.
• What we can expect Trump’s impact to be, on trade and SCF.
• What regions are likely to be singled out from a more combative trade policy, and what methods there are for assessing and monitoring as the effects of Trump become realised.
• The impact of protectionist trade on currency markets and international capital flows.

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• 2024 ICC Trade Register report reaffirms low risk nature of trade finance assets, despite a slowdown of global trade volumes in 2023.
• Receivables finance is outpacing traditional documentary trade products, marking a shift towards open account trade and flexible working capital solutions.
• The report highlights a notable shift towards trade in regional blocs, particularly growth in non-USD settlements.

The annual Trade Register from the International Chamber of Commerce (ICC) in collaboration with Boston Consulting Group (BCG) and Global Credit Data (GCD) has been released, analysing the landscape for trade, supply chain finance, credit risk, and proprietary trade finance risks for 2023. 

The report surveys partner banks of the ICC Banking Commission, representing 5% of global trade flows and 18% of financed trade flows. The conclusions are indicative of the industry’s trajectory and highlight opportunities down the road.

2023 was mired by ongoing geopolitical tension, stilted market demand, corporate deleveraging, and high interest rates, transforming the industry. Overall, though, indicators for 2024 are positive, while the low-risk nature of trade finance remains a pillar of stability.

Trade: 2023, 2024 forecast, beyond

Global goods trade saw a year-on-year decrease in both real terms (-0.7%) and nominal terms (-4.8%): a slowdown from growth post-pandemic in 2021 and 2022.

The variance of this by sector is interesting in defining the future of commodity demand. The energy sector fell by 19% in nominal terms (while demand remained steady, increasing by 1% in real terms). Modest downturns were seen in metals and mining (-7% and -9%), semifinished intermediate good such as chemicals (-10%), semiconductors (-10%), and agribusiness (-4%).

On the other hand, automotive trade increased by 12% in nominal terms while the aerospace sector saw a 16% increase. 

This was offset by an 8% increase in services trade, now making up one-third of all trade. In nominal terms, this constituted $7.9 trillion, with Middle-Eastern countries (Saudi Arabia, UAE, Qatar), India, and Ireland witnessing the fastest growth.

Sectorally within services, the travel industry rebounded strongly, returning to approximately 25% of the global services trade. Financial services and information and communications technology (ICT) also saw steady annual growth. Conversely, construction services reported slower growth.

Global inflation fell from 8.0% in 2022 to 6.5% in 2023. But despite the moderation of inflation, consumers continued to suffer expensive essentials like energy bills.

In terms of trade currency, while the US dollar is likely to retain its dominance in the short term, non-US dollar trade is on the rise. This is driven by increased use of Chinese currency in cross-border payments; and by US foreign policy affecting specific sectors, with around 20% of the global oil trade settled in non-USD currencies.

Having said this, the USD’s dominance is still decisive, with 55% of international payments and 83% of trade finance market payments made in the American currency.

Looking forward, as central banks have reduced interest rates in response to waning inflation, 2024 should theoretically be reviewed as a year of relative normalisation. Yet the year has been defined by shifting geopolitics, the result of elections for more than half the world’s population and conflict.

Supply chains have seen monumental rerouting. The drop in trade between the US and China has pushed both parties closer to their allies. Similarly, the EU has been seeking to diversify from Russia and China.

But surprisingly, the strongest growth has come from the ‘Global South’, which largely consists of emerging economies. India’s trade growth is expected only to accelerate, at 9% CAGR over the next decade. The benefits of campaigns like ‘Make in India’, as well as continued growth in projected trade with China, reinforce India as a rapidly emerging platform.

Trade and supply chain finance

Slowing trade volumes, compounded by higher interest rates, posed challenges for trade and supply chain finance. Banks reported the following as the greatest threats to their businesses:

• Disrupted trade flows from ongoing geopolitical conflict (40% responded this to be a high or severe threat)
• Margin erosion (36%)0
• New regulation on capital treatment (30%)
• Increased competition amongst financial institutions (25%)
• Increased fraud risk (21%)

Trade and SCF revenues declined overall, with the most notable contraction in the Asia-Pacific region. But the only modest reduction in the EU, which accounts for one-fifth of global trade finance revenues, lessened the severity of this decline.

While some expect receivables finance and payables finance to accelerate faster than the growth of documentary trade and trade loans, the proportions within overall trade and SCF revenue growth remain steady. 

In fact, documentary trade products are projected to have a below-average growth at 3.7% CAGR, and reduced demand for payables finance comes as a result of disclosure rules and Basel III capital treatment regulation.

Nonetheless, the wider picture is positive for trade finance. Much optimism comes from the modernisation of platforms, the result of the rapid evolution of technological solutions. As many as 90% of banks are investing in digital customer experience initiatives to meet client expectations.

Artificial intelligence (AI) and generative-AI have huge potential regarding data extraction, fraud prevention, document checking, and creating data model language universality. This technology can also improve accessibility for smaller, less technologically-literate parties by providing validation and assistance in contracts, and by using chatbots to simplify customer service.

In this regard, momentum picking up around digital trade and related regulation, such as the Model Law on Electronic Transferable Records (MLETR), is likely to have informed positive projections. However, 80% of survey respondents believe the digitalisation of trade is dependent on collaboration throughout the ecosystem – corporates, shipping companies, banks, insurance brokers, as well as regulatory bodies. 

Climate and sustainability remain important, with a notable change from banks. Over 90% of those already engaging in sustainable finance report positive growth. In Western Europe, regulations like the EU’s Carbon Border Adjustment Mechanism mandate this transition, but creating profit incentives around sustainability mean its significance will only grow.

Credit risk, proprietary trade finance risk

The report proposes that trade finance, SCF, and export finance have proven resilient from a credit risk perspective because they involve low-risk transactions, which constitute the bulk of global trade. 

These instruments represent a low-risk asset class, even during times of uncertainty: as elucidated by Figure 4. On an exposure-weighted basis:

• Global default rates for import letters of credit (LoCs) decreased from 2022 to 2023.
• Default rates for export LoCs are significantly lower than for other trade finance products, and defaults increased negligibly between 2022 and 2023.
• For loans for import/export, 2022 to 2023 saw a slight decrease.
• Default rates for performance guarantees decreased in 2023 (this was on an obligor-weighted basis too).

For export finance, most transactions are guaranteed by export credit agencies at up to 100% of their value. In the sample surveyed, the average was 94%. This grants banks the capacity to be indemnified by an export credit agency (ECA) up to the level specified, meaning export finance has a particularly low loss given default (LGD) levels.

—

The findings of the 2024 ICC Trade Register Report are consistent with commentary throughout the year, regarding the significant disruptions posed by geopolitical uncertainty as well as the opportunity provided by technology. It is in this opportunity that positive forecasts seem to stem.

Importantly, however, the findings in this year’s report align with previous reports: that trade finance, SCF, and export finance present a low risk for banks. These trade finance instruments appear, in their nature, to be insulated from inevitable disruptions.

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• At Sibos 2024, during a panel session entitled ‘Empowering emerging capital markets: Local to global success stories’, industry leaders explored opportunities for emerging markets.
• Absolving into the world economy as a developing market is challenging – but far from impossible.
• Support must be tailored to specific needs.

For emerging capital markets, the journey from local origins to global success doesn’t usually follow a one-size-fits-all script. But there are lessons that can be learned and actions the global financial community can take to smooth the path. 

As the world economy grows to bring prosperity everywhere and global connectivity becomes the norm, newly developed countries are rushing to join the world markets. But with infrastructural, regulatory, and technological challenges, emerging markets have to work adversely hard to do before joining the most important players on the world stage.

At an industry session during the 2024 Sibos conference in Beijing, speakers gathered to extrapolate future trends by looking backwards. The panel consisted of:

• Bernard Ferran, Managing Director and CCO, Euroclear
• Rajesh Ramsundhar, Head of Investor Services, Standard Bank
• Jiang Rui, Deputy General Manager China, Foreign Exchange Trade System (CFETS)
• Julia Streets, Founder and CEO, Streets Consulting
• Ying Ying Tan, Global Head, Product Management, Financing & Securities Services, Standard Chartered Bank
• Anupam Verma, Global Head-International Financial Institutions Group & Head- Syndications, ICICI Bank

China and India: the giants’ examples

Looking at some past successes is a good place to start. 

Consider, for instance, China’s bond market, which in just a few years became the second-largest bond market in the world. The China Foreign Exchange Trade System worked with central security depositories to turn all market mechanisms —from trade to clearing—into seamlessly interconnected structures that can be easily accessed by investors everywhere. This means that international traders can use trading platforms they are familiar with while still abiding by China’s financial regulations.

In today’s interconnected global market, not harmonising is just not an option. “Clients may use one provider to go into 30 or 40 markets, and they don’t want 40 different sets of reports – they want aggregation. So clients will force you to harmonise within local market practices so it looks and feels seamless to them,” said Tan. 

A strong market base is also essential to ensure that things run smoothly once global investors have entered the market. A strong and transparent institutional framework is key, not only to attract investors but to keep them there and strengthen the domestic side at the same time. 

For example, China has introduced new trading mechanisms to make its markets stronger and more appetising for investors. “The international standards and practices not only benefit foreign investors, they are also adopted by the domestic institutions, which help to further improve the trading efficiency in the domestic market,” said Jiang.

Liquidity is also a crucial factor in attracting international investors: 10-year Chinese government bonds are now almost as stable as US treasuries, which should encourage investors. Japan, whose foreign debt is 14% foreign-owned, and South Korea have employed similar strategies, placing them as some of the most attractive markets globally. Strong and liquid government bonds mean investors can use them as collateral and trade them frequently in several regions, strengthening a market’s global reach. 

India, another new player whose debt and equity markets are among the largest among emerging economies, has instead focused on innovation: new issuers and original structures like zero-coupon bonds are attracting investors and propelling growth. As innovations sweep the market, countries must be able to quickly adapt and leverage new technology to make themselves more attractive to investors looking for the “next best thing”.

Challenges

Innovation is also crucial to addressing development challenges. Emerging markets in Asia, Africa, and the Middle East are all growing at different paces, making collaboration difficult; geopolitical uncertainty in many of these regions requires businesses to closely monitor their supply lines, be resilient, and adapt to changing circumstances. 

Africa, for example, has a wide range of market development: while countries like South Africa have well-established financial markets with corporate, government, and fixed-rate bonds, new players are only just starting to develop a secondary market. Many Sub-Saharan African countries, however, are growing at extraordinary speeds: Ghana has seen a fiftyfold growth in its secondary market since the establishment of a financial market less than 10 years ago. 

Sometimes development doesn’t last: Nigeria, which had been an investment darling in the early 2000s, was removed from the JP Morgan Index in 2015 due to overly complex currency regulations and is only just building back infrastructure and credibility. Geopolitical, regulatory, and economic challenges have slowed foreign investment, but can be overcome with a strong infrastructure and a focus on innovation. 

The new frontiers

While innovation in both emerging and established markets has been transformative, the next step is to ensure it reaches every player and is implemented in the same way everywhere. Harmonising new practices, such as the shift to T+1 settlement in the US, which is driving change globally, is crucial to ensuring seamless collaboration between markets. 

Advanced emerging markets like China have found it easier to join the effort, standardising practices on green bonds and settlement cycles that have made it even more attractive to Western investors; newer players, like sub-Saharan African countries, can find it harder to catch up. This is where external help can come in. The Africa Exchange Linkage Project, an AfDB initiative to promote cross-border securities trading, has been helping countries develop stronger interconnected markets and strengthen regional trade. 

Increased efforts to support climate efforts will also lead to innovation and new bonds entering global markets at a scale. “India has taken a commitment of net zero by 2070, which will require an investment of about $5 to $10 trillion; it’s too early for the domestic stock market to have established ESG funds, but the government is trying to start setting up a green bond, which it piloted in 2023,” said Verma.

Unique solutions for unique needs

Ultimately, supporting emerging markets depends on each region and country’s specific circumstances: a project that worked in India might not work in Africa’s fragmented economic landscape, and strategies that helped China grow may not be compatible with the Middle East’s complex geopolitics. 

The strategy each country takes, for example, will depend on the type of investors it is trying to attract – individuals, credit institutions, and investment banks – as well as the government’s openness to having its bond market partially owned by foreigners. 

However, some challenges and opportunities are common to all. AI is set to be a key driver of change, enabling data sourcing and analysis at a scale never seen before. This will lead to more accurate, fact-based decision-making processes everywhere, which could be crucial for markets still building their infrastructure. 

The emergence of digital currencies and distributed ledger technologies (DLT) will also be crucial in unlocking private market assets – which could be especially helpful to Africa’s many infrastructure investments. For digital assets, “It’s not a matter of if, it’s a matter of when,” said Ramsundhar. “I see DLT as essential in unlocking assets in the African market and propelling a big shift in digital ledger technology, creating opportunities in the private market,” 

The tokenisation of non-bankable assets in general, including art or intellectual property, could be transformative for all players; emerging markets could seize the opportunity to be at the forefront of the tokenisation revolution and draw foreign investment. “Emerging markets have a very great part to play because they don’t really have the legacy that the old economies have, which means they can really embrace new technology,” said Ferran.

—

For an emerging market attempting to incorporate itself into the global economy, obstacles can be paralysed. But harnessing their unique advantages could drive market integration to the betterment of not just that country, but the entire ecosystem.

“In China,” explained Jiang, “we didn’t simply apply a copy and paste method. Instead, we created a model of interconnectivity between the domestic infrastructure and the international infrastructure. That was impossible because at that time, China bond market was one of the top three globally by size.” Also, we always established a framework including a centralised electronic trading platform and the efficient central secret depositories The connectivity allow us to maintain our domestic strengths while meeting the needs and habits of the international investors.”

Domestic and international interest often overlap: the intention for financiers and policy makers should be to find this mutual area.

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Ratan Tata became the Tata Group’s chairman in 1991. In his 21-year tenure, the Tata Group saw profits multiply fifty-fold. He transformed the company from a mostly domestic Indian producer to a global industrial powerhouse.

Tata passed away on Wednesday night, 9 October 2024. His legacy is one of global ambition, spinning a vital trade and investment web between India and the rest of the world.

Forging a global India

Jamshedji Tata founded the Tata Group in 1868; his great-grandson, Ratan Tata, was born during the British Raj in 1937. After his early studies in Mumbai, he completed his bachelor’s degree at Cornell University. His time in the US added to Tata’s macroeconomic vantage point a perspective of India from the eyes of the West.

When he went to study abroad, he was offered a job at IBM—which he refused in favour of a hands-on internship on the shop floor of Tata Steel, returning to India. In his biography, he recognised that there was neither supply nor demand for high-level industrial businessmen in India. Tata created both.

By 1990, former Indian prime minister Rajiv Gandhi had instigated a liberalisation program to open India to the world. Finance Minister (and later Prime Minister) Manmohan Singh, in eliminating the ‘License Raj’ pejorative, changed India’s economy from state-controlled and socialist-leaning, to a more capitalist one in which foreign direct investment was easier.

Where Gandhi and his government were modernising India politically, Tata sought to transform the corporate world.

Strategic divestment, acquisition spree

Tata championed India’s global role in trade and supply chains, using Tata Group’s acquisitions and reach to connect Indian industry to international markets. Over his tenure, India’s stake in key global commodities grew increasingly embedded.

In the late 1990s and early 2000s, Tata divested from several consumer-focused businesses within India. This consolidation was partly necessitated by a sharp economic slowdown in India. Between 1997 and 2001, group revenues shrunk by 5%, while net profits plummeted by 85%. 

With a leaner portfolio, Tata set his sights on global expansion. The turning point came in 2000 when Tata Tea acquired the British tea manufacturer Tetley for $432 million, making it the world’s second-largest branded tea company. This acquisition set the stage for a series of bold moves in the international arena: after Tetley, the company bought around 30 companies. 

In 2004, Tata Motors acquired the South Korean Daewoo Motors’ heavy vehicles unit, followed by a stake in Spanish luxury bus maker Hispano Carrocera S.A. The pinnacle of Tata’s automotive ambitions was realised in 2008 with the $2.3 billion acquisition of Jaguar Land Rover, catapulting Tata Motors into the ranks of the world’s top automakers.

Perhaps the most audacious move came in 2007 when Tata Steel acquired the Anglo-Dutch steel manufacturers, the Corus Group, for $12.2 billion during the steel boom. In the longer term, the Corus Group acquisition was a lesser success, mired by financial challenges and controversies which resulted in job cuts and asset sales.

Overall, acquisitions were costly. The group’s balance sheet leverage ratio peaked at debt equal to 1.84 times its equity in 2009, up from 0.52 times in 2005. The 2008 financial crisis exacerbated this financial strain, with the group’s combined net profits falling by 54% in 2009 and a further 7.4% the following year.

By late 2014, Tata Group was £13 billion in debt. The Tata Group’s core companies have since rebounded, largely due to Tata Sons’ financial resources and growing dividend income from Tata Consultancy Services.

Yet, what Ratan Tata accomplished in the ideological domain is unquantifiable. The name of ‘Tata Group’ had irreversibly penetrated household vocabulary across industries, continents, and social strata. Whether or not they paid off in the shorter term, India’s central position in global supply chains today comes as a direct consequence of these gambles.

“Urging compassion”

Ratan Tata was a frequent advocate for stray dogs, allowing them to lounge in the Tata Group headquarters in Mumbai. Evidently, his personal commitment to environmental, social, and governance (ESG) causes has shaped the group’s strategy today.

Under his leadership, the Tata Group committed to becoming carbon neutral, with many of its companies setting targets for reducing their carbon footprints. Tata Trusts, the group’s philanthropic arm, has invested heavily in water conservation measures, afforestation programmes, and initiatives to promote sustainable farming techniques in rural areas. 

The Tata Group’s environmental initiatives gained momentum during Ratan Tata’s tenure. Tata Motors ventured into electric vehicles (EVs), launching the Tigor EV and Nexon EV. The intention was to create a generation of millions of middle-class Indians, for whom sustainability was in the popular lexicon. While the Nexon, advertised as the world’s cheapest car in 2009 (for ₹100,000, or $1,350), proved an expensive failure, the project was socially forward-looking.In the realm of social responsibility, the ‘S’ of ESG, Tata Trusts has provided scholarships and supported sustainable living programs towards rural development across India. During the COVID-19 pandemic, Tata personally contributed ₹500 crore (approximately $68 million at the time) to relief efforts.

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Highly unconventionally for a business tycoon, Ratan Tata has been described as introverted, humble, compassionate, and even adorable. but regarding his approach to placing India on the map of global investment and trade, Tata’s salutary long-termist attitude shows how, above all, he was patient.

The post Ratan Tata, India’s global business ‘titan’ appeared first on Trade Finance Global.

• India introduced digital Trade Receivable Discounting System (TReDS) platforms in 2017 to help SMEs overcome late payment issues, with three licensed entities expected to reach $25 billion in throughput by FY 2024-25.
• TReDS platforms have proven commercially viable and contributed significantly to SME financing by offering innovative auction-based pricing, removing collateral requirements, and promoting factoring adoption.
• Building on TReDS success, India launched International Trade Financial Services (ITFS) platforms in GIFT City for cross-border trade finance, with potential for exponential growth due to wider geographical coverage and product offerings.

Nowadays, every conference, event, and forum across the globe seems to have some discussion on SMEs and how to resolve the challenges they face in global markets – and for good reason. SMEs contribute immensely to employment generation, manufacturing, capital formation, and trade, making them vital to any domestic economy.    

When it comes to trade, one of the major challenges that SMEs face is late payments from their suppliers, which increases the need for costly working capital. Around the world, countries are taking their own approaches to tackle this: often, legally binding buyers to a specific time within which payment must be made, for the goods supplied or services rendered.

But in actuality, these laws are difficult to implement, and many prove ineffective in practice.

India turns to digital platforms 

This was the case in India too – small businesses critical to the economy were struggling because they couldn’t get paid by their buyers on time, despite government legislation.

To resolve this issue, the Reserve Bank of India (RBI) proposed a digital trade receivable discounting marketplace for SMEs in March 2014: marking the beginning of the Trade Receivable Discounting System (TReDS) platforms in India. 

After an elaborate evaluation process and drafted guidelines, the RBI gave three entities licenses for building and operating the TReDS. The platforms went live in 2017 and were the first instance of a digital marketplace being regulated by the financial regulator of the country.

Both the RBI and the Indian government have taken various measures to support the platforms. Some of the significant steps taken by RBI are: 

• Creating a special clearing window dedicated to settling transactions that originated on the TReDS platforms.
• Ensuring that KYC and AML done by the TReDS platforms are accepted by the Banks and non-bank factors.
• Providing a transparent price discovery mechanism through a unique auction process. 
• Introducing the master agreement concept between participants and the TReDS platform (which eliminates the need for bilateral agreements between participants).
• Integrating TReDS entities with the central registry for the registration of factoring units. 
• Allowing TReDS platforms access to the central KYC (CKYC) registry.
• Ensuring that exposure through TReDS is considered part of priority sector lending by the banks.  

The Indian government has also supported the platforms by making registration on TReDS platforms compulsory for all central public sector enterprises, and for all business entities with turnover greater than $30 million. They have also implemented appropriate changes in the Factoring Regulation Act to align with workflows on TReDS platforms.

TReDS: seven years and growing

Over the last seven years, the three TReDS platforms have experienced consistent growth.  

Together, the three platforms are expected to reach a throughput (i.e. total amount discounted) of $25 billion in FY 2024-25, with around 90,000 SME sellers, 5,000 buyers, and 50 financiers. The combined short-term trade asset base is expected to exceed $6 billion.

The TReDS model has also proven to be commercially viable, with all three platforms being cash-positive. Based on market information, delinquencies sit at 0.2%. Making credit insurance available which is aligned with the TReDS workflow can more than double present volumes. This would increase liquidity and encourage financiers to invest more in short-term trade assets – ultimately benefiting SMEs.

The TReDS ecosystem has contributed significantly to the short-term working capital finance ecosystem for SMEs in India. Some of the contributions include:

• Proving how digital platforms can resolve complex financing challenges in the B2B space.
• Creating innovative auction-based price discovery, which reduces borrowing costs.
• Removing collateral and recourse to the seller to better align with the needs of SMEs. 
• Minimising costs for financiers to get a granular self-liquidating portfolio.
• Extending the usance period for buyers to align their working capital cycle.
• Promoting widespread adoption of factoring as a financing tool.
• Maximising security by allowing integration with the ERP systems of all participants.
• Eliminating geographical or time constraints by making the platform accessible from anywhere at any time.
• Removing scalability constraints in terms of liquidity and volume of business.   

IFSCA launches cross-border trade finance platform in GIFT City 

With TReDS’s successful implementation in the domestic market, a new digital cross-border platform is gaining traction under the watchful eyes of the International Financial Services Centres Authority (IFSCA). 

IFSCA – the unified financial regulator in Gujarat International Finance Tec-City (GIFT City) special economic zone in India – calls these new digital cross-border platforms ‘International Trade Financial Services (ITFS) Platforms’.  

GIFT City is being developed as a global financial and IT services hub – a first of its kind in India – and is designed to be at par with globally benchmarked financial centres worldwide. GIFT City’s master plan facilitates a multi-service special economic zone with International Financial Services Centre (IFSC) status, a domestic finance centre, and the associated social infrastructure. 

ITFS is the electronic platform that provides trade finance services at the IFSC. It facilitates cross-border trade financing through a bidding mechanism to global buyers and sellers; financial institutions in India and abroad are participating.

IFSCA issued four licenses to build and operate the ITFS Platforms. Three have been commercially live as of July 2023, and the fourth has completed the regulatory sandbox. 

The ITFS platforms gaining traction amongst buyers, sellers, and financial institutions: over 15 factors and banks are already transacting on the platforms. 

Opportunities and challenges for ITFS platforms

Compared to TReDS, ITFS platforms have more expansive geographical coverage and more product offerings. As such, their potential for exponential growth is immense.

Trade finance professionals anticipate that the ITFS platforms will grow more successful. Some of the reasons are: 

• The widespread adoption of platforms and marketplaces in all formats across the globe.
• Enabling laws passed in different countries aligning with the Model Law on Electronic Transferable Records (MLETR) to fully digitise vital trade documents (like bills of exchange, promissory notes, and bills of lading).
• Platforms and marketplaces that operate in multiple legal jurisdictions will help drive further adoption of MLETR in various countries. 
• More than 80% of cross-border trade today is on an open account basis. With the implementation of MLETR, these trade transactions will become much more fundable by financial institutions than they are today. 
• Platforms and marketplaces provide unparalleled convenience of access in terms of geography, timing, interoperability, and ease of operation.
• ITFS platforms are operated under strict monitoring by financial regulators, which enhances their credibility.
• Access to the central registry makes platforms safer for financiers. 

Despite the optimism, a few challenges persist for the ITFS platforms, including an absence of uniform stnadards and regulations for open account transactions. Since funds are settled outside the platform, high turnaround times also pose a problem; as does awareness creation, and concerns of data privacy.

Nonetheless, it is believed that ITFS platforms will benefit from network effects, leading to value creation for participants and expansion of the market. 

The adoption of MLETR, increased volumes for open account trade, interoperability, seamless integration capability, ensured liquidity, transparent regulations, the possibility of tokenisation and secondary market operations will all make platforms like ITFS the future of global trade finance. These developments will be exciting to watch in the coming years.

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