Download Trade report India

Trade Report India
Dong, Quanhui #260011618
Country Profile: Republic of India 28 states and 7 union territories, capital New
Dehli. Currency is Indian rupee (INR), 1 C$=31 INR as of Feb.20, 2003
India belongs to Southern Asia, bordering the Arabian Sea and the Bay of Bengal,
between Burma and Pakistan, slightly more than one-third the size of the Canada.
Weather varies from tropical monsoon in south to temperate in north. There are upland
plain (Deccan Plateau) in south, flat to rolling plain along the Ganges, deserts in west,
Himalayas in north. India dominates South Asian subcontinent; near important Indian
Ocean trade routes .
Population is 1.0 billion as of estimation of July 2002, among which 32.7% are under
14 years old. Multiple languges are spoken, while English enjoys associate status but is
the most important language for national, political, and commercial communication;
Hindu is the national language and primary tongue of 30% of the people; there are 14
other official languages.
A remarkeble resource is that India has large numbers of well-educated people skilled
in English language; India is a major exporter of software services and software workers.
Infrastracture is not good enough to support high growth of productivity, except it has
longest railway in the world which is legacy of colonial age. For example telephone line
has a 2.9 per hundred head popular rate. Electricity shortage hurts cities and industries,
tap water is not potable throughout the country.
Soil erosion and air pollution add burden to development of this over crowded country
and who is still seeing a high birth rate of infant, and considering huge population base of
India it would become the number one country in population in 2050 by overpassing
China.
By Purchasing Power Parity standard India is the world’s 4th largest economic body,
ahead of Canada. GDP per capita PPP is US 2,500 dollars, growth rate in year 2001 is
5%.
Poverty line: 25% (2001 est.) of population live under government defined poverty
line which is 10 Rupees per day, equals to US$75-80 per year.
Unemployment rate : 9% but it should be pointed out that 70% of population live in
countryside and it is hard to get an unemployment rate for such people.
Major industries are textiles, chemicals, food processing, steel, transportation
equipment, cement, mining, petroleum, machinery, software. India's economy
encompasses traditional village farming, modern agriculture, handicrafts, a wide range of
modern industries, and a multitude of support services. Growth in manufacturing output
has slowed, and electricity shortages continue in many regions.
India has a mixture economy and since independence in 1947, central government
gradually tightened control of states’ economy. A central planningn commission was set
up in 1951 to begin the five year plan for macro economics progress. Year 2002-2007
sees the 10th five-year plan. India was pretty closed to outside world until the slow
motion of economic reform since 1991. The good points are India has relatively low
inflation rate, steady economic growth and stable currency and banking system.
As India has border dispute with all its neighbor countries, conventional and nuclear
arm force are being built up. In other words defense industry and market grow at annual
rate of 5% and in budget 2003 only the growth rate is 14%.
Import/Export
Exports amount US$44.5 billion in 2001, commodities are textile, gems, engineering
goods, chemicals and leather. Exports partners are United States 22%, Hong Kong 6%,
Japan 5.3% and United Kingdom 5.3%.
Imports amount US$53.8 billion in 2001, a deficit as we see same in historical data
year over year. Commodities are crude oil, machinery, gem stones, fertilizer and
chemicals. Imports partners are U.S.A 8%, UK 6.2%, Japan 5.7% and Saudi Arabia
4.6%.
In short, in goods or merchandise trade India has trade deficit in most of years since
independence in 1947 .
Service starting 1974 India exports software and IT products, the growth rate is big
from 1990 to 2001 average at 42% per year, and even higher the decade before. As
service is not accountable or visible in trade statistics, it is estimated that this occupies
about 51% of total import export trade amount. Software export in year 2002 only has a
scale of over 7 Billion US dollars.
As to FDI inflow India has not a remakable achievement in attracting foreign direct
investment although it is on uphill from year to year, because of foreign currency control,
tariff rate, approval process and not enough tax incentive for FDI investment related
enterprises. Much more trade and business liberalization need to be done to gain a
favourable advantage in competing world FDI regionally.
A second source of FDI for India is oversea non residents indians , or virtual India. It
is estimated that between US$300 to US$400 Billion of "Indian Money", is lying outside
India, due to poor governance & administration of India and due to past regimes of
controls and high taxation. Many things have changed since 1991, but not the quality of
Governance & Administration. If India could put its "House in Order" a substantial part
of this money could easily come back to drive the Indian economy.
Finally the balance of payment is always surplus if considering the current account and
capital account , and plus FDI and other loans. And this leads to India’s foreign exchange
reserve maintained at positive level.
Canada-India
Founded initially on the Commonwealth connection, Canada-India bilateral relations
have traditionally been broadly based and characterized by straightforward and
constructive cooperation and discussion.
Canada-India relations endured a relatively prolonged period of tension. Since the
announcement of Canada's "re-engagement" with India in March 2001, exchanges at the
levels of senior officials and ministers have accelerated.
Canadian areas of expertise such as power, communications and transportation, and
there are promising new sales in sectors such as information technology, the environment
and agri-food.
Bilateral trade reaches C$2 Billions in year 2001, which includes Canada's measurable
exports of $620.8 million, and Canada’s imports from India C$1,154 million. The ratio is
1 to 2, India enjoys a surplus in merchandise trade. The total figure would be double in a
year as both parties see big potential in old and new sectors of business.
In service sector Canada’s export gains same share as goods, mainly in consulting, IT,
banking and financial services. And other the other direction India elected to invest
heavily in software development in Canada since the latter would be used as an entry to
NAFTA zone.
Hence investment in service sector by India has been increasing rapidly and is the
biggest FDI inflow to Canada from India, while Canada’s FDI to India focus in
infrastracture, oil and gas, financial service etc. Inflow from Canada is 1% of total FDI
that India receives in year 2001 .
Tension between canada and india , mainly nuclear test measurement, has impact on
the bilateral trade development, however with evolvement of senior level of talks
between peers of both countries trade become more and more important in relationship.
For year 2003 India government has made new efforts to promote trade and attract
more FDI. Its ambition is to obtain double of inflow of last year’s base, which is about
US$4.6 Billion actually utilised. Measures include:
Remove all quantitive restriction for all exports.
Set up special economic zone (SEZ) for foreign investors.
Focus on primary export-oriented items such as agricultural, leather and electrical
hardware, and small scale industry.
Further lower tariff from 30% to 20%, budget year 2003 and 2004.
Substantial increase in public investment in infrastracture.
Beginning at same era of late 1940s, India and China has been working on different
tracks from agricultural economy toward industrial economy. Predominant opinion
within India compares economic and societal achievements more than half a century later
with that of China, to conclude that India is lagging behind in all major indices except a
few such as software export. And the slow warming reform of 1991 has already a gap of
ten years in timeline.
A sharp distance can be noted in FDI inflow between the two rivals in region. Now
India realizes there are something strategic need to learn from the Chinese. The author
think oversea Indians are a large and wealthy group of elites both in finance and
knowledgement. Question is to have a world-class governance, a robust economic system
and an agile foreign policy.
But there is one critical aspect that India could not match, no matter how many SEZs
be created, China has a free-port, a global financial center and a hub for absorbing of
foreign investment that is Hong Kong. Hong Kong’s special status allows it play a major
role in attracting FDI (50-60% ) and contribute greatly to the open policy of mainland
government.
India has a long road to go.
Bibliography
(1)www.cia.gov/worldfact
(2) Center for Strategic and International Studies www.csis.org/saprog
(3) http://exim.indiamart.com/
(4) www.worldbank.org/data/countrydata/aag/ind_aag.pdf
(5) http://www.india-watch.com
(6) www.edc.ca/docs/ereports/monitors/fdi
(7) www.dfait-maeci.gc.ca/asia/country/india-en.asp
(8) http://www.hongkong.org/press/ny_090801_1.htm