DBA - 1702 - INTERNATIONAL BUSINESS MANAGEMENT ASSIGNMENT – I 1. Describe the types and role of Export promotional council to promote International Trade. EXPORT PROMOTION: Export promotion has been one of the main planks of foreign trade policy of most countries. With increasing export earnings, the benefits of enhanced domestic employment, rising revenues to companies and government, rise in standard of living, expanding overseas operations funded by export surplus, appreciation of domestic currency, raising forex reserve, no pressure to borrow from world markets – institutional or otherwise, an acknowledgement of capabilities of domestic people and firms, etc emanate. Also, in the world of rising oil prices, countries with no or far less oil reserves have to depend on exports to pay for rising oil import bills. Thus exports benefit a nation in many ways, but the world market is competitive, because every firm/country wants to export more. To have the edge over others in the global market, governments provide some promotional measures to firms to increase their export competitiveness. These measures are: (roles) Financial, Fiscal, Facilitative, Favours and Felicitating. Types: Export Promotion Council & Commodities Boards Federation of Indian Export Organizations (FIEO) All India Exporters Chamber Agricultural and Processed Food Products Export Development Authority (APEDA) Marine Products Export Development Authority Carpet Export Promotion Council Engineering Export Promotion Council Export Promotion Council for EOUs and SEZ Units Electronics & Computer Software Export Promotion Council Export Promotion Council for Handicrafts Gem & Jewellery Export Promotion Council Apparel Export Promotion Council (AEPC) Basic Chemicals, Pharmaceuticals & Cosmetics Export Promotion Council, (CHEMEXCIL) Cashew Export Promotion Council of India (CEPC) Chemical & Allied Products Export Promotion Council (CAPEXIL) Cotton Textile Export Promotion Council Council for Leather Exports (CLE) Handloom Export Promotion Council (HEPC) Indian Silk Export Promotion Council (ISEPC) National Agricultural Cooperative Federation of India Ltd. (NAFED) Project Exports Promotion Council (PEPC) Plastics Export Promotion Council (PLEXCONCIL) Shellac Export Promotion Council Sports Goods Export Promotion Council (SGEPC) Synthetic & Rayon Textiles Export Promotion Council (SRTEPC) Wool & Woollens Export Promotion Council (WWEPC) Central Silk Board (CSB) Coconut Development Board (CDB) Coffee Board of India Coir Board Jute Manufacturers Development Council (JMDC) Rubber Board Spices Board Tea Board Tobacco Board
A. Financial Services for Exporters Exporters are given priority finance at concessional terms of lending by financial and banking institutions under a kind of directive lending. Even specialist financial institutions are created to exclusively cater to export firms. Commercial banks and the special Export-Import Bank of India, in short, EX-IM Bank, serve the exporting community by providing credit finance to exporters. The EXIM bank functions as the principal financial institution for coordinating the working of institutions engaged in financing export and import of goods and services with a view to promoting the country’s international trade. Another facility is credit guarantee. a. Credit by EX-IM bank, Commercial Banks and ECGC for exporters Pre-shipment credit, Post Shipment credit, Supplier’s Credit, Credit for Project Exporters, Credit for Exporters of Consultancy and Technological Services, and Guarantee facilities are different assistances offered by EX-IM bank, Commercial Banks, Export Credit and Guarantee corporation, etc. Pre-shipment Credit facility, in Indian Rupees and foreign currency, provides access to finance at the manufacturing stage - enabling exporters to purchase raw materials and other inputs. Supplier’s Credit facility enables exporters to extend term credit to importers (overseas) of eligible goods at the post-shipment stage. Credit facility for Project exporters to meet rupee expenditure on overseas project export contracts on mobilization / acquisition of materials, personnel and equipment etc is also offered. Credit facility to exporters of consultancy and technology services, so that they can, in turn, extend term credit to overseas importers is also provided. EX-IM bank offers Rediscounting Facility to commercial banks, enabling them to rediscount export bills of their SME customers, with usance not exceeding 90 days. EX-IM bank also offers Refinance of Supplier’s Credit, enabling commercial banks to offer credit to exporters of eligible goods, who in turn extend them credit over 180 days to importers overseas. Companies executing contracts within India, but which are categorized as Deemed Exports in the Foreign Trade Policy of India or contracts secured under international competitive bidding or contracts, under which payments are received in foreign currency, can avail of credit under Finance for Deemed Exports facility, aimed at helping them meet cash flow deficits. Overseas buyers can avail of Buyer’s Credit, for import of eligible goods from India on deferred payment terms. Special schemes are available for Small and Medium enterprises (SMEs), rural grass-root enterprises and Agri-exporters. b. Funding for Exporting Companies EX-IM bank, term lending financial institutions and commercial banks provide term Finance under different schemes: Equity Participation, Project Finance, Equipment Finance, Import of Technology & Related Services, Domestic Acquisitions of businesses/companies/brands and Export Product Development/ Research & Development. Under General Corporate Finance Working Capital Finance (For Exporting Companies) Working Capital Term Loans [< 2 years], Long Term Working Capital [upto 5 years], Export Bills Discounting, Warehousing Finance, Export Lines of Credit, Export Packing Credit and Cash Flow financing are extended. Letter of Credit facility is also extended to importers. Funding for overseas acquisition: The schemes for financing Indian Company’s equity participation in the overseas Joint Venture (JV)/ Wholly Owned Subsidiary (WOS), Term & Working Capital to the overseas JV / WOS, Finance (for equity/debt component) for acquisition of overseas businesses / companies including leveraged buy-outs including structured financing options and Direct Equity are available with Exim Bank, selected commercial banks and term lending financial institutions. c. Line of Credit Line of credit is a facility where a foreign institution, generally government or government owned, is provided finance which in turn extends the funds to a domestic institution that takes designated works or projects in the foreign country concerned. This is a tripartite arrangement, of which one is the Indian financing institution, the second is an Indian firm carrying out a project oversea and the third is the foreign government or financing agency. d. Export Credit Guarantee service Apart providing finance for exporters, insurance against risk of default on the part of importers is a very great need. To provide this guarantee, Export Credit Guarantee Corporation of India (ECGC) was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of
exporting on credit. ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports. It provides a range of credit risk insurance covers to exporters against loss in export of goods and services. Offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them. Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan B. Facilitating Services for Exporters There are scores of institutions that render varied services to exporters. There are Export Promotion Councils for major product groups, Commodity Boards for selected plantation and other crops, Trade Authorities for few product classes that render a range of services for product/service/commodity items that they are responsible. a. Services extended Exploration of overseas market, Identification of items with export potential, Market survey and up-to-date market intelligence, Contact with protective buyers to interest them in the exporters’ products, Providing the export company’s profile to overseas buyers and vice-versa, Advice on international marketing, Display of selected product groups ,Arrangement for supply of indigenous and imported raw materials for export production, Resolving shipping and transport problems, Advice on export finance banking and insurance, Extensive publicity in India and abroad, Participation in Trade Fairs and Exhibitions abroad, Deputation of trade delegations, study teams and sales teams to foreign markets, Organizing Buyer-Seller Meets in India and abroad, Catering to other developmental needs, Collecting, collating and disseminating world market intelligence, Updating the information on global trends in fashion & design, product development and adaptation, Dissemination of information of commercial and technological nature through seminars, news bulletins and magazines, Organizing participation of Indian exporters in international fairs and buyer seller meets, Organizing visits of buyers’ delegations from different countries, Liaising with various international organizations dealing with trade information, Leading trade delegations to potential markets globally, Formulating Inter-State trade Council to engage State Governments in providing an enabling environment for promotion of international trade, etc. b. Facilitating Institutions: Export Promotion Councils and Authorities i. Agricultural and Processed Food Products Export Development Authority, ii. Marine Products Exports Development Authority, iii. Apparel Export Promotion Council, iv. Building Materials and Technology Promotion Council, v. Carpet Export Promotion Council, vi. Cashew Export Promotion Council of India, vii. Chemicals & Allied Products Export Promotion Council, viii. Council for Leather Exports, ix. Cotton Textiles Export Promotion Council, x. Electronics & Computer Software Export Promotion Council, xi. Engineering Export Promotion Council, xii. Export Promotion Council for Handicrafts, xiii. Gem and Jewellery Export Promotion Council, xiv. Handloom Export Promotion Council, xv. Silk Export Promotion Council, xvi. Synthetic & Rayon Textile Export Promotion Council, xvii. Wool & Woolens Export Promotion Council, xviii. Jute Manufactures Development Council, xix. Plastics and Linoleums Export Promotion Council, xx. Power loom Development & Export Promotion Council, xxi. Cotton Textile Export Promotion Council, xxii. Shellac Export Promotion Council, and xxiii. Sports Goods Export Promotion Council. c. Facilitating Institutions: Commodity Boards and Other Agencies Asia Pacific Textile Clothing Forum, Central Silk Board, Coconut Development
Board, Coir Board, Federation of Indian Export Organizations (FIEO, India Trade Promotion Organization, Indian Institute of Foreign Trade, National Agricultural Cooperative Marketing Federation of India Limited (NAFED), National Dairy Development Board, National Horticulture Board, National Oilseeds and Vegetable Oils Development Board,National Medicinal Plants Board, Patent Facilitating Centre, etc. C. Fiscal Concession for Exporters Fiscal concessions are in the form of tax concession on profit from export business, import duty concession on imports for supporting export activities, excise duty concession for export activities, exemption from certain levies on exports, etc. I Export cess on export of all agricultural and plantation commodities levied under various Commodity Board Acts was waived. Ii No safeguard and antidumping duty to be levied on inputs under advance license for deemed export supplies made to ICB (International Competitive Bidding) projects. Iii EPCG Scheme will facilitate the modernization of retail sector by allowing concessional duty imports. For this the retailer should have a minimum covered shopping area of 1000 square meters. IV Duty free import of inputs based on the past export performance, import of mono filament long line system for tuna fishing at concessional duty and establishes a self removal for clearance of waste of perishable commodities. V Entitlement of duty free imports of samples enhanced to Rs. 3 lakhs for gems. VI EOUs can claim IT exemption within a period of 12 months from the date of exports. Vii All actions by Income Tax authority on DEPB benefits have been stopped by Prime Minister with immediate effect. The matter is to be decided at economic advisory council headed by Prime Minister in the next 30 days. Viii Export obligation for specified projects shall be calculated based on Concessional duty permitted to them. This would improve the viability of such projects. An EPCG license can also be issued for import of capital goods for supply to projects notified by the Central Board of Excise and Customs under S.No.441 of Customs Exemption Notification No.21/2002 dated 01-03-2002 where in the basic customs duty on imports is 10% with a CVD of 16%.The export obligation for such EPCG licenses would be eight times the duty saved. The duty saved would be the difference between the effective duty under the Aforesaid Customs Notification and the concessional duty under the EPCG Scheme. Ix Fiscal Relief to EOUs a. EOUs shall be exempted from Service Tax in proportion to their exported goods and services. b. EOUs shall be permitted to retain 100% of export earnings in EEFC accounts. c. Income Tax benefits on plant and machinery shall be extended to DTA units which convert to EOUs. D. Favours for Exporters i. Realizing that great potential and opportunities exist in the manufacturing sector, Annual supplement introduces a number of measures to enhance the competitiveness of manufacturing sector. ii. To promote accelerated export performance, balance export obligation will be waived iii. for the exporters completing 75% of their export obligation in half the prescribed export obligation period. iv. Reduced export obligation and enhanced time available for exports under the EPCG Scheme for the imports made by the agriculture sector. v. Favours to EOUs vi. Favours to Free Trade and Warehousing Zone vii. Common Facilities Centre viii. Procedural Simplification & Rationalization Measures ix. Facilities at Pragati Maidan x. Legal Aid xi. Grievance Redressal xii. Quality Policy
xiii. xiv. xv. xvi.
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E. Felicitative Encouragements to Exporters a. Target Plus A new scheme to accelerate growth of exports called “Target Plus” has been introduced. Exporters who have achieved a quantum growth in exports would be entitled to duty free credit based on incremental exports substantially higher than the general actual export target fixed.(Since the target fixed for 2004-05 is 16%, the lower limit of performance for qualifying for rewards is pegged at 20% for the current year). Rewards will be granted based on a tiered approach. For incremental growth of over 20%, 25% and 100%, the duty free credits would be 5%, 10% and 15% of FOB value of incremental exports. b. New Status holder Categorization: The Scheme of status holders continues but the categorization of status holders from Export House, Trading House, Star Trading House and Super Star Trading House has been changed to one Star Export House, two Star Export House, three Star Export House, four Star Export House and five Star Export House. Star Export Houses shall be eligible for a number of privileges 2. What are the concerns and challenges for India from the WTO perspective? World Trade Organization India is an original Member of the WTO and provides MFN treatment to all Members and other countries. It has accepted the Fourth and Fifth Protocols and is a Member of the Information Technology Agreement. It is not a party to the WTO Government Procurement Agreement (GPA). Like all Members, India is required to make regular notifications on its trade-related laws and measures. India is an active Member of the WTO. In the current negotiations, it has submitted proposals relating to, inter alia, agriculture, non-agriculture market access (NAMA), services, disputes, competition policy, trade facilitation, rules, TRIPS, and special and differential treatment. A number of these proposals were made jointly with other Members and in many instances with developing countries, including the G-20, G-33, and NAMA-11 groups. India’s position prior to the launch of the Doha Round of negotiations placed emphasis on securing the objectives outlined in the mandated negotiations and the implementation issues raised by a number of developing countries. At the Ministerial Conference in Cancun, in September 2003, and in Hong Kong, China in December 2005, India stressed the need to address agricultural subsidies in rich countries and tariff and non-tariff barriers maintained by these countries on products of export interest to developing countries. India believes that the interests of its 650 million rural poor, who are dependent on agriculture for a livelihood, cannot be jeopardized. It is therefore emphasizing special and differential treatment through proportionately lower overall bound tariff reduction commitments by developing countries, coupled with a special safeguard mechanism and a list of special products vital to ensuring livelihoods and food security of farmers in developing countries. With regard to NAMA, (NAMA products include fish and fishery products, wood and forestry products, electronics, manufactures, automotive products, machinery, textiles, clothing, leather, chemical products, and mining products) India, along with its coalition partners, believes that: progress must be made on achieving a fair, balanced, and development-oriented set of modalities based on the mandated principles of placing development concerns at the heart of the negotiations; ensuring less than full reciprocity in reduction commitments for developing countries; achieving a comparable level of ambition.
Read and concise India submits proposals Published in SUNS #6739 dated 13 July 2009
Geneva, 10 Jul (Kanaga Raja) -- India has proposed that the forthcoming seventh Ministerial Conference of the World Trade Organization (WTO) end November should address some systemic issues with the aim of improving the functioning and efficiency of the WTO as a rules-based system, and make the system more useful, relevant, vibrant and user-friendly. Towards this end, India has submitted a set of five proposals, in a communication (WT/GC/W/605, dated 2 July 2009) to the upcoming General Council meeting on 28-29 July. The communication is in the context of India's stated intention at a General Council meeting on 26 May 2009 to submit a few proposals that it considered important from the perspective of improving the functioning and efficiency of the WTO as a rules-based system. India's first proposal relates to trade information based on member notifications. The proposal calls on Ministers to direct the setting up of a project to enhance the Integrated Database to include in an appropriate format non-tariff data, based on the current notification obligations under WTO Agreements. [Trade experts and former negotiators have been noticing, and commenting, that many of the agreements have provisions requiring members to notify regularly - such as on agriculture supports/subsidies, and regulatory changes in respect of services - and the scheme of the Marrakesh agreement envisaged the various committees to exercise oversight. However, in the preoccupations of launching the Doha Round, and attempts to conclude it, via miniministerial meetings etc, an important aspect of routine technical work has been neglected.] The project, India said in its communication, should be designed to be efficient and effective by inter alia limiting additional resource requirements; optimising the design and structure of present notification systems; enhancing cooperation with related multilateral agencies; and providing technical assistance to developing countries, in particular the LDCs. India noted that in the realm of trade information, there is a significant gap in the information available on non-tariff measures (NTMs). Closing this gap is of particular importance to governments as well as for trade operators. While the WTO is uniquely placed as the biggest repository of certified trade information about its members' regimes through its system of notifications under various WTO agreements, at present, this information has at best archival value because of the way information is submitted and stored. "It is incomplete, not comparable amongst members or even timely." What is needed is better integration and coherence in database form and more effective public visibility of the existing information, said India, voicing the view that such an exercise need not be resource intensive. The second proposal relates to re-vitalizing WTO Committees. The proposal points to direction from Ministers to include in the agenda of formal WTO Committee meetings inter alia - monitoring of recent developments in members on the trade disciplines covered by the committee, based on a compilation by the Secretariat of developments between formal meetings and verified by the member concerned; regular discussions on general developments in the areas covered by the committee, including in the presence of outside experts; and through adoption of appropriate procedures, discussion on and resolution of low threshold specific trade concerns in small group settings. "Given the widely perceived declining utility of the committee work, it is imperative that measures to revitalise them be adopted," said India, suggesting some ways on how the committees can be re-invigorated. One way is that the recent exercise in the TPRB (Trade Policy Review Body) of the WTO of monitoring developments in the trade regimes of various members has proved to be a useful tool for all members, particularly the developing countries that have an inherent disadvantage in gathering such information. This practice could be formalized and be made a regular agenda item for all formal meetings of all trade related WTO Committees. "Along with member notified measures, the Secretariat may make factual presentation on developments in various members on the disciplines covered by a committee. The Secretariat may base its factual report on information gathered from publicly available and reliable sources and after the gathered information being verified by the member concerned." Another way to improve the relevance of the WTO Committees may be to include on the agenda, on a mandated basis, a discussion on the current practices and developments in the trade disciplines covered by a particular Committee. It may be considered to invite outside experts to present their views on such developments. Such a topical discussion will keep members abreast of the latest developments, said India. According to the communication, one other measure would be to enable the Committees to discuss and offer possible solutions to the specific trade concerns of members. As a forum to discuss and resolve the specific trade concerns, it is important that members have access to at least a limited committee process right through the year and not just the periodical formal committee meetings.
"Working procedures that balance the need for confidentiality, to meaningfully discuss and resolve a specific trade concern, with that of transparency, i. e. information to the membership as a whole about the issue and its resolution, has to be devised and adopted." Finally, said India, keeping the above in view, members may like to review the frequency of the WTO meetings. The frequency of the meetings refers to both the formal meetings as well as informal meetings. These could be increased to allow discharge of its work efficiently. The third proposal concerns the WTO's engagement with Regional Trade Agreements (RTAs). The proposal states: "Directions from Ministers to monitor the developing trends in RTAs and develop non-binding best practice guidelines for reference while negotiating new RTAs. To ensure robust and regular monitoring, the two transparency mechanisms should be implemented on a permanent basis; the Secretariat to produce an Annual Review of RTAs based on the factual reports; and members to discuss trends and formulate non-binding best practices in the CRTA (Committee on Regional Trade Agreements)." India explained that the fact that RTAs are proliferating and most of the global trade is conducted on preferential terms is well documented. The work in the WTO on RTAs which earlier focused entirely on evaluating the RTAs for their compatibility with GATT/ WTO provisions was for long log-jammed. Members could neither definitively establish standards for the examination or evaluation, and even where they had clear yardsticks such as for "reasonable length of time", they could not agree whether indeed the RTAs under examination met the standards or not. Noting that the RTA Transparency Mechanism was a success, India said that the success of the existing mechanism is reflected by the desire of the membership to design a similar mechanism for the unilateral preferential schemes as well. Even this mechanism, which is not Doha mandated, is close to finalisation. Thereby, all agreements offering preferences of any kind to participants will be covered by the transparency regime in the WTO. Given the accepted benefits of the RTA Transparency Mechanism and the expectation that the transparency mechanism on preferential schemes will be as useful, Ministers could now agree to implement both on a permanent basis, albeit with in-built provisions for periodic review, said the communication. The basic problem with examination of RTAs in the WTO has been the lack of a clear understanding amongst the members about the yardsticks on trade coverage; implementation periods; means to evaluate trade diversion, etc. While the work on the substantive issues may continue in the NGR (Negotiating Group on Rules), "it will be useful, in parallel, to put in place measures that will allow us to move further on implementing the Transparency Mechanisms and best utilise the knowledge gathered on RTAs through them." In this context, said India, it is suggested that the Secretariat be requested to prepare an annual RTA Review. This publication, based on the factual presentations prepared by the Secretariat of individual RTAs, will inter alia review horizontally, across RTAs, the trends in content and structure of the RTAs that have come into effect during the year concerned. Based on the trends detected in the annual reviews, members in the CRTA may examine from an educative perspective ways to reduce the adverse impact of RTAs on multilateral trade. Aspects like trade coverage/substantially all trade; reasonable length of time; non-trade issues; preferential rules of origin, etc. can be examined. To the extent that there is consensus, the outcome could be a series of non-binding "best practices/guidelines" on various elements/aspects of RTAs for reference by members in negotiating future RTAs. The fourth proposal tabled by India relates to an omnibus legal instrument for preferential market access to LDCs. The proposal states: "Direction from Ministers for establishing a 'Steering Group' or a subsidiary body under the General Council to comprehensively examine all WTO-related instruments allowing members to grant preferential access to LDCs. Following such examination, members to consider; propose and adopt a single instrument that would address all forms of preferential market access for LDCs." Within the GATT/WTO, members have provided special and differential treatment for Least-Developed Country members (LDCs) on a preferential basis under a variety of legal instruments and agreements. These preferential schemes have evolved over time both from the perspective of coverage, depth of concessions and the members granting the concessions, said India. Highlighting several existing instruments that provide legal coverage for preferential market access for LDCs, the communication said that the multiple and sometimes overlapping instruments have different types of legal coverage and a variety of procedural requirements. This, combined with differential levels of market access commitments made in favour of LDCs, has created an environment of uncertainty both for the LDC preference receivers and the members granting or establishing such preferential market access schemes, said India.
It noted as an example, that just on the procedural front, the developed country GSP schemes under the Enabling Clause are notified in the CTD (Committee on Trade and Development) while developing countries will have to notify their schemes through the Council for Trade in Goods under the cover of the Decision contained in WT/L/759. The implementation of the DFQF (duty-free, quota-free market access) Decision is being notified to the CTD. For the purposes of certainty, predictability and transparency on all aspects of preferential market access for LDCs, an Omnibus Legal Instrument is necessary, stressed India. The final proposal concerns the need to reaffirm the primacy of international standards and standard setting for WTO obligations. It calls for a "Statement from Ministers in the Conference outcome document, reaffirming the provisions relating to the need to adopt international standards in respect of sanitary, phytosanitary and technical barriers to trade, stressing the need for members to primarily base domestic regulations on such international standards for all trade in goods. Encourage increased participation in international standard setting activities." India argued that lack of common product standards and framing of technical regulations on national rather than international standards is increasingly a major hindrance to a smooth flow of trade. Arguably, alignment of standards amongst the membership and reduction of costs related to adherence, i. e. conformity assessment procedures, will bring about the most significant benefit to world trade. A reaffirmation by Ministers will be an important signal to the membership that the increasing divergence from international standards and conformity assessment/testing practices is a matter of concern and it is time to roll back the complications brought about by the divergent national regulatory regimes, said India. ASSIGNMENT- II 1. What is Globalization? Is it a Threat, Challenge or Opportunity to Indian Economy Discuss? Introduction: Globalisation is the new buzzword that has come to dominate the world since the nineties of the last century with the end of the cold war and the break-up of the former Soviet Union and the global trend towards the rolling ball. The frontiers of the state with increased reliance on the market economy and renewed faith in the private capital and resources, a process of structural adjustment spurred by the studies and influences of the World Bank and other International organisations have started in many of the developing countries. Also Globalisation has brought in new opportunities to developing countries. Greater access to developed country markets and technology transfer hold out promise improved productivity and higher living standard. But globalisation has also thrown up new challenges like growing inequality across and within nations, volatility in financial market and environmental deteriorations. Another negative aspect of globalisation is that a great majority of developing countries remain removed from the process. Till the nineties the process of globalisation of the Indian economy was constrained by the barriers to trade and investment liberalisation of trade, investment and financial flows initiated in the nineties has progressively lowered the barriers to competition and hastened the pace of globalisation Definition: Globalised World - What does it mean? Does it mean the fast movement of people which results in greater interaction? Does it mean that because of IT revolution people can be in touch with each other in any part of the world? Does it mean trade and economy of each country is open in Non-Intrusive way so that all varieties are available to consumer of his choice? Does it mean that mankind has achieved emancipation to a level of where we can say it means a social, economic and political globalisation? Though the precise definition of globalisation is still unavailable a few definitions worth viewing, Stephen Gill: defines globalisation as the reduction of transaction cost of transborder movements of capital and goods thus of factors of production and goods. Guy Brainbant: says that the process of globalisation not only includes opening up of world trade, development of advanced means of communication, internationalisation of financial markets, growing importance of MNC's, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution Impact on India: India opened up the economy in the early nineties following a major crisis that led by a foreign exchange crunch that dragged the economy close to defaulting on loans. The response was a slew of Domestic and external sector policy measures partly prompted by the immediate needs and partly by the demand of the multilateral organisations. The new policy regime radically pushed forward in favour of amore open and market oriented economy.
Major measures initiated as a part of the liberalisation and globalisation strategy in the early nineties included scrapping of the industrial licensing regime, reduction in the number of areas reserved for the public sector, amendment of the monopolies and the restrictive trade practices act, start of the privatisation programme, reduction in tariff rates and change over to market determined exchange rates. Over the years there has been a steady liberalisation of the current account transactions, more and more sectors opened up for foreign direct investments and portfolio investments facilitating entry of foreign investors in telecom, roads, ports, airports, insurance and other major sectors. The Indian tariff rates reduced sharply over the decade from a weighted average of 72.5% in 1991-92 to 24.6 in 1996-97.Though tariff rates went up slowly in the late nineties it touched 35.1% in 2001-02. India is committed to reduced tariff rates. Peak tariff rates are to be reduced to be reduced to the minimum with a peak rate of 20%, in another 2 years most non-tariff barriers have been dismantled by march 2002, including almost all quantitative restrictions. India is Global: The liberalisation of the domestic economy and the increasing integration of India with the global economy have helped step up GDP growth rates, which picked up from 5.6% in 1990-91 to a peak level of 77.8% in 1996-97. Growth rates have slowed down since the country has still bee able to achieve 5-6% growth rate in three of the last six years. Though growth rates has slumped to the lowest level 4.3% in 2002-03 mainly because of the worst droughts in two decades the growth rates are expected to go up close to 70% in 2003-04. A Global comparison shows that India is now the fastest growing just after China. This is major improvement given that India is growth rate in the 1970's was very low at 3% and GDP growth in countries like Brazil, Indonesia, Korea, and Mexico was more than twice that of India. Though India's average annual growth rate almost doubled in the eighties to 5.9% it was still lower than the growth rate in China, Korea and Indonesia. The pick up in GDP growth has helped improve India's global position. Consequently India's position in the global economy has improved from the 8th position in 1991 to 4th place in 2001. When GDP is calculated on a purchasing power parity basis. Globalisation and Poverty: Globalisation in the form of increased integration though trade and investment is an important reason why much progress has been made in reducing poverty and global inequality over recent decades. But it is not the only reason for this often unrecognised progress, good national polices , sound institutions and domestic political stability also matter. Despite this progress, poverty remains one of the most serious international challenges we face up to 1.2 billion of the developing world 4.8 billion people still live in extreme poverty. But the proportion of the world population living in poverty has been steadily declining and since 1980 the absolute number of poor people has stopped rising and appears to have fallen in recent years despite strong population growth in poor countries. If the proportion living in poverty had not fallen since 1987 alone a further 215million people would be living in extreme poverty today. India has to concentrate on five important areas or things to follow to achieve this goal. The areas like technological entrepreneurship, new business openings for small and medium enterprises, importance of quality management, new prospects in rural areas and privatisation of financial institutions. The manufacturing of technology and management of technology are two different significant areas in the country. There will be new prospects in rural India. The growth of Indian economy very much depends upon rural participation in the global race. After implementing the new economic policy the role of villages got its own significance because of its unique outlook and branding methods. For example food processing and packaging are the one of the area where new entrepreneurs can enter into a big way. It may be organised in a collective way with the help of co-operatives to meet the global demand. Understanding the current status of globalisation is necessary for setting course for future. For all nations to reap the full benefits of globalisation it is essential to create a level playing field. President Bush's recent proposal to eliminate all tariffs on all manufactured goods by 2015 will do it. In fact it may exacerbate the prevalent inequalities. According to this proposal, tariffs of 5% or less on all manufactured goods will be eliminated by 2005 and higher than 5% will be lowered to 8%. Starting 2010 the 8% tariffs will be lowered each year until they are eliminated by 2015. GDP Growth rate: The Indian economy is passing through a difficult phase caused by several unfavourable domestic and external developments; Domestic output and Demand conditions were adversely affected by poor performance in agriculture in the past two years. The global economy experienced an overall deceleration and recorded an output growth of 2.4%
during the past year growth in real GDP in 2001-02 was 5.4% as per the Economic Survey in 2000-01. The performance in the first quarter of the financial year is5.8% and second quarter is 6.1%. Export and Import: India's Export and Import in the year 2001-02 was to the extent of 32,572 and 38,362 million respectively. Many Indian companies have started becoming respectable players in the International scene. Agriculture exports account for about 13 to 18% of total annual of annual export of the country. In 2000-01 Agricultural products valued at more than US $ 6million were exported from the country 23% of which was contributed by the marine products alone. Marine products in recent years have emerged as the single largest contributor to the total agricultural export from the country accounting for over one fifth of the total agricultural exports. Cereals (mostly basmati rice and nonbasmati rice), oil seeds, tea and coffee are the other prominent products each of which accounts fro nearly 5 to 10% of the countries total agricultural exports. Where does Indian stand in terms of Global Integration? India clearly lags in globalisation. Numbers of countries have a clear lead among them China, large part of east and far east Asia and Eastern Europe. Let’s look at a few indicators how much we lag. Over the past decade FDI flows into India have averaged around 0.5% of GDP against 5% for China 5.5% for Brazil. Whereas FDI inflows into China now exceeds US $ 50 billion annually. It is only US $ 4billion in the case of India Consider global trade - India's share of world merchandise exports increased from .05% to .07% over the pat 20 years. Over the same period China's share has tripled to almost 4%. India's share of global trade is similar to that of the Philippines an economy 6 times smaller according to IMF estimates. India under trades by 70-80% given its size, proximity to markets and labour cost advantages. It is interesting to note the remark made last year by Mr. Bimal Jalan, Governor of RBI. Despite all the talk, we are now where ever close being globalised in terms of any commonly used indicator of globalisation. In fact we are one of the least globalised among the major countries - however we look at it. As Amartya Sen and many other have pointed out that India, as a geographical, politico-cultural entity has been interacting with the outside world throughout history and still continues to do so. It has to adapt, assimilate and contribute. This goes without saying even as we move into what is called a globalised world which is distinguished from previous eras from by faster travel and communication, greater trade linkages, denting of political and economic sovereignty and greater acceptance of democracy as a way of life. Consequences: The implications of globalisation for a national economy are many. Globalisation has intensified interdependence and competition between economies in the world market. This is reflected in Interdependence in regard to trading in goods and services and in movement of capital. As a result domestic economic developments are not determined entirely by domestic policies and market conditions. Rather, they are influenced by both domestic and international policies and economic conditions. It is thus clear that a globalising economy, while formulating and evaluating its domestic policy cannot afford to ignore the possible actions and reactions of policies and developments in the rest of the world. This constrained the policy option available to the government which implies loss of policy autonomy to some extent, in decision-making at the national level. ~ 2. Examine the various forms of Tariff and non Tariff Barriers in international trade & their impact on India’s trade. Tariff Barrier: A tariff is a duty imposed on goods when they are moved across a political boundary. They are usually associated with protectionism, the economic policy of restraining trade between nations. For political reasons, tariffs are usually imposed on imported goods, although they may also be imposed on exported goods.A certain amount of goods allowed in one's country. In the past, tariffs formed a much larger part of government revenue than they do today. When shipments of goods arrive at a border crossing or port, customs officers inspect the contents and charge a tax according to the tariff formula. Since the goods cannot continue on their way until the duty is paid, it is the easiest duty to collect, and the cost of collection is small. Traders seeking to evade tariffs are known as smugglers. Types: There are various types of tariffs:
An ad valorem tariff is a set percentage of the value of the good that is being imported. Sometimes these are problematic, as when the international price of a good falls, so does the tariff, and domestic industries become more vulnerable to competition. Conversely, when the price of a good rises on the international market so does the tariff, but a country is often less interested in protection when the price is high. They also face the problem of inappropriate transfer pricing where a company declares a value for goods being traded which differs from the market price, aimed at reducing overall taxes due. A specific tariff, is a tariff of a specific amount of money that does not vary with the price of the good. These tariffs are vulnerable to changes in the market or inflation unless updated periodically. A revenue tariff is a set of rates designed primarily to raise money for the government. A tariff on coffee imports imposed by countries where coffee cannot be grown, for example raises a steady flow of revenue. A prohibitive tariff is one so high that nearly no one imports any of that item. A protective tariff is intended to artificially inflate prices of imports and protect domestic industries from foreign competition (see also effective rate of protection,) especially from competitors whose host nations allow them to operate under conditions that are illegal in the protected nation, or who subsidize their exports. An environmental tariff, similar to a 'protective' tariff, is also known as a 'green' tariff or 'eco-tariff', and is placed on products being imported from, and also being sent to countries with substandard environmental pollution controls. Tariffs, in the 20th century, are set by a Tariff Commission based on terms of reference obtained from the government or local authority and suo motu studies of industry structure. Tax, tariff and trade rules in modern times are usually set together because of their common impact on industrial policy, investment policy, and agricultural policy. A trade bloc is a group of allied countries agreeing to minimize or eliminate tariffs and other barriers against trade with each other, and possibly to impose protective tariffs on imports from outside the bloc. A customs union has a common external tariff, and, according to an agreed formula, the participating countries share the revenues from tariffs on goods entering the customs union. If a country's major industries lose to foreign competition, the loss of jobs and tax revenue can severely impair parts of that country's economy and increase poverty. If a nation's standard of living or industrial regulations are too great, it is impossible for domestic industries to survive unprotected trade with inferior nations without compromising them; this compromise consists of a global race to the bottom. Protective tariffs have historically been used as a measure against this possibility. However, protective tariffs have disadvantages as well. The most notable is that they prevent the price of the good subject to the tariff from undercutting local competition, disadvantaging consumers of that good or manufacturers who use that good to produce something else: for example a tariff on food can increase poverty, while a tariff on steel can make automobile manufacture less competitive. They can also backfire if countries whose trade is disadvantaged by the tariff impose tariffs of their own, resulting in a trade war and, according to free trade theorists, disadvantaging both sides. Non-tariff barriers to trade (NTB's) are trade barriers that restrict imports but are not in the usual form of a tariff. Some common examples of NTB's are anti-dumping measures and countervailing duties, which, although they are called "non-tariff" barriers, have the effect of tariffs once they are enacted. Their use has risen sharply after the WTO rules led to a very significant reduction in tariff use. Some non-tariff trade barriers are expressly permitted in very limited circumstances, when they are deemed necessary to protect health, safety, or sanitation, or to protect depletable natural resources. In other forms, they are criticized as a means to evade free trade rules such as those of the World Trade Organization (WTO), the European Union (EU), or North American Free Trade Agreement (NAFTA) that restrict the use of tariffs. Examples of Non-Tariff Barriers to Trade Non-tariff barriers to trade can be: Import bans General or product-specific quotas Rules of Origin Quality conditions imposed by the importing country on the exporting countries Sanitary and phyto-sanitary conditions Packaging conditions Labeling conditions Product standards Complex regulatory environment
Determination of eligibility of an exporting country by the importing country Determination of eligibility of an exporting establishment(firm, company) by the importing country. Additional trade documents like Certificate of Origin, Certificate of Authenticity etc. Occupational safety and health regulation Employment law Import licenses State subsidies, procurement, trading, state ownership Export subsidies Fixation of a minimum import price Product classification Quota shares Foreign exchange controls and multiplicity Inadequate infrastructure "Buy national" policy Over-valued currency Intellectual property laws (patents, copyrights) Restrictive licenses Seasonal import regimes Corrupt and/or lengthy customs procedures Bribery and corruption .
Reasons why India struggles with trade policymaking in a broad sense in turn, feeds through to operational and procedural difficulties at every level. Economic analysis Libertarian economic theories hold that tariffs are a harmful interference with the individual freedom and the laws of the free market. They believe that it is unfair toward consumers and generally disadvantageous for a country to artificially maintain an industry made inefficient by local demands, and that it is better to allow a collapse to take place. Opposition to all tariffs is part of the free trade principle; the World Trade Organization aims to reduce tariffs and to avoid countries discriminating between differing countries when applying tariffs. Political analysis The first is that the ministry that negotiates international trade agreements – the Ministry of Commerce and Industry (MoCI) – is firmly embedded in the domestic political culture, which accords little importance to the principles of free trade within the domestic context. This is a development model to which both the federal and state governments largely subscribe, and which political parties, most NGOs and major business associations all share, to some degree or the other. Indeed, it is revealing that no single ministry deals with the issue of domestic free trade, which means that India’s international negotiating position, is often at substantial variance with the way that the domestic economy is actually run creating obvious operational problems. And secondly, India’s political culture is strikingly insular, in marked contrast to her foreign policy. Political attention is directed resolutely inward for the most part, and, if anything, this process has become more pronounced over the years with the rise to political power of formerly disadvantaged castes, classes and communities, and the steady fragmentation of the structure of political parties combined with the growing influence of federal units. As a consequence, India’s political appetite and interest in engaging with the outside world is very limited. The Ministry of External Affairs (MEA), which was responsible for so much of post-independence policy-making – and which has a strong internationalist reputation – watches from the sidelines and can do little to alter this state of affairs. In this strange situation, the MoCI can only be effective at the multilateral level, if what it says and does remains largely concealed from domestic public view, including from other ministries of the central government and state governments. On the other hand, as this is, in reality, impossible, it often means minimal real discussion, and minimal real engagement with the ideas of liberalization and reciprocity in the process of policy formulation