Globalization, Indian Exports and India’s FTP 2009-14 March 30,

2010
Posted by Chetan Chitre in India's Foreign Trade, International Business Management.
trackback

Major Policy Changes post 1991 -

# Delicensing of Industry

# Removal of Trade restrictions

• Peak duties down from 400% to 45% in 1991

• Removal / Phasing out of QRs
• Most commodities brought under the OGL category
• Export Promotion

# Active involvement in Multilateral Trade Forums

# Rationalization of Tax structures

# Exchange rate liberalization

# Liberalizing Capital flows – FDI / FII

# PPP in key sectors

# Disinvestment

# Simplification of procedures (Administrative Reforms)

# Financial Sector liberalization – from “supervision and control” to “regulation”

Impact of 1991 Reforms

# Industrial Growth – Qualitative and Quantitative

# Consumer Welfare – Choice, Quality, Price, Standard of Living

# Export competitiveness

# Economic Growth

# Forex Reserves

# Employment generation

# Administrative changes – Result oriented, Customer Satisfaction Approach

Negative Impact of 1991 Reforms

# Changes in Labour Laws (?)

# Adverse effects of Consolidation

# Infrastructure has failed to keep pace

# Cultural changes

Challenges for Indian Companies

# Family managed

# Quality and cost consciousness

# Lack of Customer Orientation

# Low R&D

# Labour intensive technology

# Low awareness of Brand Value

# Low value addition – Focus on commoditized production

# Lack of Aggression and Vision

# Corrupt practices

# Low availability of capital

Major Export Sectors – Gems & Jewellery

# Exports in 2008-09 – USD 28 bn (PY USD 19 bn)

• Cut and Polished diamonds – USD 15 bn (55%)

• Gold Jewelry – USD 9 bn (35%)- 60% growth

# Contributes 15% of net Exports

# Low Value addition – about 10%

• 55% world net exports in value

• 90% pieces
• 80% carats
• Specializes in small diamonds
• Lack of design expertise

# Other Competitors – China, Belgium (Brussels), Netherlands (Amsterdam)

# Major Trade Certifications – Hallmark (BIS), Kimberly, De Beers

Major Export Sectors – Textiles

# 10% of India’s Exports

# Total Industry size – INR 3,00,000 cr.

# Exports – INR 1,00,000 cr.

# Fragmented Industry – few large units of about 1,00,000 spindles (Avg. size in China 3,00,000

spindles)

# Other Competitors – China, S. Korea

# Spinning Mills – about 1600 in 2003 – doubled in 10 yrs.

# Largest cotton acreage in the world

# India enjoys advantage in having export potentials in all kinds of fibers

# TUFS

# Brand Acquisitions

# Multi Fiber Agreement

Major Export Sectors – Information Technology

# World-wide IT and Tech industry size – USD 1.6 tr.

# Global sourcing market size – USD 90 bn.

# Size of Indian IT Industry – USD 72 bn. –

• 5.8% of GDP
• Of this – Software & Services – USD 60 bn.
• Employment – 2.25 mn (direct) and 8 mn (indirect)

# IT & ITES Exports (excluding BPO) – USD 26.9 bn.

# BPO Exports – USD 12.8 bn.

# Outsourcing to India leads to 60-70% of Cost saving

# Notable growth of domestic IT market – USD 30 bn.

# India’s Expertise in Financial Services Software, Entertainment and Enterprise Solutions

# Needs to develop products and higher end skills for embedded technology, AI, etc

Foreign Trade Policy – 2009-2014

Background

Objectives of FTP – 2004-09

• Double India’s % share on global merchandize trade

• Trade as a means for development

Achievements –

• Additional 14 mn jobs (direct and indirect) created

2003-04 2008-09

Exports USD 63 bn USD 168 bn

Share in Global Merchandize Trade 0.83% 1.45%

Share in Global Services Trade 1.4% 2.8%

Share in Total Global Trade (goods + 0.92% 1.64%

services)

Objectives of FTP 2009-14

# 15% annual growth in exports upto 2011 – Export target of USD 200 bn by 2011)

# 25% annual growth in exports upto 2014

# Double India’s share in global trade by 2020

Focus

# Improvement in Export related infrastructure

# Bring down transaction costs

# Provide full refund of all indirect taxes and levies

# Enhanced market access

# Diversification of Export Markets

• Products
• Geographies
Export Incentives

# DEPB scheme to continue upto Dec 2010

# Sec 10(A) and Sec 10(B) benefits under Income Tax Act to IT and EOUs to continue upto March 2011

# Enhanced Insurance coverage under ECGC

# Continuation of interest subvention scheme

# Minimum value add of 15% on imports under advanced authorization scheme

Diversification

# New Markets – Africa, Latin America, Oceania, CIS countries

# Market Development Assistance Scheme

# Market Access Initiative

# Comprehensive Economic Partnership Agreement with South Korea

# Trade in Goods Agreement with ASEAN

# MERCOSUR Preferential Trade Agreement

Other Measures

# Promotion of Brand India thru 6 “Made In India” shows

# Technological Upgradation – Import of capital goods to certain sectors under EPCG at 0% duty

# Export “Status Holders” eligible for import of Capital Goods duty-free upto 1% of FOB value of

exports (Duty Credit Scrips)

# Towns of Export Excellence

# Promotion of “Green Products”

# Directorate of Trade Remedy Measures

# e-Trade Project