Indian recent trend in global trade

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Recent trends in global trade

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Chapter 1

Introduction

Importance/Role of foreign trade in economic development of countries

Introduction of foreign trade:

There is no country in the world today which produces all the commodities itneeds. Every country, therefore, tries to produce those commodities in whichit has comparative advantage. It exchanges part of those commodities with thecommodities produced by other countries relatively more efficiently. Therelative difference in factor endowments, technology, tastes etc, among thenations of the world have greatly widened the basis of international trade.

Role of foreign trade in economic developmentThe role of foreign trade can be judged by the following faces:

Foreign trade and economic development.

Foreign trade plays very important role in the economic development of anycountry. Pakistan also exports a lot of agricultural product to other countriesand imports the capital goods from other countries. Therefore, it is not wrongto say that economic development of a country depends of foreign trade.

Foreign exchange earning

Foreign trade provides foreign exchange which can be used to remove thepoverty and other productive purposes.

Market expansion

The demand factor plays very important role in increasing the production ofany country. The foreign trade expands the market and encourages the

producers. In Pakistan home market is very limited due to poverty. So it is

necessary chat we should sell our product in other countries.

Increase in investment

Foreign trade encourages the investor to increase the investment to producemore goods. So the rate of investment increases.


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Foreign investment

Besides the local investment, foreign trade provides incentives for the foreigninvestors to invest in those countries where there is a shortage of investment.

Increase in national income

Foreign trade increases the scale of production and national income of thecountry. To meet the foreign demand we increase the production on largescale so GNP also increases.

Decrease in unemployment

With the rise in the demand of goods domestic resources are fully utilized andit increases the rate of development in the country and reduces theunemployment in the world.

Price stability

Foreign trade helps to bring stability in price level. All those goods which areshort and prices are increasing can be imported and those goods which aresurplus can be exported. There by stopping fluctuation in prices.

Specialization

There is a difference in the quality and quantity of various factors ofproduction in different countries. Each country adopts the specialization in theproduction of those commodities, in which it has comparative advantage. Soall trading countries enjoy profit through international trade.

Remove monopolies

Foreign trade also discourages the monopolies. Where every any monopolistincreases the prices, government allows the import of goods to reduce the

prices in the country.

Removal of food shortage

India is also facing the food shortage problem. To remove the food shortageIndia has imported the wheat many times. So due to foreign trade we aresolving this problem for many years.


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Agricultural development

Agricultural development is the back bone in our economy. Foreign trade hasplayed very important role for the development of our agriculture sector.Every year we export rice, cotton, fruits and vegetables to other countries. Theexport of goods makes our farmer more prosperous. It inspires the spirit ofdevelopment in them.

Import of consumer goods

India and Pakistan imports the various consumer goods from other countries,which are not produced inside the country. Today the shortage of anycommodity can be removed through international trade.

To improve quality of local products

Foreign trade helps to improve quality of local products and extends marketthrough changes in demand and supply as foreign trade can create competitionwith the rest of the world.

External economics

External economics can also be achieved through foreign trade. The industriesproducing foods on large scale in Pakistan and India are enjoying the external

economics due to international trade.

Competition with foreign producers

We can compete with the foreign producers in foreign trade so it improves thequality and reduces the cost of production. It is also an advantage of foreigntrade.

Useful for the world peace

Today all the countries are tied in trade relations with each other. So foreigntrade also contribute to peace and prosperity in the world.

Import of capital goods and technology


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The inflow of capital goods and technology in the less developed countrieshas increased the rate of economic development, and this is due to foreigntrade.

Import substitution

These countries not only produce import substitute, but also reduce deficit inbalance of payment of their countries.

Better understanding

Foreign trade provides an opportunity to the people of different countries tomeet, discuss, and exchange views and ideas related to their social, economicand political problems.

Dissemination of knowledge

Foreign trade is also responsible for dissemination of knowledge and learningfrom developed countries to under developed countries.

Interdependence

Foreign trade is responsible for creating economic depending and establishingeconomic interest in the economy of the countries having trade relations.

Factors productivity

Through foreign trade the productivity of labour and capital and organizationincreases. Demand make them mobile on national as well as internationallevel which helps underdeveloped countries to develop and maintain a highlevel of growth of developed countries.


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Evolving structure of global trade

The global economy has grown continuously since the Second World War.

Global growth has been accompanied by a change in the pattern of trade,which reflects ongoing changes in structure of the global economy. These

changes include the rise of regional trading blocs, deindustrialization in

many advanced economies, the increased participation of former

communist countries, and the emergence of China and India.

Changes in the global economy the main changes in the global

economy are:

1. The emergence of regional trading blocs, where members freely trade with

each other, but erect barriers to trade with non-members, has had a significant

impact on the pattern of global trade. While the formation of blocs, such as

the European Union and NAFTA, has led to trade creation between members,

countries outside the bloc have suffered from trade diversion.

2. Like several advanced economies, the UK's trade in manufactured goods

has fallen relative to its trade in commercial and financial services. Many of

these advanced economies have experienced deindustrialization, with lessnational output generated by their manufacturing sectors.

3. The collapse of communism led to the opening-up of many

former-communist countries. These countries have increased their share of

world trade by taking advantage of their low production costs, especially their

low wage levels.

4. Newly industrialized countries like India and China have dramatically

increased their share of world trade and their share of manufacturing exports.

China, in particular, has emerged as an economic super-power. China's shareof world trade has increased in all areas, and not just in clothing and low-tech

goods. For example, in 1995, the US had captured nearly 25% of global trade

in hi-tech goods, while China had only 3%. By 2005, the US share had fallen

to 15%, while China's share had risen to 15%.


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The Diffusion of Key Players in Global Trade

Changing Patterns of Global Trade outlines the factors underlying

important shifts in global trade that have occurred in recent decades. The

emergence of global supply chains and their increasing role in trade patterns

allowed emerging market economies to boost their inputs in high technology

exports and is associated with increased trade interconnectedness.

BRICS Economies for diffusing key players

Brazil, Russia, India and China, South Africa are combinedly referred to as

BRICS countries by Goldman Sachs. These countries will start the next

shift in balance of power in the global economy. It is expected that BRICS

will be wealthier than most of the current major economic powers by 2050.

The BRIC thesis states that China and India will become the world's dominantsuppliers of manufactured goods and services, respectively, while Brazil and

Russia will become similarly dominant as suppliers of raw materials.

Goldman Sachs states that these countries may not make a formal trading

association - but they have the potential to form a powerful economic bloc.

Due to lower labor and production costs, many companies also cite BRIC as

a source of foreign expansion opportunity.


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Growing Trade Interconnectedness

Increased interconnectedness and interdependence of countries include two

factors:

1.

The opening of borders to increasingly fast flows of goods, services,finance, people and ideas across international borders; and

2. The changes in institutional and policy regimes at the international

and national levels that facilitate or promote such flows.

Such inter connectedness has both positive and negative impacts on

development.

Effects of interconnected trade:

Economic change: trade liberalization, deregulation, expansion of

the global market place Political change, redistribution of power from states to interstate

bodies and the growth of global civil society

Social and cultural change

Technological change, including improved global

telecommunications and transport links.

The increases in economic cross-border flows that have resulted in more

open economies are a result, in part, of World Trade Organization,

International Monetary Fund and World Bank policies. All this change issupported by economic blocs like European Union, the Organization of

Petroleum Exporting Countries, and the North American

Free Trade Agreement. This trend benefits globalization, to the richer, more

powerful nations.


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Major Current Trends in Foreign Trade

Major current trends in foreign trade are as follows:

Current trends are towards the increasing foreign trade and interdependenceof firms, markets and countries.

Intense competition among countries,industries, and firms on a global level isa recent development owed to theconfluence of several major trends.Among these trends are:

1) Forced Dynamism:

International trade is forced to succumb to trends that shape the globalpolitical, cultural, and economic environment. International trade is a complextopic, because the environment it operates in is constantly changing. First,

businesses are constantly pushing the frontiers of economic growth,technology, culture, and politics which also change the surrounding globalsociety and global economic context. Secondly, factors external tointernational trade (e.g., developments in science and information technology)are constantly forcing international trade to change how they operate.

2) Cooperation among Countries:

Countries cooperate with each other in thousands of ways throughinternational organizations, treaties, and consultations. Such cooperationgenerally encourages the globalization of business by eliminating restrictionson it and by outlining frameworks that reduce uncertainties about whatcompanies will and will not be allowed to do. Countries cooperate:

i) To gain reciprocal advantages,

ii) To attack problems they cannot solve alone, and

iii) To deal with concerns that lie outside anyones territory.

Agreements on a variety of commercially related activities, such astransportation and trade, allow nations to gain reciprocal advantages. Forexample, groups of countries have agreed to allow foreign airlines to land in
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and fly over their territories, such as Canadas and Russias agreementscommencing in 2001 to allow polar over flights that will save five hours

between New York and Hong Kong.

Groups of countries have also agreed to protect the property of foreign-ownedcompanies and to permit foreign-made goods and services to enter theirterritories with fewer restrictions. In addition, countries cooperate on

problems they cannot solve alone, such as by coordinating national economicprograms (including interest rates) so that global economic conditions areminimally disrupted, and by restricting imports of certain products to protectendangered species.

Finally, countries set agreements on how to commercially exploit areasoutside any of their territories. These include outer space (such as on the

transmission of television programs), non-coastal areas of oceans and seas(such as on exploitation of minerals), and Antarctica (for example, limits onfishing within its coastal waters).

3) Liberalization of Cross-border Movements:

Every country restricts the movement across its borders of goods and servicesas well as of the resources, such as workers and capital, to produce them. Suchrestrictions make international trade cumbersome; further, because therestrictions may change at any time, the ability to sustain international trade

is always uncertain. However, governments today impose fewer restrictionson cross-border movements than they did a decade or two ago, allowingcompanies to better take advantage of international opportunities.Governments have decreased restrictions because they believe that:

i) So-called open economies (having very few internationalrestrictions) will give consumers better access to a greater variety ofgoods and services at lower prices,

ii) Producers will become more efficient by competing against foreigncompanies,

iii)

iii) If they reduce their own restrictions, other countries will do thesame.

4) Transfer of Technology:

Technology transfer is the process by which commercial technology isdisseminated. This will take the form of a technology transfer transaction,


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which may or may not be a legally binding contract, but which will involvethe communication, by the transferor, of the relevant knowledge to therecipient. It also includes non-commercial technology transfers, such as thosefound in international cooperation agreements between developed anddeveloping states. Such agreements may relate to infrastructure or agriculturaldevelopment, or to international; cooperation in the fields of research,education, employment or transport.

5) Growth in Emerging Markets:

The growth of emerging markets (e.g., India, China, Brazil, and other parts ofAsia and South America especially) has impacted international trade in everyway. The emerging markets have simultaneously increased the potential sizeand worth of current major international trade while also facilitating the

emergence of a whole new generation of innovative companies. According toA special report on innovation in emerging markets by The Economistmagazine, The emerging world, long a source of cheap la, now rivals the richcountries for business innovation.


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Chapter 2

Indias Trade Performance

Indias merchandise exports reached a level of US $ 312.61 billion during

2013-14 registering a growth of 4.06 percent as compared to a negative

growth of 1.82 percent during the previous year. Despite the recent setback

faced by Indias export sector due to global slowdown, merchandise exports

still recorded a Compound Annual Growth Rate (CAGR) of 15.79 per cent

from 2004-05 to 2013-14.

World trade scenario

As per IMFs World Economic Outlook April 2014, world trade recorded its

largest ever annual increase in 2010, as merchandise trade surged 14 per cent,but in the year 2012, it declined to 2.6 per cent and showed only a marginal

improvement to 2.7 per cent in 2013. It however projects acceleration of world

trade in goods in 2014 and 2015 with forecasted growth rates of 4.3 per cent

and 5.3 per cent respectively. Growth in volume of world trade also increased

marginally to 3 per cent in 2013 over 2.8 per cent in 2012 and is projected to

accelerate further to 4.3 per cent and 5.3 per cent in 2014 and 2015

respectively. The IMF has put its growth projections of world output at 3.6

per cent in 2014. The advanced economies are expected to grow at 2.2 per

cent while the emerging and developing economies to grow at 4.9 per cent in2014. The projected growth rates in different countries are expected to

determine the markets for our exports.

Exports

Exports recorded a growth of 4.06 per cent during Apr-Mar 2013-14. The

Government had set an export target of US $ 325 billion for 2013-14. The

merchandise exports have reached US $ 312.61 billion in 2013-14. Export

target and achievement from 2004-05 to 2013-14 is given in the Chart.

Imports

Cumulative value of imports during 2013-14 was US $ 450.07 billion as

against US $490.74 billion during the corresponding period of the previous

year registering a negative growth of 8.29 per cent in $ terms. Oil imports


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were valued at US $ 167.62 billion during 2013-14 which was 2.2 per cent

higher than oil imports valued at US $ 164.04 billion in the corresponding

period of previous year. Nonoil imports were valued at US $ 283.32 billion

during 2013-14 which was 13.3 per cent lower than non-oil imports of US $

326.7 billion in previous year

Trade Balance

The Trade deficit in 2013-14 was estimated at US $ 137.46 billion which was

lower than the deficit of US $ 190.34 billion during 2012-13. Performance of

Exports, Imports and Balance of Trade during 2004-05 to 2013-14 is given in

the table

Export target & Achievement

Trade Data for period 2004-05 to 2013-14


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Exports by Principal Commodities

Disaggregated data on exports by Principal Commodities, both in Rupee and

Dollar terms, available for the period 2013-14 as compared to 2012-13 are

given in Table 3.1 and Table 3.2 respectively. Exports of the top five

commodities during the period 2013-14 registered a share of 50.05 per cent

mainly due to significant contribution in the exports of Petroleum (Crude &

Products), Gems & Jewellery, Transport Equipment, Machinery and

Instruments and Drugs, Pharmaceuticals & Fine Chemicals. The share of top

five Principal Commodity Groups in Indias total exports during 2013 -14 is

given at Chart

Share of Top Five Commodities in India's Export 2013-14

The export performance (in terms of growth) of top five commodities during

2013-14 vis-a vis the corresponding period of the previous year is shown in

Chart

Plantation Crops

Export of Plantation crops during 2013-14, decreased by 8.17 per cent in US

$ terms compared to 2012-13. Export of Coffee registered a negative growth


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of 7.81 per cent, the value decreasing from US $ 866.13 million to US $

798.49 million. Export of Tea also decreased by 8.54 per cent.

Agriculture and Allied Products

Agriculture and Allied Products as a group include Cereals, Pulses, Tobacco,Spices, Nuts and Seeds, Oil Meals, Guar gum Meal, Castor Oil, Shellac, Sugar

& Molasses, Processed Food, Meat & Meat Products, etc. During 2013-14,

exports of commodities under this group registered a growth of 0.81 per cent

with the value of exports increasing from US $ 32,017.27 million in 2012-13

to US $ 32,277.59 million during 2013-14.

Ores and Minerals

Exports of Ores and Minerals were estimated at US $ 5,604.22 million during

2013-14 registering a negative growth of 0.48 per cent over 2012-13. Subgroups viz. Iron Ore, and mica have recorded a negative growth of 5.45 per

cent and 0.57 percent respectively. Processed minerals, other ores and

minerals and coal registered a growth of 1.76 per cent, 1.59 per cent and 0.4

per cent respectively.

Leather and Leather Manufactures

Export of Leather and Leather Manufactures recorded a growth of 16.49 per

cent during 2013-14. The value of exports increased to US $ 5,687.63 million

in 2013-14 from US $ 4,882.35 million in 2012-13. Exports of Leather andManufactures have registered a growth of 13.71 per cent and Leather

Footwear registered a growth of 20.35 per cent.

Gems and Jewellery

The export of Gems and Jewellery during 2013-14 decreased to US $

41,100.13 million from US $43,344.85 million in 2012-13 showing a negative

growth of 5.18 per cent.

Chemicals and related ProductsDuring the period 2013-14, the value of exports of Chemicals and Related

Products increased to US $ 43,755.48 million from US $ 41,504.68 million in

2012-13 registering a growth of 5.42 per cent. Rubber, Glass & Other

Products, Basic Chemicals, Pharmaceuticals & Cosmetics, Plastic and


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linoleum and residual chemicals & allied products have registered a positive

growth.

Engineering Goods

Items under this group consist of Machinery, Iron & Steel and OtherEngineering items. Export from this sector during the period 2013-14 stood at

US $ 61,623.50 million compared with US $ 56,796.94 million in 2012-13,

registering a positive growth of 8.5 per cent. The growth in export of Residual

engineering items stood at 22.79 per cent, Aluminum other than products

stood at 28.6 per cent, Primary & Semi-finished iron & steel stood at 23.95

per cent, Transport equipment stood at 16.47 per cent and Machinery and

Instrument 5.93 per cent.

Electronic Goods

During the period 2013-14, exports of Electronic Goods as a group was

estimated at US $7,690.68 million compared with US $ 8,442.77 in 2012-13,

registering a negative growth of 8.91 per cent

Textiles

During the period 2013-14, the value of Textiles exports was estimated at US

$ 30,379.55 million compared with US $26,362.39 million in 2012-13,

recording a positive growth of 15.24 per cent. The export of Natural Silk

Textiles, Wool and Woolen manufactures and Jute manufactures registerednegative growth of 8.95 per cent, 7.15 per cent and 3per cent respectively.

However, Readymade Garments, Cotton yarn/Fabrics/Made-ups etc.,

Manmade Textiles & Made Ups etc, Coir and coir manufactures registered a

positive growth of 15.53 per cent, 18.11 per cent, 12.85 per cent and 16.89 per

cent respectively.

Handicrafts and Carpets

Exports of Handicrafts increased to US $ 277.13 million during 2013-14 from

US $ 203.76 million in 2012-13 registering a positive growth of 36.01 percent. Export of carpets increased to US $ 1037.11 million from US $ 988.14

million during the same period last year registering a growth of 4.96 per cent.


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Project Goods

During 2013-14, the export of Project Goods were estimated at US $ 39.65

million compared with US $ 145.97 million in 2012- 13 registering a negative


Petroleum Products

Export of Petroleum Products increased to US $ 62,685.29 million during

2013-14, as compared with US $ 60,859.81 million in 2012-13 recording a

positive growth of 3 per cent.

Cotton Raw including Waste

There was a negative growth in the exports of Cotton Raw including waste by

3.33 per cent from US $ 3,747.73 million in 2012-13 to US $3,622.89 million

during 2013-14.

Imports by Principal Commodities

Disaggregated data on imports by principal commodities, both in Rupee and

Dollar terms, available for the period 2013-14, as compared 2012-13 are given

in Table 3.5 and Table 3.6 respectively. Imports of the top five commodities

during the period 2013-14 registered a share of 60.58 per cent mainly due to

significant imports of Petroleum (Crude & Products), Electronic Goods, Gold,

Pearls, precious and semi-precious stones and Machinery except electrical and

electronic. The share of top five Principal Commodity in Indias total imports

during 2013-14 is given at Chart

Share of Top Five Commodities in India's Imports 2013-14


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The import performance by growth of top five Principal commodities during

2013-14 Vis-a vis the corresponding period of the previous year is shown at

Chart

Growth of Top Five Imports during 2012-13 & 2013-14

Fertilizers

During 2013-14, import of Fertilizers decreased to US $ 6,469.27 million

from US $ 9,074.95 million in 2012-13 recording a negative growth of 28.71

per cent.

Petroleum Crude & Products

The import of Petroleum Crude & Products stood at US $ 165,148.10 million

during 2013- 14 as against US $ 164,040.56 million in 2012- 13 registering a


Pearls, Precious and Semi-Precious Stones

Import of Pearls and Precious and Semiprecious Stones during 2013-14

increased to US $ 24,001.39 million from US $ 22,666.61 million in 2012-13

registering an increase of 5.89 per cent.

Capital Goods

Import of Capital Goods, largely comprises of Machinery, including

Transport Equipment and Electrical Machinery. Import of Machine Tools,


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Machinery other than electrical, Electrical Machinery and Transport

Equipment registered a negative growth of 25.56 per cent, 14.32 per cent, 2.06

per cent, and 12.86 per cent respectively.

Organic and Inorganic Chemicals

During 2013-14, import of Organic and Inorganic Chemicals increased to US

$ 20,213.03 million from US $ 19,319.84 million in 2012-13, registering a

growth of 4.62 per cent. Import of Medicinal and Pharmaceutical Products

decreased to US $ 2,973.83 million in 2013-14 from US $ 3,117.96 million in

2012-13 registering a negative growth of 4.62 per cent.

Coal, Coke & Briquettes

During 2013-14, import of Coal, Coke & Briquettes decreased to US $

16,431.87 million from US $ 16,995.89 million in 2012-13, registering anegative growth of 3.32 per cent.

Gold & silver

During 2013-14, import of Gold and Silver decreased to US $ 33,430.94

million from US $ 55,793.71 million in 2012-13 registering a negative growth

of 40.08 per cent.

Direction of Indias Foreign Trade

The value of Indias exports and imports from major regions/ countries bothin Rupee and Dollar terms are given in Table. Share of major destinations of

Indias Exports and sources of Imports during 2013-14 are given in Chart 3.7

and 3.8 respectively. During the period 2013-14, the share of Asia comprising

of East Asia, ASEAN, West Asia, Other West Asia, North East Asia and

South Asia accounted for 49.67 per cent of Indias total exports. The share of

Europe and America in Indias exports stood at 18.65 per cent and 17.35 per

cent respectively of which EU countries (27) comprises 16.5per cent. During

the period, USA (12.53 per cent) has been the most important country of

export destination followed by UAE (9.76 per cent), China P RP (4.76 percent), Hong Kong (4.07 per cent) and Singapore (4 percent). Asia accounted

for 60.87 per cent of Indias total imports during the period followed by

Europe (15.7per cent) and America (12.91 per cent). Among individual

countries the share of China stood highest at (11.33 per cent) followed by


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Saudi Arabia (8.12 per cent), UAE (6.47 per cent), USA (4.96 per cent) and

Switzerland (4.31 per cent)


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India's percentage share of the trade to the world trade

The export target for the year 2013-14 was fixed at 325 US $ Billion. India'spercentage share of the trade to the world trade for the year 2013 is 2.07%.India's share in world trade is given below: YearTotal Trade: Value in US$ BillionPercentage share of India in World Trade WorldIndia201136830 767.4 2.082012 37012 785.4 2.122013 37658 778.3 2.07Source: WorldTrade Organisation (Calendar Year)

With a view to increase our share of trade in global trade, the Government ofIndia continuously monitors the export performance of different sectors andtakes need based measures from time to time, keeping in view the financialand overall economic implications. Review of Foreign Trade Policy is a partof this strategy, and Annual Supplements to the Foreign Trade Policy (2009-

14) were announced time to time. The last Annual Supplement was announcedon 18.4.2013.

Further in order to boost Exports, Government has taken a number ofmeasures, which, inter alia, include the following:

Two percent Interest Subvention Scheme, which was available for certain

export sectors viz. Handicrafts, Carpet, Handlooms, SMEs, Readymade

Garments, Processed Agriculture Products and Toys, was widened to include

134 tariff lines of Engineering Sector w.e.f 1st January, 2013. Government

enhanced the rate of Interest Subvention from 2% to 3 % with effect from 1

August 2013. As part of product diversification and market diversification

strategy, 47 new items were added to Market Linked Focus Product Scheme

(MLFPS) and 122 new items were added to the Focus Product Scheme (FPS).

Government also notified 153 hi-tech products on 10 July 2013 under Focus

Product Scheme making them eligible for duty script at the rate of 2%
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Indias trade with top most countries

India - US Trade

Trade and commerce form a crucial component of the rapidly expanding andmulti-faceted relations between India and U.S. From a modest $ 5.6 billion in1990, the bilateral trade in merchandise goods has increased to $ 66.9 billionin 2014 representing an impressive 1094.6% growth in a span of 24 years.India's merchandise exports to the U.S. grew by 2.93% from $ 26.32 billionduring the period January - July 2014 to $ 27.09 billion during the periodJanuary - July 2015. US exports of merchandise to India grew by 11.95% from$ 11.54 billion during the period January - July 2014 to $ 12.92 billion duringthe period January - July 2015. India - U.S. bilateral merchandise trade duringthe period January - July 2015 was $ 40.01 billion.

Trade during the year the period January - July 2015

i) Major items of export from India to USSelect major items with their percentage shares, are given below.

a) Textiles (17.1%)b) Precious stones & metals (20.1%)c) Pharmaceutical products (12.5%)

d) Mineral Fuel, Oil (7.2%)e) Machinery (5.5%)f) Organic chemicals (4.5%)g) Articles of Iron and Steel (3%)h) Vehicles, excluding railway (3%)

ii) Major items of export from US to India

Select major items with their percentage shares, are given below

a) Precious stones & metals (31.6%)b) Machinery (9.8%)c) Mineral Fuel, Oil etc (6.5%)d) Electrical machinery (6.4%)e) Aircraft, spacecraft, Parts (6.2)f) Optical instruments & equipment (6%)


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g) Organic chemicals (3.7%)h) Plastic Products (3%)

Trends with respect to the major items of bilateral trade during the past

two years are as follows.

India's exports to USTrends in the top 10 items of India's Exports to theU.S.:

During the period January - July 2015, exports of Cut and polisheddiamonds and jewelry exports amounted to $ 5532 million as comparedto $ 5168 million during the period January - July 2014 which is anincrease of 7%.

Pharmaceutical products exports grew by 11% to $ 3383 million, from$ 3049 million.

Mineral Fuel oil exports fell by 38.3% to $ 1940 million from $ 3145million.

Machinery exports increased by 18.6% to $ 1500 million from 1265million.


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Miscellaneous Textile articles grew by 12.9% from $ 1213 million to $1369 million.

Woven apparel exports increased by 7.4% from $ 1258 million to $1351 million.

Organic Chemicals exports fell by 7.7% accounting for $ 1232 millioncompared to $ 1335 million.

Exports of Knitted apparel exports increased by 12.3% to $ 1003million from $ 893 million.

Articles of Iron and Steel grew by 22.1% to $ 806 million from $ 660million.

Vehicles except railway exports grew by 19.5% to $ 798 million from$ 668 million

US exports to IndiaTrends in the top 10 items of US exports to India:

During the period January - July 2015 exports of Cut and polisheddiamonds and jewelry exports amounted to $ 4082 million as comparedto $ 2719 million during the period January - July 2014 which is agrowth of 50.1%.

Machinery exports grew by 5.1% from $ 1205 million to $ 1267million.

Mineral Fuel, oil grew by 11% to $ 840 million from $ 757 million. Electrical Machinery exports grew by 9.6% to $ 824 million from $ 752

million. Aircraft and parts exports fell by 41.6% to $ 807 million from $ 1381

million. Optical & Medical Instruments exports grew by 5.9%, accounting for $

770 million from $ 727 million. Organic Chemicals exports grew by 15% from $ 413 million to $ 475

million. Plastic Products decreased by 0.8% from $ 387 million to $ 383 million. Edible fruits and nuts exports grew by 32.6% to $ 349 million from $

263 million.

Miscellaneous Chemical products exports fell by 1.8% to $ 337 millionfrom $343 million


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IndiaUAE Trade

Economic and Commercial cooperation with the UAE is a key aspect of

overall bilateral relationship. The traditionally close and friendly India-UAE

bilateral relationship has evolved into a significant partnership in the

economic and commercial sphere. Indians have emerged as important

investors within the UAE and India as an important export destination for the

UAE manufactured goods. India-UAE trade, valued at US$180 million per

annum in the 1970s is today around US$60 billion making UAE, Indias third

largest trading partner for the year 2014-15 after China and US. Moreover,

UAE was the second largest export destination of India with an amount of

over US$ 33 billion for the year 2014-15. For UAE, India was the largest

trading partner for the year 2013 with an amount of over US$ 36 billion (non-

oil trade). India's major export items to UAE include petroleum products;precious metals, stones, gems and jewellery; minerals; food items (cereals,

sugar, fruits & vegetables, tea, meat, and seafood); textiles (garments, apparel,

synthetic fibre, cotton, yarn); engineering & machinery products and

chemicals. Indias major import items from UAE include petroleum and

petroleum products; precious metals, stones, gems & jewellery; minerals;

chemicals; wood & wood products. With respect to oil trade, UAE was the

sixth largest import source of crude oil for India in 2014-15.

With respect to bilateral investments, total FDI from UAE to India is

estimated to be US$3.01billion (Jan. 2015) and ranked as tenth biggestinvestor in India. At the first meeting of India-UAE High Level Task Force

on Investment (HLTFI) held on February 18, 2013 in Abu Dhabi, Abu Dhabi

Investment Authority (ADIA) announced its plans of investing US$ 2 billion

in Indian Infrastructure sector. The second meeting of HLTFI was held in


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pg. 25

March 2014. Also several joint working groups were set up to address issues

of mutual interest in sectors including infrastructure, energy & investment.


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pg. 26

IndiaEU trade

India has embarked on a process of economic reform and progressiveintegration with the global economy that aims to put it on a path of rapid and

sustained growth. However, India's trade regime and regulatory environmentremains comparatively restrictive India still maintains substantial tariff andnon-tariff barriers that hinder trade with the EU. In addition to tariff barriersto imports, India also imposes a number of non-tariff barriers in the form ofquantitative restrictions, import licensing, mandatory testing and certificationfor a large number of products, as well as complicated and lengthy customs

procedures.

With its combination of rapid growth, complementary trade baskets andrelatively high market protection, India is an obvious partner for a free trade

agreement (FTA) for the EU.

The parameters for an ambitious FTA were set out in the report of the EU-India High Level Trade Group in October 2006, which was tasked withassessing the viability of an FTA between the EU and India. Other studieshave reinforced the economic potential of an FTA between the EU and India,notably asustainability impact assessment was carried out by the EU.

Negotiations for a comprehensive FTA were started in June 2007 and areongoing. This would be one of the most significant trade agreements, touching

the lives of 1.7 billion people.

India enjoys trade preferences with the EU under the Generalised Scheme ofPreferences.

To assist India in its efforts to better integrate into the world economywitha view to further enhancing bilateral trade and investment ties the EU is

providing trade related technical assistance to India. This is part of the EU'sassistance programmes with India.

Trade picture

India is an important trade partner for the EU and an emerging globaleconomic power. The country combines a sizable and growing marketof more than 1 billion people.
http://ec.europa.eu/trade/policy/policy-making/analysis/sustainability-impact-assessments/assessments/#study-7http://ec.europa.eu/europeaid/where/asia/country-cooperation/india/india_en.htmhttp://ec.europa.eu/europeaid/where/asia/country-cooperation/india/india_en.htmhttp://ec.europa.eu/europeaid/where/asia/country-cooperation/india/india_en.htmhttp://ec.europa.eu/europeaid/where/asia/country-cooperation/india/india_en.htmhttp://ec.europa.eu/trade/policy/policy-making/analysis/sustainability-impact-assessments/assessments/#study-7


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pg. 27

The value of EU-India trade grew from 28.6 billion in 2003 to 72.5billion in 2014.

EU investment stock in India is 34.7 billion in 2013. Trade in commercial services quadrupled in the past decade, increasing

from 5.2billion in 2002 to 23.7 billion in 2013.


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pg. 28

IndiaChina Trade

Indian Exports to China is an integral part of the bilateral trade relations

between the two Asian countries, India and china. Indian Exports to China

focus on mainly primary products. In 1984, India and China signed a tradeagreement, providing for Most Favored Nation treatment, to foster greater

cooperation between each other. Moreover, the year 2006 was celebrated as

Friendship Year between India and China.

Items of Indian Exports to China

The principal items of Indian exports to China comprise of ores, slag and ash,

iron and steel, plastics, organic chemicals, and cotton. In order to increase the

extent of exporting Indian goods to China, however, there should be a special

emphasis on investments and trade in services and knowledge-based sectors.At present, iron ore constitutes about 53% of the total Indian exports to China.

The other items that have potentials are marine products, oil seeds, salt,

inorganic chemicals, plastic, rubber, optical and medical equipment, and dairy

products. Not only this, great potential exists in areas like biotechnology, IT

and ITES, health, education, tourism, and the financial sector - all of which

will contribute to the services and knowledge based sectors.

The need is to shift the focus from primary exports to the export of diverse

range of high value added products, including -

Auto engine components and automobiles Organic and inorganic products Pharmaceuticals Metal and metal based products like alloy steel bars and rods Agricultural products like grains, tobacco and oilseeds Engineering goods like diesel engines and compressors Marine foods

Fresh and processed fruits and vegetables Medical and optical diagnostic equipment and laboratory equipment Consumer durables Textile yarns

Such diversification of Indian exports to China clearly indicates that there

exists a steady demand for these products in the Chinese.


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pg. 29

Chinese exports to India focuses on resource based exports as well as theexports of manufactured products. China has emerged as a globalmanufacturing center and India as the most lucrative market in the world.

In 2004, the Chinese exports to India stood at US$ 5926.67 million. However,

it industrialists in India were not in favor of China being given free access tothe domestic markets. But bilateral trade relations between India and Chinahave increased over the years, reaching US$18.7 billion in 2005 from US$ 4.8

billion in 2002. However, the bilateral trade is to be increased further to US$20 billion by 2008 and further to US$30 billion by 2010.

Items of Chinese Exports to India

The main items to be exported from China to India are electrical machineryand equipment, organic chemicals, nuclear reactors, boilers, machinery, silk,mineral fuels, and oils. Value added items also dominate Chinese exports toIndia, like machinery, specially electrical machinery, which forms about 36%of Chinese exports to India.

Recent developments regarding Chinese Exports to India

In the beginning, Chinese firms were keen on exporting cheapelectronic items, garments, and toys to the Indian markets. But recently,Chinese exporters have been focusing on the cement market. Two

Chinese cement companies, Yingde Dragon Mountain Cementcompany Ltd. and Longkou Fanlin Cement Company have beenauthorized to sell cement in Indian market. The reasons behind thesudden interest of the Chinese cement companies in penetrating theIndian market are that China is the world's largest cement producer andthat the per capita cement consumption is relatively low in India -around 150 kilogram per annum, less than one-third of China's percapita consumption, as in 2006. An Ahmadabad-based textile companyis acting as the local agent of the Chinese firms in India.

The prospects for Chinese exports to India have been enhanced from

2006, with the opening of the prospective Indo China border trade.Trade has been initiated between Tibet, an autonomous region of China,and India through Nathu La Pass, reopened after 44 years. From thenonwards, nearly 15 items are being exported from China to India.


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pg. 30

CHAPTER 3

CONCLUSION

The global trade landscape has changed over the past few decades. This haslead to increased interconnectedness and strengthened trade spilloverchannels.

The relative importance has changed from large advanced economies such asjapan and the United Kingdom to EMEs such China and India. Importantly,china is now on par with the United States ranking first in systemic importancenot only in terms of size but also in terms of significant bilateral traderelations. This has important implications on trade spillovers as the sources ofdemand shift from advanced countries to EMEs.

India's exports grew by 3.98 per cent to $312.35 billion in FY 2013-14 whileimports fell by 8.11 per cent during the period. Imports declined to $450.94

billion, narrowing thetrade deficit to $138.59 billion in the last fiscal. In FY2012-13, trade deficit stood at $190.33 billion. However, in March exportscontracted by 3.15 per cent to $29.57 billion and imports fell by 2.11 per centto $40 billion as compared to the same period last year. Trade deficit duringthe month was at $10.5 billion as against $10.4 billion in March 2013.In FY2012-13, the country's merchandise exports had aggregated at $300.4 billion.The overall shipments in 2013-14 fell short of the target of $325 billion fixed

by the government for the period.

Initially, a trade deficit is not a bad thing. It raises thestandard of living of acountry's residents, since they now have access to a wider variety of goodsand services for a more competitive price. It can reduce the threat of inflation,since the products are priced lower. A trade deficit can also indicate that thecountry's residents are feeling confident, and wealthy, enough to buy morethan the country produces.

Over time, however, a trade deficit can causejobs outsourcing.That's because,as a country imports certain goods rather than buying domestically, the localcompanies start to go out of business. The domestic business itself will losethe expertise needed to produce that good competitively. As a result, fewer

jobs in that industry are created in the home country. Instead, the foreigncompanies hire new workers to keep up with thedemand for their exports.
http://businesstoday.intoday.in/story/india-for-china-investments-to-offset-trade-deficit/1/204381.htmlhttp://useconomy.about.com/od/fiscalpolicy/fl/Standard-of-Living.htmhttp://useconomy.about.com/od/tradepolicy/tp/How-Jobs-Outsourcing-Affects-US-Economy.htmhttp://useconomy.about.com/od/demand/a/demand_primer.htmhttp://useconomy.about.com/od/demand/a/demand_primer.htmhttp://useconomy.about.com/od/tradepolicy/tp/How-Jobs-Outsourcing-Affects-US-Economy.htmhttp://useconomy.about.com/od/fiscalpolicy/fl/Standard-of-Living.htmhttp://businesstoday.intoday.in/story/india-for-china-investments-to-offset-trade-deficit/1/204381.html


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pg. 31

For this reason, many leaders propose reducing the trade deficit to increasejobs. They often blametrade agreements for causing deficits. A great exampleis the world's largest agreement, theNorth American Free Trade Agreement,or NAFTA. A response to trade deficits is often to raise importtariffs,or otherforms oftrade protectionism.However, these rarely work. That's because theindustry is usually already moribund, and the skills lost, by the time these

policies are suggested. For more, seePros and Cons of Trade Agreements.
http://useconomy.about.com/od/glossary/g/Trade_Agreements.htmhttp://useconomy.about.com/od/tradepolicy/tp/NAFTA_Facts.htmhttp://useconomy.about.com/od/glossary/g/tariff.htmhttp://useconomy.about.com/od/glossary/g/Trade-Protectionism.htmhttp://useconomy.about.com/od/glossary/g/Free-Trade-Agreements.htmhttp://useconomy.about.com/od/glossary/g/Free-Trade-Agreements.htmhttp://useconomy.about.com/od/glossary/g/Trade-Protectionism.htmhttp://useconomy.about.com/od/glossary/g/tariff.htmhttp://useconomy.about.com/od/tradepolicy/tp/NAFTA_Facts.htmhttp://useconomy.about.com/od/glossary/g/Trade_Agreements.htm


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BIBILIOGRAPHY

Economics of Global Trade and FinanceManan Prakshan & ShethPublication

http://www.ecb.europa.eu

http://commerce.nic.in

http://www.yourarticlelibrary.com/foreign-trade/5-major-current-trends-in-foreign-trade

Documents

Indian recent trend in global trade