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INDIAN TRADE: FEATURES, FACTS AND FUTURE
ASHISH DWIVEDI
INDIA’S SHARE IN WORLD TRADE
n 1950 --- 1.78%
n 1960 --- 1.36%
n 1970 --- 0.65%
n 1980 --- 0.57%
n 1990 --- 0.59%
n 2000 ---0.80%
n 2009 ---1.50%
WHY IT DECLINED?
n SIZE OF THE CAKE HAS INCREASED MANIFOLD

n INWARD LOOKING ECONOMY

n LACK OF CLEAR FOCUS ON EXPORTS

n ABSENCE OF VALUE ADDED PRODUCTS IN EXPORT BASKET

B.O.T AND B.O.P.
n B.O.T. = net export value- net import value

n B.O.P. Current a/c= trade balance+ net invisibles+ Pvt. transfers

n B.O.P. Capital a/c= FDI+ Loans from abroad+ NRI deposits


TRADE DEFICIT: TREND
n 1950 --- Rs. 2 Crore
n 1960 --- Rs.480 Crore
n 1970 --- Rs. 99 Crore
n 1980 --- Rs. 5900 Crore
n 1990 --- Rs. 10,600 Crore
n 2000 --- Rs. 27,300 Crore
n 2004 --- Rs. 90,000 Crore
WHY ?
n India has always had a negative B.O.T.


n The trade deficits has grown sharply in recent past

n It does not seem alarming?


INTERPRET THEM !
n Export/ GDP = 11%
n Import/ GDP = 13.5%
n B.O.T./ GDP = - 2.5%
n External debt/GDP = 17.8%
n S.T.B./ Total ext. debt = 5.7%
n Debt service ratio = 10.4%
WHAT DO WE SELL ?

n Engineering goods --- 20.1%
n Gems & jewellry --- 17.5%
n Textiles & RMG --- 16.3%
n Chemicals --- 14.2%
n Agro products --- 9.5%
n Petrochem --- 8.6%
n Mineral and ore --- 4.7%
n Leather and manufactures --- 3.0%
n Others --- 3.5%


WHAT DO WE BUY ?
n P.O.L. --- 30%
n Capital goods --- 10%
n Electronics goods --- 9.3%
n Gold and silver --- 8.7%
n Precious stones --- 8.0%
n Chemicals --- 7.0%
n Edible oils --- 3.0%
n Coal --- 2.5%
n Others --- 20%

WHO DO WE DO BUSINESS WITH?
n USA --- 11.1 %
n CHINA --- 5.6 %
n UAE --- 5.5 %
n BELGIUM --- 3.8 %
n UK --- 3.7 %
n GERMANY --- 3.5 %
n SINGAPORE --- 3.3 %
n SWITZERLAND --- 3.0 %
n HONGKONG --- 2.8 %
n JAPAN --- 2.6 %
THE DRAGON OUTPERFORMS US!
HOW CAN WE INCREASE OUR SHARE IN GLOBAL TRADE ?
n Lower import duties
n Become more cost competitive
n RTA, PTA and FTAs
n Shift to value added products
n Shift to high end consulting
n Market our own products
n Buy brands abroad
n Play on strengths

THE INDIAN SUCCES STORIES…. WHAT’S COMMON IN THEM?
n RELIANCE

n MOSER BAER

n SUNDARAM FASTNERS

n BHARAT FORGE

POTENTIAL DRIVERS
n IT Consulting
n BPO
n KPO
n R&D
n HEALTHCARE
n TOURISM
NEW CHALLENGES !
n Enter Product Patent Regime…


n End of textile quota …


n Child labour and environmental issues…

F.T.A.s= BUSINESS -BOUNDARIES
n N.A.F.T.A.-

• Non tariff /tariff barriers to agro trade removed/ on their way out
• Spl protection to import sensitive industry
• 149% rise in US- Mexico agro- trade
• 112% rise in US- Canada agro- trade
• General rise in living std and economy







F.T.A.s= BUSINESS -BOUNDARIES
§ A.S.E.A.N.-
• 20% rise in intra- ASEAN exports


§ E.U.
• World’s largest emerging market


S.A.F.T.A. : FACTS
n Signed in 12th SAARC summit , Jan 2004
n India Pakistan Bangladesh Bhutan Maldives Nepal Srilanka
n Presupposes elimination of all trade and tariff restrictions
n Ultimate goal—creation of common market with common currency
n Initially tariffs brought at 5%
n All tariffs to be reduced to 0% by 2015 Dec.
n Any state can pull out at any time

S.A.F.T.A.: HOW IT WILL WORK
n Countries to form sensitive lists
n Revenue loss compensation mechanism for LDCs to be in place
n SAFTA ministerial council with membership of each country’s commerce minister
n A committee of experts to supervise
n An arbitration council to settle disputes
n Removal of barriers to intra-SARC investments, simplification of Visa procedures

S.A.F.T.A. : ODDS AGAINST …..
n Speculation rife about future given political dynamics of the region

n Sizes of economies do not match

n Home to some of the poorest countries

n Lack of a unified agenda and political willingness







FOREIGN TRADE POLICY
n Dual objectives—
1-To double India’s share in world trade
2- Creation of employment
n Focus –
1- Agriculture
2- Handicrafts
3- Handlooms
4- Leather
5- Gems and Jewelry
FOREIGN TRADE POLICY.. Contd.
n Special initiatives—
n Schemes to promote agriculture and services trade
n Duty free imports for services importers
n Ban on old machinery imports lifted
n FTWZs to be created on the lines of SEZs

SPECIAL ECONOMIC ZONES
n What is an SEZ ?

n An area specially demarcated by physical boundary from DTA, to provide an internationally competitive environment for export promotion.. by means of providing tax shelter ,streamlined govt. approvals and excellent infrastructure.
WILL SEZs PAY OFF ?
n Labour laws may NOT be as liberal as are in China

n Export earnings must outweigh the tax loss

n Infrastructure may not keep with mushrooming of SEZs

n EPZs must be brought at par to arrest erosion of industry from them



THANK YOU!