Important Facts Related to Indian Economy: – (Foreign Trade)

Last Updated on June 30, 2017 by Bharat Saini

• Over the last ten years, India’s merchandise trade (on customs basis) increased manifold from US $ 195·1 billion in 2004-05 to US $ 655·013 billion in 2016-17 helping India’s share in global exports and imports improve from 0·8 per cent and 1·0 per cent respectively in 2004 to 1·62 per cent and 2·34 per cent in 2015.
• India’s ranking amongst the leading exporters  and importers improved from 30 and 23 in 2004 to 19 and 13 respectively in 2015.
• During 2016-17, India’s foreign trade scenario was :

        Exports              $ 274·645 billion

        Imports              $ 380·368 billion

        Trade Deficit     $ 105·723 billion

• Value of imports declined from US$ 448 billion in 2014-15 to US$ 380·368 billion in 2015-16, mainly on account of decline in crude oil prices resulting in lower levels of POL imports. During 2016-17 imports declined by 0·17 per cent to US $ 380·368 billion compared  to  the  corresponding period  of  previous  year.   POL imports increased  by 4·24 per cent.
• India’s imports from Europe, Africa, America, Asia and CIS & Baltics regions declined in 2015-16.  However,  in 2016-17

 

RuPay

President Pranab Mukherjee on May 2014 dedicated to the nation indigenous card payment network called RuPay taking on the global players like Visa and Master Card. The new payment network developed by the National Payments Corporation of India (NPCI), a not-for-profit company envisioned by the Reserve Bank of India (RBI) and created by the banking industry, covers all the Automated Teller Machines (ATMs) and most of the retail and e-commerce platforms. RuPay is the coinage of two terms Rupee and Payment. With the launch of new system, India has now ranked among the “few countries in the world to have such a network built domes­tically to meet the card-based payment  system needs of the country.” RuPay cards are accepted at all ATMs, more than 90 per cent of ‘Point of Sale’ (PoS) terminals and more than 10,000 e-commerce merchants across the country

 

(April – November),     imports from CIS & Baltics region increased by 10·3 per cent while other four regions witnessed decline. Top three import destinations   of  India  were   China followed by UAE and USA in 2016-17 (April-November).

• In 2015-16, India’s trade deficit declined by 13·8 per cent (vis-à-vis 2014-15) to US$ 118·7 billion. Furthermore, it declined by 10·94 per cent to US$ 105·723 billion in 2016-17 as compared to US$ 118·716 billion in previous year.

 

Incentive Packages to Boost Exports

2%   interest  subsidy  scheme  extended till March 2014.

Pilot scheme of 2% interest subvention for project exports through EXIM Bank.

Incentives on better export performance.

3% Duty credit in Focus Market scheme.

4% Duty credit in special Focus Market Scheme.

2% Duty credit in Market Linked Focus Product Scheme.

2% Duty credit in Focus Product Scheme.

 

• India’s major imports which are re-exported after processing are capital goods, fertilizers, coal, chemicals, minerals, edible oils, food grains, pulses, paper etc.
• The major exportable items from India are agriculture and allied products,  minerals,  manufacturing goods.
• With a share of 23% of India’s merchandise exports, engineering sector is the largest contributor to such exports well ahead of gems and jewellery.
• India  had  a  share  of  2·3%  of world exports of marine products.
• Textiles Industry contributes the maximum net foreign exchange in India’s exports because its exports are least dependent on imports.
• In 1994-95, Indian rupee was declared fully convertible on cur-rent account.

 

Highlights of Foreign Trade Policy 2015–20

Aiming to nearly double India’s exports of goods and services to $900 billion by 2020, the government has announced several incentives in the five-year Foreign Trade Policy for exporters and units in the Special Economic Zones. Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS) are to be introduced to boost outward shipments. Increase exports to $ 900 billion by 2019-20, from $ 466 billion in 2013-14. Raise India’s share in world exports from 2% to 3·5%. Chapter-3 incentives extended to units located in SEZs. Export obligation under EPCG scheme reduced to 75% to Promote domestic capital goods manufacturing. FTP to be aligned to Make in India, Digital India and  Skills India initiatives. Duty credit scrips made freely transferable and usable for payment of custom duty, excise duty and service tax. Export promotion mission to take on board state Governments. Unlike annual reviews, FTP will be reviewed after two-and-Half years. Higher level of support for export of defence, farm Produce and eco-friendly products.

 

• Finance Ministry has introduced Prevention of Money Laundering (Amendment) Bill 2008 on October 17, 2008 in the Parliament for making amendments in existing Prevention of Money Laundering Act, 2002.
• As per WTO data, India’s commercial services exports increased from US $ 51·9 billion in 2005 to US $ 155·3 billion in 2015. The share of India’s commercial services to global services to global services exports increased to 3·3 per cent in 2015 from 3·1 per cent in 2014 despite negative growth of 0·2 per cent in 2015 as compared to 5·0 per cent growth in 2014. This was due to the relatively greater fall in world services exports by 6·1 per cent in 2015.
• As per RBI’s BoP data, India’s services exports declined by 2·4 per cent in 2015-16 as a result of slowdown in global output and trade. However, in H1 of 2016-17, services exports increased by 4·0 per cent compared to 0·3 per cent growth in the same period of previous year. Growth of net services, which has been a major source of financing India’s trade deficit in recent years, was (–) 9·0 per cent in 2015-16 and (–) 10·0 per cent in H1 of 2016-17 due to relatively higher growth in imports of services. Growth of software exports which accoun-ted for 48·1 per cent share in ser-vices exports was 1·4 per cent in 2015-16 and 0·1 per cent in H1 of 2016-17.
• Nominal   Effective    Exchange Rate (NEER) and Real Effective Exchange Rate (REER) indices are used as indicators of external competitiveness of the country over a period of time. NEER is the weighted average of bilateral nominal exchange rates of the home  currency  in  terms  of foreign currencies, while REER is defined as a weighted average of nominal exchange rates, adjusted for home and foreign country relative price differentials.
• Anti-dumping  duty  imposed on Chinese equipment—India   has imposed anti-dumping duty of upto 266 per cent on import of an  IT  equipment—also  used  in the telecom sector—to guard the domestic industry against cheap Chinese  and  Israeli  shipments. According to the official declaration, the restrictive duty on import of the ‘synchronous digital hierarchy transmission equipment’ would range from three to 266 per cent on the CIF (cost, insurance  and   freight) value of imports.
• NAFED disallowed for white sugar imports—The government has  excluded  National  Agricultural Cooperative Marketing Federation of India (NafEd) from the list of four nominated agencies for white sugar imports, restricting  the  job  to  the  three public sector trading firms—MMTC, PEC and STC. As per NAFED’s      official      sources, NAFED itself requested the government to exclude it from the list as the sale of white sugar to domestic  mills  has  become  a little difficult.
• Regionwise,  Asia  and  ASEAN countries have emerged as major export destinations for India.
• India has implemented an FTA (Free  Trade  Agreement)  with Indonesia, a member of 10-nation ASEAN block. Implementation of this FTA slashes import duties on thousands of products like seafood, chemicals and apparel. On the reciprocal side, Indonesia will also slash import duties on Indian goods simultaneously.
• India 19th biggest exporter in merchandise trade—According to the recent classification done by the World Trade Organisation (WTO) Secretariat. India is the world’s 19th biggest exporter  in  merchandise  trade surpassing  countries   like   Australia, Brazil, Switzerland and Sweden. On import front India is the 13th largest importer of the world.
• The USA, the European Union, China and Japan are the major importers of services in the world.
• The China has replaced the USA as  the  topmost  destination  of India’s exports in 2015-16.
• Export-Import Ratios in top 15 trading partners show that India had bilateral trade surplus with five countries, namely the UAE, USA,  Singapore,  the  UK  and Hong  Kong  in  2009-10  and 2010-11.
• Export-import  ratios show that among its top 15 trading partners, India had bilateral trade surplus with  five countries, namely the UAE, USA, Singapore,  UK and Hong kong.
• Foreign exchange reserves are an important component of the BoP and an essential element in the analysis of an economy’s exter­nal position. India’s foreign ex-change reserves comprise Fore­ign    Currency    Assets   (FCA),  gold,  Special  Drawing  Rights (SDRs)   and    Reserve  Tranche  Position (RTP) in the Inter-national Monetary Fund (IMF).
• In  terms  of  the  destination  of FDI flows Delhi, parts of U. P. and Haryana, Maharashtra, Dadra and Nagar Haveli and Daman and Diu accounted for almost 50% of the total inflows.
• Amid dwindling interest in SEZs, the  government  announced  a ‘package of reforms’ on April 18, 2013, including easing of land requirement norms and an exit policy, to rekindle investor interest in Special Economic Zones.
• The Special Economic Zones (SEZs) Policy supported by the SEZ Act 2005 and SEZ Rules 2006  intends  to  make SEZs  an engine  for  economic  growth supported   by   quality   infra-structure, complemented by an attractive fiscal package, both at the Central and State levels and with the single-window clearance mechanism.SEZ Norms Liberalised
  1. The Minimum Land Area Requirement for SEZ has been reduced by half for different categories of SEZs,
  2. For  multi-product   SEZ, minimum land requirement has been brought down from 1000 hectare to 500 hectare and   for   Sector-Specific SEZs, it has been brought down to 50 hectare.
  3. Also, there would be no minimum land requirement for  setting   up   IT/ITES    SEZs,  besides  easing  of minimum  built  up  area criteria.
  4. The Government has decided to allow transfer of owner-ship of SEZ units including sale.

 

SEZs Scenario (As on September 2016)
Approved SEZs	408
Notified SEZs	346
Operational SEZs	204
Total Units Approved	4166

 

Among sectors attracting high cumulative FDIs, Services Sector retained  the  first spot, followed by construction development for the period April 2000 to March 2016.

• The World Bank’s concessionary lending arm, the International Development Association (IDA), which helps the world’s poorest countries,  committed  17·7  per cent of its total aid, amounting to $ 2·6 billion, to India in 2009-10.
• Asian Development Bank (ADB) has  approved  $  132  million        ( 585 crore) loan for upgrading electricity system in Bihar and also a loan package of $ 120 million ( 532 crore) to Assam towards efforts to combat flood-ing and erosion.
• All  the  8  Export  Processing Zones (EPZs) located at Kandla and Surat (Gujarat), Santa Cruz (Maharashtra), Cochin (Kerala), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal) and Noida (U.P.) have been converted into Special Economic Zones.
• India’s  external  debt  stock increased to $ 456·1 billion at end-December 2016.

At end-December 2016

        *   External Debt                                                    —$ 456·1 billion

        *   Total External Debt to GDP (2015-16)                      —23·5%

        *   Debt Service Ratio (2015-16)                                     —8·8%

        *   Concessional Debt to Total external debt                 —9·2%

        *   Foreign Exchange Reserves to total external debt          —78·7%

        *   Short term External Debt to total Debt                        —18·4%

        *   Short  term  External  Debt to Foreign Exchange Reserves —23·4%