Analysis of Trends, Composition and Direction of India's Foreign Trade Since 2000

Analysis of
Trends, Composition and

Direction
of India's foreign trade since 2000
Analysis of
Trends, Composition and Direction
of India's foreign trade since 2000
Amit Singh
Chetan Pandit
Parshva Doshi
Soumit Ghosh
Venkati Muttappa
Foreign Trade Policy 2004-09
India’s Foreign Trade:
Period Growth Rate
1999-2000 10.85
2000-2001 21.01
2001-2002 -1.65
2002-2003 20.34
2003-2004 17.26
Objectives:
• Objective:-
# Facilitate sustained growth in exports

to attain a share of atleast 1.5% of global
merchandise trade.
# Present share - 0.67%
# Export target (2006-07)- 85 b $.
# Present Annual growth rate(CAGR) -11.9%
New Export Target
# Target- 1.5% of the International Trade
# CAGR Required- 15.18% (in US$ terms)
# Assumption- World Trade Growth @ 4.5%

(2003 rate)
Objectives (Contd.):
Facilitating high share of Indian Goods
and Services in the International market
# Act as Instrument of Economic Growth,

Employment Generation and Poverty
Alleviation
# Reflect the priorities for development of

the Indian Economy
Strategy:
• # Bring down transaction cost– Simplified procedure,
• Unshackling of controls, built-in transparency &
• mutual trust;
• # India to be a Global hub for Manufacturing, Trading
• & Services;
• # Special Focus area Initiatives;
• # Facilitating Technological & Infra-structural upgradation;
• # Neutralising incidence of all levies & duties on inputs—
• Duties & Levies should not be exported.
Thrust Sectors:
# Agricultural
# Handicrafts
# Handlooms
# Gems and Jewellery
# Leather
# Textile
WTO and Issues Concerning India
Background
• India joined WTO since inception in 1995.
• Aim to participate in WTO rule based system with
greater stability, transparency and predictability in
governance of international trade.
• Developing countries like India availed of greater
trade opportunities and also challenged certain
policies of developed countries (DCs)
• Developmental issues increasingly focused along
with trade issues.
• S&D treatment for developing and LDCs
incorporated
Areas of concern
• In spite of special provisions for developing countries,
certain imbalances and inequities experienced.
• India has reduced tariffs to bring them to bound levels.
Even lower for a large number of commodities as part
of the reforms process. Now, India committed to
reduce tariffs to bring in line with South East Asian
countries by 2007.
• The industrial sector faces several constraints-some
protection warranted for specific industries.
• Non-agricultural tariffs gradually reduced but
agricultural tariffs require greater caution due to
following reasons
• India and other developing countries have argued that
agriculture is way of life and employs large proportion of
workforce while contributing significantly to GDP.
• Exposure to volatile international market would affect not
only domestic prices but also incomes of poor.
• Technical barriers to trade and stringent restrictions on
grounds of SPS regulations to be relaxed to prevent
protectionist measures by DCs on this plea.
• Grant of patents on non-original innovations, particularly
linked to traditional medicines issue of concern.
• Mechanism proposed for disclosure of source of origin of
biological material used along with consent of country of
origin. Dissemination of knowledge and also patent rights for
seed diversity important for developing countries.
• Under agreement on Trade in Services, developing countries
have asked for relaxing restrictions on movement of natural
persons.
Tariff Structure in India
• Tariff structure in India highly complex in early 1990s. With
initiation of reforms, substantial reduction in customs duty
rates. Simple average duty rates declined from 128% in 1991-
92 to 22.4%.
• While average duty rates have declined, still large number of
tariff rates prevalent ranging from zero per cent to over 150%.
• Commodity Groups in range 100% or higher in 2004-05
include coffee, tea, alcoholic beverages, essence and perfumes,
sugar items, grapes and juices, motor cars, and motor cycles.
• In the 50-100% range, commodities are edible oils, wheat, rice
and some other agricultural goods
Observations
• Large tariff reductions of essential import items like cereals, dairy
products, edible oils and other agricultural products with low
elasticity would benefit the consumers but would be unacceptable on
considerations of number of people dependent on these items for
their livelihood and implications on domestic production. These
sensitive items are also heavily subsidized by DCs.
• On the other hand, drastic tariff reductions on items with high import
elasticity could lead to substantial surge in imports and affect the
domestic economy adversely.
• It is imperative that tariff rates need to be rationalized and more
importantly made more uniform and transparent.
• While undertaking reduction commitments, need to carefully identify
sectors that could be subjected to greater tariff reductions than others.
• At the same time, items of export interest with high import content
need separate treatment.
• Delicate balance of various considerations required to determine
tariff reductions such that have minimal detrimental impact on
economy
Latest Trade Statistics
• Top 5 Countries of Import
• Top 5 Countries of Export
• Top 5 Commodities of Import
• Top 5 Commodities of Export
• Import of Principal Commodities Groups
• Export of Principal Commodities Groups
• Import details : Continent and country wise
• Export details : Continent and country wise
• TRENDS 2004-2010 AGGREGATE & OIL
• BOP 2007 – 2008

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Analysis of

Trends, Composition and

# Facilitate sustained growth in exports

# CAGR Required- 15.18% (in US$ terms)

# Assumption- World Trade Growth @ 4.5%

# Act as Instrument of Economic Growth,

# Reflect the priorities for development of

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