IMT – 19: INDIAN FOREIGN TRADE

PART – A

Q1. What are the focus areas of trade policy in eleventh five-year plan?

Q2. Briefly describe the provisions and implications of foreign trade policy in India. 

Q3. State the components of the current account of balance of payments. Examine the changes in the current account deficit of India in the decade of 1990s and 2000s. 

Q4. What are the top ten items of export and import of India? 

Q5. “Foreign trade can help in economic development.” Critically examine the statement. 

PART – B

Q1. Discuss the changes in global trade in the decade of 2000. 

Q2. What are the features of Duty Exemption and Duty Remission Scheme?

Q3. What is the role of services sector in promotion of exports in India? 

Q4. Describe the main features of the Foreign Trade Policy of 2009-14. 

Q5. What is globalization? How has it helped in the promotion of foreign trade?

PART - C

Q1. Discuss the importance of foreign direct investment in rapid economic development of Indian economy.

Q2. “Mergers and acquisitions are growth drivers in a globalised world.” Explain 

Q3. State the different types of special economic zones. What role has been played by them in promotion of exports in India?

Q4. Describe the importance of Board of Trade in promotion of trade in India 

Q5. What role is played by Marine Products Export development Authority (MPEDA) in promotion of exports in India?

CASE STUDY – I

Ban on Leather Goods from India

Indian leather export, an important foreign exchange earner for the country, has been reportedly hit hard by the decision of some major US retail chains like Eddie Bauer, LL Bean, Timberland and Casual Corner, and a German company Bader to boycott leather goods from India in protest against the ill-treatment of animals here. This move came shortly after a decision by the global retail chains Gap, Marks & L. Spencer, Liz Claiborne and J. Crew not to buy Indian leather goods. This development has a lot to do with the lobbying by the US-based animal rights group People for Ethical Treatment of Animals (PETA) for a ban on leather goods from India by documenting evidence of cruelty to animals’ killed for making leather. It has been reported that the overseas firms have officially communicated to the Indian outfit of PETA that they will not be sourcing leather products from India until there is a strict enforcement of animal protection laws. Following this, the Mumbaibased Teja Industries, the official supplier of leather goods for Marks & Spencer in India, started outsourcing leather from other countries to manufacture products for the global chain.

Questions

1. In the light of the case discuss the implications of social activist groups for business. 

2. What should the Council for Leather Exports (GOI) and the leather industry do to overcome the problem?

CASE STUDY – II

Consistency of Indian Exports with Global Demand

In the recent episode of global recession, the shocks were transmitted very fast from industrialized countries to developing countries, through international trade among other channels. The pace of export growth recovery could be relatively faster, if the export basket is in harmony with the globally dynamic products, though the depth of recession affecting different segments of the world economy also counts. Dynamic products play a crucial role in the global economic recovery as demand for these products picks up very fast with change in global trade winds. Based on the twin criteria of export growth and market share, 1,242 export products at the four-digit level are classified into five different groups. Two sub-periods, 1999-2001 and 2004-06 are taken for computation of the CAGR. The sub-period 2004-06 is taken for global exports share of products. Based on the twin criteria, five groups of products are identified as 1) trend setters, 2) champions, 3) under achievers, 4) achievers in adversity and 5) losers in declining markets. Dynamic products falling under the “trend setters” group with high CAGR and high share and “champions” group with high CAGR and relatively high share are the drivers of global trade. Most of the dynamic products fall under four broad categories of exports: machinery, auto components and cinematography which are high and medium technology-intensive; chemicals and plastics which are medium technology intensive; gems, jewellery and base metal which are mainly low technology-intensive; and mineral products which are mainly primary and resource-based products. The non-dynamic products include all the other three categories, namely the “under- achievers” with high CAGR but low share and heavily concentrated in sectors like processed food, minerals, chemicals, plastics, T&C and base metals; “achievers in adversity” with high share and low or declining growth rate mostly concentrated in sectors like processed food, pulps of wood, T&C, machinery and auto components; and “losers in Declining Markets “with low share and low CAGR concentrated in sectors like vegetable products, chemicals, pulps of wood, T&C, plaster & cement, base metals and machinery with bleak prospects of revival in the medium term. Securing market access for the last two sets of product groups is a major concern, because the global market is shrinking for these products.

Global dynamic products constitute nearly 10 per cent of products but slightly less than 50 per cent of value. On the contrary, the product share of non-dynamic products is around 90 per cent and value share is slightly above 50 per cent. In the Indian case, dynamic products constitute 10 per cent of products and 51.3 per cent of value, while non-dynamic products constitute 90 per cent of products and 48.7 per cent of value. Thus the general pattern of composition of dynamic and non-dynamic products is similar in India and the world.

Since the Asian Crisis, dynamic export products have provided a new direction to Indian exports. Products under the “trend setters” group have consistently improved their share in Indian exports from 21.5 per cent in 1998-99 to 35 per cent in 2006-07, posting a CAGR of 26.3 per cent during 1999/2000-2006/07 in rupee terms. The robust performance of the “trend setters” has been supported by the sustained growth of these products in global exports. The “champions” have also significantly improved their share in Indian exports from 10.8 per cent in 1998-99 to 16.3 per cent in 2006-07. This segment of exports has registered the fastest CAGR of 27.1per cent, even better than the “trend setters”, during the period 1999/2000-2006/07. While the share of the tiny emerging products, that is the group of “under achievers”, is almost stagnant even during the period of global export boom, the two weak segments of the export sector, namely “achievers in adversity” and “losers in declining markets” together have a share of nearly 35 per cent. The differing performances of dynamic versus non-dynamic products are particularly important in the context of multilateral vs regional/ bilateral trade. The composition of India’s exports by the two categories in the Regional Trading Arrangements (RTAs) of India with developing countries shows that the share of dynamic products is high in value

terms in all the RTAs, while the share of non-dynamic products is very high in terms of numbers and quite substantial in value terms in all the RTAs

Import preference for globally non-dynamic products is either thinly spread across the globe or heavily concentrated in some select regions. Marketing globally dynamic products could be done with ease under the multilateral set up without any preferential arrangement, while the regional approach could help in exporting sizeable amounts of globally non-dynamic products. As India is actively engaged in the process of regional trade, sizeable amounts of such products could find market in different regional, sub-regional and bilateral trading arrangements through negotiations. Thus systematic planning could help in diversification of India’s commodity basket as well as markets.

Questions

1. What has been the growth of Indian exports during recession?

2. How can India promote the non-dynamic products?