INDIA’S

INTERNATION
AL RELATIONS
WITH
RESPECT TO
TRADE
RISHABH S IYER
 TITLE: - INDIA’S INTERNATIONAL
RELATIONS

WITH RESPECT TO TRADE

NAME OF : - RISHABH S IYER

THE STUDENT

FACULTY: - Mrs Kaushalya Rajpurohit

Faculty of English,

NMIMS School of Law

Roll No: - A033

Date & Time of submission: - 11/08/2014

 Table of Contents

 Literature Review
 Introduction and Research Methodology.
 India’s International Image: Past &
Present.
 Aspects that matter. The facts and
factors that create India’s global image
 Blots on India’s Image: The Challenges
that the country faces
 Pros & cons of having an International
Image
 Conclusions.
 Bibliography and references.
 Literature Review

The concepts discussed in the project are derived from the

writer himself. The reason for this being the aim and objectives that the topic would deal
with. This topic is less of a legal topic and more of a psychological based subject. Therefore,
not many articles can be found about India’s International relations with respect to trade.

The reason one cannot find such a project out there is because
of the fact that the project is perception based. However, the writer has referred to articles
which talk about the current scenario of International trade of India. The reason why articles
relating to India’s international trade were being referred is because the topic talks on the
ambit of international trade. The topic would be more focused on the manner of building of
the brand “India.”

a) India’s International Trade Policy – by Lawrence Henry:

The writer is in consent to the
material researched by learned Lawrence Henry. Lawrence henry states that despite that fact
that the Indian economy is a heavy weight, it has to work on specified subjects, important
commercial and trade issues, with the European Union or the United Nations which it has long
procrastinated. The author, while quoting us the example of Singapore. He points outs the name
of the fact that India has been procrastinating over its commercial issues with EU and UK..
He, however, opinionates to get rid of this procrastination and improve its ties with EU and UK
and eventually get a bigger say at WTO.

b) Various Articles relating to trade aspect:

There are various articles which talk about India’s
current stand in the WTO and the DOHA rounds etc. These articles talk about what are the
current status of India’s trade relation and India’s International Image
 Introduction and Research
Methodology

With the onset of 1991 reforms, the concept of LPG (Liberalisation, Privatisation and
Globalisation) came into the picture, before which, India was considered as a ‘Closed
Country’. There was extreme government intervention and a very narrow view point.
However, these concepts brought forth by the ‘New Economic Policy of 1991’ helped India
open up to become a part of the trading world and thus transform into a section of the ‘Global
Village’. India being considered a ‘Closed Country’, refers to the fact that the other countries
viewed India as a ‘Closed or Constrictive Economy’.

In fact from the day of its inception, at various points, India’s global image is both tarnished
and adorned due to its acts with respect to its actions, both domestic and international. The
volatile socio-economic and political conditions of a country either make it vulnerable or
influential in garnering popularity in the international market.

This project aims at analysing:

 Its image – past and present

 The factors that influence India’s image in the eyes of the world
 Amendments required to enhance its influence in world politics
 The gains that can be accrued in trade due to change in international relations
 Find suitable means to lead the race to become one of the most prominent trading
country in the world.

Scope and limitations of the research:

 Existing trade policies and its outcome

  To elucidate the political hurdles
 To evaluate the economic barriers in international trading
 To enlist the legal factors affecting trade relationships

The research done for this project has been done on the image that India builds with respect
to the trade aspect. The project majorly deals with what kind of relation do we, as a country,
share with our neighbours, especially with the SAARC nations and the world powers. One of
the aspects that is covered in the project is what effect does the domestic changes in the
political, technological, social, legal and economic systems in them as well as in us, have on
the other. Another highlight of this project i.e. the basic aim of the project is to come out with
a However, this project will not delve into the intricate facts and details of parts other than
economical and legal aspects.

Thus, we can clearly infer that the word ‘relations’ has been interpreted in a whole different
context. Here this term does not mean the trade specifics and technical façade but the
psychological part of it. It would be more inclined toward ‘How India is being perceived?’
and would try to examine the reasons for it.
 India’s International Image:
Past & Present.
Trade is no new concept to man. One of the oldest known trade
records of India is with between the Southern part ruled by the Cholas, Cheras and the
Pandayans and the romans in the 30BCE. During this ancient era, India was very renowned
for its spices and cloth. This led to people like Vasco-da-Gama and Christopher Columbus to
find various routes to come to India. Therefore, it is evident that India was one of the most
developed country in those times. However, the modern India came into the notice of the
world powers after its independence. Resorting to the Non-Alignment policy, India, as a
nation, enticed the interest of the super powers. India came up with a different approach all
together and formed a third category of nations, other than capitalists and socialists. This idea
of Non-Alignment movement emerged from the experience of India under colonialism.

Now that India was independent, how it grew and progressed

depended on itself. The laws it enacted and the policies that it framed were what shaped its
medium paced growth and progress. India had a mediocre growth; neither as high as its
south-eastern neighbours nor as low as Africa and Latin American countries. Its growth was
3 phased: A) 1950-75 where the focus was to maintain tighter controls and be economically
self-sufficient. B) 1976-90 where during the final 5 years of the period there was a certain
amount of liberalisation. C) 1992 & hence where more deeper and systematic liberalisation is
being implemented. Over all, with new technology introduced, India had grown into a more
happening place of the world. Now, armed with the power of both technology and with a
team of one of the most brilliant minds of the world, India, with all its might, is marching its
way to be known as a developed nation. The ‘7-7-7 formula’1 recommended by Kishore
Mahbubani is in fact a very good example of our image growing stronger and stronger.

1
7-7-7 formula by Kishore Mahbubani
 Aspects that matter. The facts and
factors that create India’s global
image
Trade for a layman is just a plain exchange of goods and services. But in
actual sense, there are many factors that influence someone to be a party to trade or not. One
looks at the behaviour and circumstances that the other party is in before venturing into a
trade relation. Similar is the case with International trade as well. It is no rocket science. A
person will not invest or trade with a company whose financial condition is bad and he
follows a very strict and tiring workflow. In the same way, in international trade, a country
will not want to deal with a nation which has a strict set of rules and regulations or has a not
so good economy. The trade barriers, the ideology of the society, the level of technological
development, the legal framework of one country either encourage or discourage the other
country’s will to trade.

International trade is a two way process, since a country can be importing or

exporting i.e. it has two elements a) Import b) export. Usually, it is the exporter that considers
the aforementioned factors. For the exporting country, the factors like hefty taxes and duties,
tedious and time-consuming processes are discouraging. For an instance, to import something
in India, the following is the procedure:

One has to obtain an importer’s license, obtain foreign exchange then place
an order for the goods, the exporter can also ask of a letter of credit to verify whether the
importer can pay the exporter. To scrutinise the quality of goods, a clearing and a forwarding
agent for safe delivery of goods and dispatch from the customs authority. For this, one needs
a shipping receipt, the valid documents, bill of exchange and a delivery order. After proper
verification of required documents, the goods can be cleared from the dock. This is followed
by the payment to agents hired. With this, the process of import is completed.
 This tedious and time consuming process leaves a bad taste in the mouth of
an exporter. The exporter, after going through such an experience, will think twice before
dealing again. The next time he would export, he would make sure that the profits that he
would earn through this would be proportionately more than the efforts to complete these
efforts. However, if one looks at China’s import procedure, it is relatively more relaxed. In
China, one has to first form a contract containing the price quoted and other terms laid out by
their foreign trade law. Then he could be asked for a letter of credit. Other than this, the usual
insurance and other papers are the only requisite thing. This eased out process encourages the
exporting countries and does not provide it with a tense and tiresome environment to trade.

Trade does not simply mean the exchange of goods and services. When
two countries trade, there is not just an exchange of goods and services but also an exchange
of cultures, people, ideas, technology and new laws. This helps in an integration of various
groups of people. Not just this, but when two countries trade, there is an improvement in the
relations between them. This helps in the relaxation of immigration laws that govern the
movement of people between the two countries. When the two countries have improved
relations, they become allies of each other. This helps provide a strategically superior
position.

The process of globalisation can rightly be called as a synonym.

Promoting globalisation would signal the world that one is broadening one’s vision. It would
help one country send a message to the world, inviting it for the purpose of trade, peace and
development. On the other hand, one also projects oneself as a part of the world and the
Global Village. It would help the country attract more interest from other countries.

For a country, especially one like India, Globalisation and opening

up does much more than just build an image. A country like India, which has been
experiencing a population explosion make up a huge and alluring to the Multinational
companies and from their respective countries that they belong to. These companies would
not just bring in their culture with them, but also their work program, their skill set, and the
most precious of all, their money. For India, which has experience a dramatic fall in the
growth of their economy, even a little capital invested into the share market and the
investment made in the economy would be of a great help. This investment would be used to
provide loans to other people and thus, in turn, increase the economic worth and standard of
living of many in the country.

Despite India steadily opening up its economy, its tariffs

continue to be high as compared to the other countries of the world, and its investment norms
still being restrictive. This leads some to perceive India as a ‘rapid globalizer’ while others
still view it to be a ‘highly protectionist’ economy. This costs us the scepticism of not just the
other countries but also of MNC’s which are the virtual representatives of its parent country.

These MNC’s bring in huge amount of capital as investment

and along with it, they bring in large employment opportunities and a chance for solving all
the major problems that ail us as an economy. Seeing the lengthy procedures would certainly
be a discouragement for them. Therefore, efforts are being made to make the process easier,
quicker and free of red tapism.

India has recognised the importance of the world organisations in

the process of forming a better international image. Therefore India has signed trade
agreements with its neighbours and seeks new ones with those from the East Asian countries
and the United States. Its regional and bilateral trade agreements - or alternates of them - are
at different stages of development:

 India-Sri Lanka Free Trade Agreement,

 Trade Agreements with Bangladesh, Bhutan, Sri Lanka, Maldives, China, and South
Korea.

 India-Nepal Trade Treaty,

 Comprehensive Economic Cooperation Agreement (CECA) with Singapore.

  Framework Agreements with the Association of Southeast Asian Nations (ASEAN),
Thailand and Chile. 2

Preferential Trade Agreements with Afghanistan, Chile, and Marcos (the latter is a trading
zone between Brazil, Argentina, Uruguay, and Paraguay).

India’s efforts to be a modern world power haven’t gone unnoticed. With

a defence budget of 2.29 lakh crore in 2014-15, India is growing to become a military world
power. But in today’s world, it’s not just about guns and tanks, it about science. Indian efforts
to acquire a nuclear capability began in the 60s, and the country conducted its first nuclear
test in 1974. There were US and western sanctions on India in the form of bans of all sorts of.
A series of nuclear tests by India in 1998 – only two years after voting against the renewal of
the CTBT – ended 3 decades of ambiguity and altered India’s status as a nuclear weapons
state from passive to active. India had gone public and given a strong signal that it equated
great power status with recognition as a nuclear weapons state.

As far as the internal aspects can be considered, the strength of the

world’s largest democracy is the fact that people from separate religious backgrounds can
live together. The country comprises of a huge and complexly diversified population. The
political scenario might seem quite energized by the fact that since the time of Rajiv Gandhi,
no individual political party had won a majority of seats in the Lok sabha. Also the Prime
ministerial candidate of the winning party is considered a synonym for development. This has
led to a certain amount of interest of the people towards the population.

To sum it up, I would say that there exist numerous number of factors
which have been and will be affecting the international image of India. Internal or external
feud or instability might send out a wrong message of an unfriendly environment for the
purpose of trade. Thus those were the factors that affect India’s international image.

2
http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/EXTSARREGTOPINTECOTRA/0,,con
tentMDK:20592520~menuPK:579454~pagePK:34004173~piPK:34003707~theSitePK:579448,00.html
 Blots on India’s Image: The
Challenges that the country faces

One of the most important factors in coining a good image of

India in the world does not only depend on the internal factors, but also there are some other
factors affecting it profoundly. Each country wants to spread its influence over the world.
Dominant in the race are China, USA and to some extent, Russia and European Union. Each
of them want to spread and increase their geographical area, the political aspect and the
religious culture. We also see India, trying to do the same stuff as the above countries do.

Asia is potentially the most unstable continent in the world as of

now. Besides having large number of diverse people, it also has countries with political
instability among them. Institutions such as the Association of Southeast Asian Nations
(ASEAN), The Regional Forum (ARF) and Shanghai Cooperation Organization (SCO) have
been founded in order to bring stability. However, these organisations have certain limitations and
security related discussions take place in a very restricted manner, since each country wants to have
their own diktat.

South Asia is definitely a part and parcel of this kind of flux.

There have been several attempts to reintroduce the concept of regional co-operation in
South-East Asia. However, such attempts to garner confidence have seen a dead end. Also,
the security deals that India has made, is of bilateral nature. It does not have a tint of a single
settlement, but rather different deals for different problems with different countries, for all of
its border disputes.
India’s rising dependability on the gulf countries is due to the fact that it imports 7o percent of
its energy from these countries. Saudi Arabia is the largest exporter of crude oil and since oil
transportation takes place through the Strait of Hormuz, it is now of extreme importance to
maintain security of sea lines. It not only is a challenge to national security but also will muddle
India’s economy.

Thus the need for energy security regulates India’s connections to the
Gulf-nations. India has always been a peaceful nation with good relations with most countries.
The same can be said for Indo-Iran relations due to which there has been establishment of the
premeditated corporation dealing in energy and economy. However the strategic construction
of gas pipelines from Iran through Pakistan has triggered quite a lot of unpleasant reactions
from the United States of America.

Although India is a very important part of the Asian region and it has good
relations with most of its neighbours, there is a need for security as far as trading via sea routes
are concerned. Also this need for maintaining good relationships with other countries has put
India in a precarious situation internationally.
 Pros & cons of having an
International Image

“AS YOU SOW, SO SHALL YOU REAP”, this is so very true in

relation to having an international image. India has always been a grand supporter of good
trade and communications as well as a peace-loving nation. However, in today’s scenario, is
that what a country needs to be? How does a good or a bad international image work for
India? What are the repercussions?

Based on the aforementioned information about international

image, it can be successfully inferred that a good international image would always bring you
more and more allies, keep you in the good books of the current world powers and make you
strategically an invincible nation – trade, economy and military-wise. You are eligible for
economic aid on the grounds of your political upkeep with certain nations and that in turn
will automatically attract more number of companies to invest in the nation leading to
internal prosperity.

However, just like a rotten tomato is kept away from the lot,
similarly, a nation with bad international image would be kept isolated. It would become
difficult for it to not only fetch allies but also to maintain them. When one country looks at a
country, not maintaining the word given, it would not only form a bad perception but also
play a part in deterring other nations from providing economic aid, citing his bad repute as
the grounds of denial. With the economy in shambles, no aid and no ally, the nation would
automatically attract no companies to invest in the nation.

Just like a set of dominoes, a bad international repute will keep

giving rise to problems one after another.
 Conclusions

We are being a witness to a clear expansion of India’s area of interest..

Not only does India seek to maximize its influence globally, but also politically, economically
and culturally. As an indication of this, relations with other world powers, namely China and
the US, but to a lesser extent also Russia and the EU are becoming more important. India seems
to be keen to avoid alliances, and maintain a balancing role.

Should India become a global power in due time, the insinuations for
the future international classification and the western security system are far from clear,
however they could be extensive. The one thing that seems certain is that we are moving
towards a multipolar system, which comprises of not just the US but also evolving global
powers i.e. China and India, and to some extent regional powers like Russia and Brazil.

For a multi-polar world, one of the key challenges would be to make

all the emerging powers of that world to assume the role and responsibility of a stakeholder in
the international system. Among all the other emerging powers, India would most likely
support an international system built on good governance and multilateralism. This fact alone
makes India an important figure of the future world. However it has to be assessed against
historical traditions and cold realpolitik, which might as well lead India to continue to take up
a balancing role in the world.

Being a global power in today’s globalized world demands taking

up of responsibility for an international system which is based on good governance,
multilateralism and human rights. Such a system will be required for solving today’s major
challenges, be it, climate change, human rights, , terrorism or even inducing other emerging
powers to take the role of responsible international actors. One can conclude with surety that as
much as it pays off to have a good international repute, it takes time and patience to build and
nurture it. Where would India stand is unpredictable but the one thing that can be controlled is the
perception of other countries towards it.
 Bibliography or References

 7-7-7 formula by Kishore Mahbubani

 http://www.brookings.edu/global/ipf/panagariya.pdf for 3 phases of

Indian economy

 The amounts of import and export are extracted from

http://commerce.nic.in/eidb/default.asp These amounts are India’s import
export amounts as on 29/7/2014

 India-U.S. Economic and Trade Relations

http://fas.org/sgp/crs/row/RL34161.pdf Order Code RL34161

 http://indiatoday.intoday.in/story/budget-2014-defence-sector-fdi-arun-
jaitley-finance-ministry-army/1/370752.html for defence budget

 http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/SOUTH
ASIAEXT/EXTSARREGTOPINTECOTRA/0,,contentMDK:20592520~
menuPK:579454~pagePK:34004173~piPK:34003707~theSitePK:579448
,00.html India’s foreign trade policy review in brief
Citations and references:

7-7-7 formula by Kishore Mahbubani

http://timesofindia.indiatimes.com/world/uk/Indian-soldier-who-
fought-and-died-in-WWI-while-rescuing-a-British-officer-praised-by-
UK-PM/articleshow/33668291.cms for valour of Indian soldiers.

http://www.brookings.edu/global/ipf/panagariya.pdf for 3 phases of Indian economy

The amounts of import and export are extracted from http://commerce.nic.in/eidb/default.asp These
amounts are India’s import export amounts as on 29/7/2014