Foreign Trade of India
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Transcript of Foreign Trade of India
Foreign Trade Of India
Meaning
• Foreign Trade refers to trade carried on by India with other countries. It comprises of :
A) Export Trade :Sale of G/S by India to other countries (visible & invisible items)
B) Import Trade :Purchase of G/S by India from other countries (visible & invisible items)
Importance In Economic Development
• Foreign Trade plays an very important role in economic development. Following are the importance listed below :
1) Industrial (Raw Materials & Technology)
2) Good insufficient e.g. petroleum, metals like: Zinc Lead Copper.
3)Export good of surplus.4) Widens Markets for our products
5) Our Exports Pay for Imports
6) Growth of NI
7) Civilization- economic well – being
8) Co-operation between countries
9) Employment
10) Exploitation of untapped resources
Features of Foreign Trade A) Sea – Born 95%
B) Increase in value of trade – in cores
C) Change in Composition of trade -
Before independence – • Imports were Manufactured goods• Exports were raw cotton & raw jute
After independence – • Imports were raw materials • Exports were commercial items
1950-51 2005-06
1,214 11,16,827
D) Invisible Imports – After Independence better Growth
E) Direction Of Trade –Before independence : UK
After independence : Germany, Japan ,China
F) Adverse BOT- in cores
G) Increase in Govt participation
H) Bilateral Agreements : Russia, Germany
I) Import Restrictions : Tariff & Quota
1991-92 2005-06
3,809 2,03,991
Composition & Direction Of Trade
Composition Of Trade
Items of Goods Imported/Exported in India.
Primary Manufacture Services
Plantation CropsTobaccoSpices Ores & Minerals Leathers
Cotton Textiles Jute ManufactureGems & jewelleryHandicraftsOthers •Sugar•Sports goods•Soaps
Computer Sofware ServiceTourist ServiceBanking Insurance
Items of exports
Primary Plantation Crops (Traditional) 2676 in 2003 -UK USA
Tobacco-(Un manufactured) – UK ,JAPAN
Spices (Traditional) pepper clove –USA, Middle East
Ores & Minerals: Iron Mica – USA ,Iran, Japan
Leathers 11,915 in 2005-2006 UK Russia Germany
ManufactureCottonTextiles (Traditional) 55,408 in 2005-06 UK Japan
Jute Manufactures (Traditional) 1,318 in 05-06 USA UK
Gems & Jewellery 68,572 in 2005 - USA, Middle East
Handicrafts 5,683 in 2005 -2006
Items of ImportsCommodities 2005-2006(crore) Countries Petroleum & products 1,94,640 Iran Iraq KuwaitPearls, precious stones
40,441 Increase in DD
Capital Goods 1,04,142 USA JapanFertilisers (Agriculture)
8,815 USA Germany
Metals 68,93 (2003-04) Germany UKFood Grains 88 (2003-04) USA Australia Edible oil 8961Raw Cotton USA EgyptRaw Jute 1 BANGLADESH
Others –Medicines, Chemicals, Coal, News Prints
Composition Of TradeCountries with which India carries foreign trade.
Before independence : UKAfter independence : Germany, Japan ,ChinaToday , India has trade with all major trading blocks and geographical regions of world.Region wise exports%
Region wise exports%
Asia W-Europe America
46.35 24.02 21.10
34.54 23.58 8.59
Country –wise India's Foreign Trade in Rs Crores (2005-06)
Country Exports % Imports %
Germany 15571 3.42 25760 4.09
U.K 22783 5.01 17259 2.74
USA 76166 16.7 34436 5.46
Russia 3232 0.7 8819 1.40
African
Countries
24723 5.44 17156 2.72
Balance of payments • In economics, the balance of payments,
(or BOP) measures the payments that flow between any individual country and all other countries. It is used to summarize all international economic transactions for that country during a specific time period, usually a year.
• Significance – 1. Indicates international economic position.2. Useful in economic analysis
Structure or components of BOP
• The current account consists of the goods and services account, the primary income account and the secondary income account. (1) Visible (2) Invisible (3) Unilateral Transfers
• The capital account in the international accounts shows (1) capital transfers receivable and payable (Movements of SR &LR); and (2) change in foreign exchange reserve
CURRENT ACCOUNT
(1) Visible - BOT covering all imports/exports
(2) Invisible–Services like Transport & Banking
(3) Unilateral Transfers – Gifts ,Donations
CAPITAL ACCOUNT
(1) Movements of SR &LR –Governmental Capital transactions including International Agencies & private capital transactions
(2) change in foreign exchange reserve – inflow and outflow of exchange reserve
Current position Of India's Foreign Trade
• 1951-76 (deterioration )
• 1977-1980( improvement)
• 1980-1990 (structural balance)
• 1991-96 (stabilization)
• 1996-2006(Surplus)
Causes for Disequilibrium in BOP
• Increase in Imports
• Slow growth of exports
• Growth of population
• Substitute Products – Silk
• Oil Crises – (300%)
• Increase expenditure on foreign loans
• Imports of Food Grains
Measure to correct Disequilibrium in BOP• Export Promotion• Publicity- Trade Fair Authority of India TFAI• Exports Incentives• Trade agreements• Devaluation• Tax Relief • Credit Facilities • Import Restriction• Attract Foreign tourist • Import Substitution
Differences between BOT & BOP
Balance Of Trade Balance Of Payments
Only visible items (Goods) Both visible & invisible (G/S)
Narrow in scope Border in scope
Current Account Current & Capital Account
No realistic Picture in economic position in international trade
Realistic Picture in economic position in international trade
Foreign exchange reserves
• Foreign exchange process of converting one national currency into another and of transferring money from one country to another.
• Foreign exchange reserves official holding of foreign currency (central bank) by a nation
• Import cover Foreign exchange - amount of foreign currencies earned by nation by export of G&S to other country at a given point of time
Trade Sector Reforms
1. Formulation of EXIM policy2. Measures for Export promotion3. Liberalized Import policy4. Removal of quantitative Restriction• GATT- General Agreement on Tariffs and Trade
• GATS- General Agreement on Trade in service
• TRIPS- Trade Related aspects of Intellectual property Rights
• TRIMS- Trade Related Investment Measures
• WTO – world Trade Organization
EXIM policy
• Export and Import Policy for the five year period 2002-07 coinciding with the 10th Five year Plan.
• This Policy recognized that international trade is a vital part of development strategy and that it can be an effective instrument of economic growth.
• the policy adopted the goal for India to reach 1% share of global trade by the year 2007, up from the level of 0.67%.
• Special Economic Zones (SEZ) • Export Oriented Units (EOU)
Measures for Export promotion
• Packaging for Exports
Role of packaging for exports has gained much significance in view of trends in the world markets. The need for better and scientific packaging for exports from small sector was recognised long back. With a view to acquaint SSI Exporters of the latest Packaging standards, techniques etc.
• Technical & Managerial Consultancy Services • Marketing Development Assistance • Setup of EXIM bank• Bilateral tarde• 100% EOU’s were promoted• Several duties have been abolished
Liberalized Import policy• One of the objective of GATT and WTO is to
Liberalized Import among members• In 2001 as per WTO, all quantitative restriction
except a few related to defence and health have been fully removed.
Removal of quantitative Restriction• Since independence, India has been
safeguarding Domestic industries. By Tariff and quotas.
• In 1999 2,700 items were not duty free. But WTO has taken a required step for the Removal of quantitative Restriction
GATT- General Agreement on Tariffs and Trade
• Launched in 1948 by 23 countries including India.
OBJECTIVES• To reduce trade Barriers• To eliminate international discriminations • To have mutual co-operation• To develop full utilization of resources• To increase world production by ensuring full
employment
GATS- General Agreement on Trade in service
• Is one of the multilateral agreements of WTO.
• Services like banking, insurance, transportation, television, radio ,film etc are heavily protected through restrictions.
• The main obligation is that the member countries are prevented from discrimination among foreign suppliers
TRIPS- Trade Related aspects of Intellectual property Rights
TRIMS- Trade Related Investment Measures
TRIPS To promote innovation and transfer of technology.
1. Property rights2. Trade marks3. Industrial designTRIMS• To meet trade balancing requirements• Local contents• Domestic sale requirements
WTO – world Trade Organization
• 1 ST JAN 1995. LOCATED IN Geneva in Switzerland.
• An international organization that administers multi lateral agreements in relation to trade of G/S TRIPS .
• 132 members countries including develop and developing countries
• Its nature is to deal with rules of trade and it provides platform for better trade relations
Objectives• To administer multi lateral trade system• Platform for multilateral trade negotiations• To keep a track of national trade policy of
member countries• To resolve disputes among member countries.
Principles • Most favored nations• Reduction in trade barriers• Unfair practices such as Dumping• More benefits to be give to less developed
countries
WTO & India
• Lowering of import duties – close of industries
• Quantitative restriction – member complains has forced to remove the Quantitative restriction has led to damage to industry
• 2nd hand cars are allowed to be imported.. Effected the automobile industry
• Small scale industries• MNC’s