IBIGI Final Presentation

IMPACT OF WTO
REGULATORY FRAMEWORK
ON INDIAN ECONOMY

Submitted By
Group 8, Section B, PGDM 2014-16

Himanshu Mendiratta

Kapil Sharma

Kaushik Thangudu

Ridhima

Sreekanth

Sridatri Dutta

WORLD TRADE ORGANISATION

Location
Established
Created By
Membership
Budget
Head
Staf

Geneva, Switzerland
1 January 1995
Uruguay Round Negotiations (1986-94)
162 countries (as on 30th Nov, 2015)
CHF 197 million (2014)
Director-General is Roberto Azevdo
600

Inter-governmental organisation that regulates

international trade

162 Membe

22

rs

Observer
States

Observers must start negotiations of accessions within five years of

becoming observers
The latest country to enter WTO as an observer is Kazakhstan, joining on
30 November 2015

Ministerial
Highest
Institutional
Conference
Meets every 2 years
Body

General Council
Conducts organizations
business

Origin of WTO

Increase in signatories from 80 to 100

1946

GATT

Increase in trading partners, evolution of trade

Domestic economic fluctuations made some of the economies to

23 countries initial increase the levels of protection
founders
Services and agricultural trade were also not included

Jan 1st,
1995

WTO

Principles of WTO
1

NonNon-discrimination
has
discrimination
two major constituents for

Reciprocity

Binding and enforceable

schedulecommitments
(list) of concessions establish

goods,
services
intellectual property:

and

The
most
favored
nation (MFN) rule : A
WTO
member
must
apply
the
same
conditions with other
WTO members on all
trade

Reflects that any

concession drawnout by one country
to another needs to
be reciprocated in
a similar manner so
as to not make a
big diference in
the
Payment
Situation of the
countries

A
ceiling bindings- commitments made by
WTO
members
in
multilateral
trade
negotiations. Countries can change their
bindings, but only after negotiating with its
trading partners.

Transparency Safety Valve

Ensures
transparency in the
domestic
trade
policies of all its
member countries to
ensure stable and
predictable business
environment.

Governments are
also allowed to
restrict
trade
under
specific
circumstances
such
as
to
protect
environment,
public health etc.

The
national
treatment policy that
treats
imported
and
domestic goods without
any biases

Function of WTO

Administering W.T.O Trade Agreements

Monitoring and reviewing national trade policies

Acting as a Forum for trade negotiations

Settling and Handling Trade disputes

Technical assistance and training for developing

countries

Assisting the member in trade policies through technical

assistance and training programs

Co-operation
Organization

with

other

International

Indian Economy

Agriculture

Services

Industry

India ranks second world

wide in farm output.
In 2007, accounted for
16.6% in GDP employing
60% of the total workforce.
After having growth rate of
2% for many years- now the
growth rate is about 4.5%.
Two thirds of Indias
workforce still earn their
livelihood directly or
indirectly through
agriculture.
High level of disguised
unemployment.
Despite improvements,
average yield in India
ranges from 30-50% of the
highest average yield in the
world.

India is fifteenth in services

output.
The growth rate which was
4.5% in 1951-80 increased
to 7.5% in 1991-2000.
Recent growth rate 10.7%.
Its share in GDP was 15% in
1950 which is now about
55.6%.
Fastest growing services are
business services,
information technology
enabled services, business
process outsourcing
contributing about one third
of total output of services in
2000.
Indias IT industry an
important contributor to
BOP, accounts for only
about 1% of total GDP and
1/50th of the total services

India ranks 14th in the world in

factory output.
Industry accounts for 27.6% of
the GDP and employs 17% of
the work force.
Manufacturing growth rate
8.4%.
One third of industrial labour
force is engaged in simple
household manufacturing only.
Economic reforms led to more
private sector participation, an
expansion in the production of
consumer goods and both
domestic and foreign
competition.

Positive Impacts
Increase in export
earnings
Growth in Merchandise exports
Impact on the tarif and non-tarif
trade barriers
Growth in service exports
General Agreement on Trade In
Services (GATS)

Agricultural exports
Curbing of trade barriers and
domestic subsidies elevated the
cost of agricultural products

Positive
Impacts
Textile Market
Foreign Direct
Investment
The quotas limiting the trade of
textile products have increased a
lot owing to the dissolution of
MFA (Multi-Fiber Arrangements)

Operate more easily in

International markets as a result of
the agreement on TRIMs (Trade
Related Investment Measures)
which lay down the rules that
restrict the preference of domestic
firms

multilateral rules and

disciplines relating to antidumping, subsidies and
countervailing measures,
safeguards and disputes
settlement machinery will
ensure greater security and
predictability of
international trade
market access to a
number of advanced
countries due to the
imposition of the clauses
concerning to trade
without discrimination

Negative Impacts
GATS (General
Agreement in Trade
and Services)
Insurance, banking,
communication,
transport

Inequality within
structure of WTO

TRIM (Trade Related

Investment
Measures) :
had to remove measures
that restricted foreign
investment
MNCs replacing Indian
resources
Impact on foreign exchange
reserve

LDC exports

TRIPS (Trade Related

Intellectual Property
Rights)
Pharmaceutical Sector
Agriculture Sector
Microorganisms

Greatest issue: Average yield: 30-50% of the highest average

yield in the world
Av
La erag
e
Ho nd
ldi
ng
s

Ina
inf deq
ur rast uate
se e an ruct
rvi d
ce
s

GDP Breakup

Sm
du all l
e
a
cei to la nd
lin
g a nd
ct
Dis Famil
pu y
tes
ma Over
nn e
s
ho ma d
ldi
ng ll
s

Ins
uf
Fin cient
an
ce

Illit
era
cy

I
cosncrea
ts, sed
pri
ce
Int risks
e
in rven
lan tio
da n
lab nd
or
C
Ma redi
rke t
ts

Ov
tio erre
ag n of gula
r ic
ul t
ur
e

Importance of Agriculture in Indian economy

Employment

Agriculture
Others

Major Agreement of WTO

Domestic Support in
India:

Domestic Support

Market Access

Tarifcation

WTO Agreement on Agriculture recognizes free and market oriented trading

system
Conversion of nonMarket access
Green(permitted),
tarifs on trade like
provisions do not
Amber(slow down),
import quota into
apply when to
Blue(forbidden)
tarifs
staple diet
Green: Not directed at
Tarif bindings are to
commodity in the
particular products,
be reduced
include direct income
developing
Least developed
support for farmers
country
countries are
Amber: distort
Minimum
exempted from tarif
production and trade;
reductions
level(5%) for
support prices, or
imports of
High import tarifs in
directly related to
agricultural
case there is need
production quantities
to restrict import of
products by
Blue: limit production
commodities
member countries
by imposing
production quotas or
requiring farmers to
set aside part of their
land

Agreement allows us to provide domestic support to the extent of 10% of the

total value of agricultural produce
Unlimited support to activities
(i) research, pest diseases control, training, extension, and advisory services
(ii) domestic food aid
(iii) income insurance and food needs, relief from natural disasters and
payments under the environmental assistance programmes

investment subsidies given to low income and resource poor

farmers are exempt from any commitments

Implications of the Agreement

Farmers, therefore, require support in terms of development of infrastructure as well as improved
technologies and provisions of requisite inputs at reasonable cost.
The implications of the Agreement would thus have to be examined in the light of the food
demand and supply situation.
i ) Whether the Agreement has opened up markets and facilitated exports of our products;
ii) Whether we would be able to continue with our domestic policy aimed at improving
infrastructure and provision of inputs at subsidised prices for achieving increased agricultural
production.
Short Term
Maintaining quantitative restrictions
(QRs) on import of 825 agricultural
products as on 1.4.97
QRs can be replaced with high import
tarif in case we want to restrict
imports of these commodities.
The minimum support price provided
to commodities is less than the fixed
external reference price determined
under the Agreement.
The agriculture sector has a typical
lag lead relationship between the
prices and the produce.

Long Term
Developing countries have been given the
freedom to implement such policies
Imports to India would not be attractive in the
case of rice, tea, sunflower oil and cotton
Through proper Tarifcation, however, we will
have to strike a balance between the
competing interest of 10% farmers who
generate marketable surpluses and
consumers belonging to the economically
poor sections of the society
encourage investment in the resource scarce
agricultural sector
The rise in domestic prices would put pressure
on the public distribution system and
accentuate the problem of food subsidy

How does it afect India

GATT
Reduction of peak and average tarifs on
manufactured products
Commitments to phase out the
quantitative restrictions over a period as
these were considered non-transparent
measure in any countries policy structure.
WTO coming into efect, the competition
from imports for the domestic firms has
increased

Trims
Agreement relates to investments
originating from one country to another
It favours national treatment of foreign
investment
Investment to be freely allowed within
domestic borders without any maximum
cap on it
Requires that there should not be any
domestic content requirement on foreign
firms operating and manufacturing in
other countries

Effects

Trips
Creator of the intangible is protected
from illegal use of his creation
The agreement stipulated some basic
uniformity of law among all trading
partners
Required suitable amendment in the
domestic IPR laws of each country
New investment in fresh research is
required
The technology transfer from abroad is
expected to become costly and difcult

Aoa
Agreement on agreement deals with
market access, Export subsidies and
government subsidies
Subsidy given to Indian farmers are much
below the acceptable levels and therefore
need not be changed
Concern is on the competitiveness and
sustainability that the Indian farmer would
be able to prove in the long run once the
markets open up

THANK YOU