INDIAN ECONOMY IN WTO PERSPECTIVE

PRESENTED BY: SUBMITTED TO:ANITA PUNJABI DR. YOGESH C. JOSHIBHARAT DUDHAIYA SUB: IEONEHA SHARMA MBA SEM IVUNNATI RAJ

G H PATEL PG INSTITUTE OF BUSINESS MANAGEMENTSARDAR PATEL UNIVERSITY

VALLABH VIDYANAGAR 388120

Introduction 

• The role of WTO in developing countries like India has held central importance in negotiation and the design of development of Doha Development Agenda which was approved at WTO Ministerial Meeting.

• Membership will bring higher growth and accelerated export expansion and a better living standard to the people in India

• The impact of WTO on agriculture was severely felt by India as cheap imports have frequently hit the Indian market

Review of Literature

• A brief review of the study is carried down in the review of literature which includes various sources and references through which we have collected and gathered the data. The review of literature has allowed gaining insight into various aspects of Indian economy affected by the trade policies formed in relevance to WTO trade agreements. The literature reviewed has been briefly presented below:-

(1) Mr. Kamal Nath, Economic Times, August 1, 2008) in his article has discussed about reasons for failure of the mini-ministerial at Geneva. According to him repeated attempts by rich nations to accord precedence to commercial interests over livelihood concerns of farmers led to failure of the WTO mini-ministerial negotiations at Geneva. According to his point of view commercial interests could guide trade but cannot override the interests of poor farmers in India and other developing countries.

(2) Sharad Pawar ,Financial Express, August 16, 2008 in his article has rejected a suggestion that India should step out of the WTO because of high agricultural subsidies in the developed countries. Such a step would be self-defeating India would be singled out and left without support. He said while agricultural subsidies were supported by most of the leading nations, their number has dwindled. This implies that over the next four to five years subsidies would definitely be on their way outland India with high labour power would be able to “excel” in global competition once the agricultural subsidies are done away with.

(3) Seema Sapra, www.indiainthewto.wordpress.com has shared her view on comparative gains to India in adopting a multilateral versus a bilateral focussed trade policy. According to her study India’s economy would grow most under a Doha agreement, although the gains would add a very modest 0.25 percent to the economy. Free trade pacts with China or the United States would produce even smaller gains. An agreement with the EU, India’s largest trading partner, would have a slightly negative overall impact on India’s economy. Dramatic swings in world agricultural prices—a common occurrence—could have much larger impacts on India if the country lowers its agricultural tariffs.

(4) Mr. Mao Siwei, Economic Times, April 14, 2009, counsel General of China made some interesting remarks on India-China trade at an Industry chamber meeting held at Kolkata. According to him China has become India’s largest trading partner and the bilateral trade reached 51.8 billion US dollars in the calendar year 2008. Ten years ago, the figure of China-India trade in 1998 was only 1.9 billion US dollars. This is a nearly 30-fold increase in just ten years and also the first time in history, India has become the biggest overseas market for Chinese companies undertaking contract projects.30,000 MW of equipment will be supplied by Chinese companies in the coming few years.

(5) Seema Sapra, www.indiainthewto.wordpress.com had discussed regarding a joint panel established by India China to defuse trade tension and resolve toy imports issue. India and China has set up a joint working team to coordinate and communicate regularly on the problems of bilateral trade. In order to avoid possible prejudice against Chinese toys, India has set safety standards for toy products, so that all imported toys and domestically made toys will all abide by the standards. India has launched 17 trade remedy probes, including those of anti-dumping and anti-subsidy, against Chinese products, covering industrial salt, steel, auto parts, coal products, textile and rubber products, which mean a total loss of more than $ 1.5 billion U.S. for the Chinese producers and traders.

 

Objectives of our Study

• To study current status of Indian economy

• To study effect of various agreements on Indian economy under WTO Regime

• To study issues and policies relating to Service Sector in India under WTO Regime

CURRENT STATUS OF THE INDIAN ECONOMY

1 TRADE POLICY REVIEW-a periodic assessment2 India’s foreign trade3 India’s policy at WTOa. India’s position at DOHA Development Agendab.India’s International Trade Policyc. India’s status in the Multilateral Trade System

TRADE POLICY REVIEW

• Periodic assessmentTo assess member’s trade policies, effect of policies on world trading system.

• Low productivityDeclining share of agriculture in GDP from 23% (2001) to 18% (2009)Share of manufacturing 16% not sufficientHigh tariff on Textile and clothing 22.5% and Automobile 33.6%, complex duty structure, rigidity in labour market.infrastructure bottlenecks-port services and marine transport

2. Attracting FDIexport promotiongovt. spending on infrastructuretariff structure -32.2% (2002) to 15.8 (2007)

3. Safeguard actionsIndia- major user of anti-dumping measurescurrent status: observer Patent Act-2005, TRIPs, SEZRegionalism Demographic Dividend- greater investment in human capital

Foreign Trade

PARTICULARS AS ON DEC 2010 $mn

AS ON DEC 2009 $mn CHANGE %

IMPORTS 25130 28251 (11.1)

EXPORTS 22500 16493 36.4

OIL IMPORTS 6926 8247 16.0

India’s policy at the WTO

• G-20 to take care of the issues concerning DEVELOPING MEMBERS

• Safe guards to protect domestic agri produce• Safe guards against removal of higher tariff• Removal of the trade distorting subsidies

India’s international trade policy

• Midway in adopting non-tariff measures• Service sector: comparative advantage• India’s role in Improvement in the dispute

settlement system

India’s status in the multilateral trade system

• Use of the special and differential treatment1. As a beneficiary from developed member2. As a provider to LDCs

• Preferential access to market under GSP, benefits are non-reciprocity and unilateral• India member of GSTP: Trade concession to

MFN

Issues concerning Indian economy

• Indian farmers not benefiting from WTO Agreement• Need for second phase of reforms• Broader commitments failed• Ministry still lays oh higher front• Entry of WTO lead Pharmaceutical sector lead to - Ever greening of patents and spiraling Drug Prices - Drugs Export and Compulsory License -Higher cost of drugs due to inflated R&D Expenditure

• IPR depends on the status of economy• WTO has stimulated R&D investments• Research in biotechnology is on hike• Complying policies with World health

organization.• Speeding up Patent processing examinations and

procedures• Issues like pricing are major concern under

patent regime, contractual research agreements, engaging biopharmaceutical research

Issues and Policies for Service Sector in India under WTO Regime

• Tourism Services: India has already emerged as a fast growing tourist destination in the world. Given its bio-diversity, variety of unique destinations and natural locales, India can transform itself into a 365 days a year destination with increased emphasis on new products like medical tourism, rural tourism. Some issues related to Tourism sector include reducing the overall tax impact on tourism which is around 30-35% in India, and is high compared to other countries, easing barriers on travel through easy visa on arrival for select countries, establishing a special tourism police force at important tourist destinations, establishing budget hotels at identified railway sites with private sector participation, upgrading airport infrastructure in a time bound manner, cleaning drives in tourist spots and metros, etc.

• Healthcare Services - Though India has a good supply base and is cost competitive, good marketing and publicity regarding these services are needed. Some of the issues include negotiating for removal of market access barriers.

• Accounting, Auditing and Bookkeeping Services: In the case of these services where India has a good potential for exports, the limitations are mainly in the form of licensing and accreditation. The horizontal limitations on the entry for speciality occupations, automatically restricts opportunities in this sector and needs to be negotiated, while the potential of outsourcing many components of these services has to be fully tapped.

• Unskilled labour Services: Since a large number of Indians work in the Gulf area mostly as unskilled workers, there is a need to train and skill certify them before going abroad as done by countries like Philippines, Thailand and Sri Lanka. This will help them to get better jobs, earn more and have higher disposable income.

• Insurance Services: In the case of Insurance services, there is the main issue of 26% cap on foreign investment besides restrictions like minimum capitalization norms, funds of policy holders to be retained within the country, compulsory exposure to rural and social sectors and backward classes. A consensus is needed in some of these issues to make further headway.

• IT Services: Policies for IT services include steps to move to systems software coupled with hardware-software combination, further progress in application software along with full exploitation of the great outsourcing revolution in services and negotiating with EU regarding 'Data Protection Act in EU' as half of off-shore work does not come to India and other countries due to this Act.

• R&D, Design and Engineering Services: The policies in the case of R&D, Design and Engineering Services are setting up R&D labs in SEZs, examining the possibility of cheaper loans taking note of gestation p eriod in R&D services, patent funding to reimburse costs of patenting, promoting lab testing services for use of South Asian countries in India and setting up design, engineering, consultancy parks.

• Ship repair Services: It has been opened by many countries like US. It is not demand that is lacking or any difficulty of market access but capacity building and effective marketing of ship repair services, providing port services by port based SEZs like supply of spare parts, ship repairs, etc. is needed.

• Printing Services: In the case of Printing Services where India has a good potential for exports there is a need to be cost competitive and leverage India’s expertise in software sector for this purpose.

• Satellite Mapping Services: In the case of Satellite Mapping Services, India has a good supply base for economic application of satellite mapping services and is also cost competitive. Policies for Satellite Mapping services could include negotiating with US, EC and other developed and developing countries regarding defense restrictions, examining possibilities of sharing some common facilities and data of public sector institutions like ISRO with private sector.

Key Strategies for the Service Sector

• Identifying the burdensome domestic regulations in India and reforming them which also includes many fiscal issues.

• Identifying the different market access barriers to India’s exports of services and focusing on the important ones for negotiations at bilateral and multilateral levels taking note of India’s domestic growth, export potential of services and import basket analysis of trading partners.

• Greater synergy is needed not only between trade strategies and multilateral/bilateral negotiations, but also between growth and development strategies and multilateral/bilateral negotiations.

• Focus should be on export of untapped services and markets and services with high linkage effects with manufacturing, growth of the economy and employment.

Thank you