|
India's Trading Arrangements in SAARC region
Rashmi and Purnima Kumar
Jamshedpur womens college, Jamshedpur, India
E-mail: kmr.rshm@gmail.com
South Asia is one of the poorest regions in the world accounting for one fourth of world’s population but with a gross national product of only 3.4% of the world’s total. As a term ‘south Asia’ has been in use only for past five decades, it is the Indian sub continent that has been in longer use. The American studies programme popularized the use of term South Asia. The south Asian countries share common historical bonds, social & cultural identities and economic- political strategic interest with a desire to live in harmony and co- operation.
South Asian economies have found the expression of their regional aims in SAARC. The south Asian association for regional co-operation (SAARC) was established when its charter was formally adopted on 8 December 1985 by the heads of states of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri lanka. During 13 th SAARC summit in Bangladesh at Dhaka, Afghanistan was included as a new member states.
Statistical data for India
Population in million 1,094.58 Area (km) 2 2973,190 G.D.P.(Constant 2000$ in billion) 644.10 G.D.P. per capita (Constant 2000$) 588 Marchandise&serviceexport (% of world) 2.34 Applied trade weighted average tariff (%) 14.76
Completing 1st phase of SAFTA
The road to accelerate development in south Asia is through the SAARC’s economic Agenda in general and quick progress on SAFTA in particular. SAFTA can be considered as a
Table1: Trade and Development Index: Global ranking
India’s superiority in the industrial sector has made it a low cost producer of several categorized goods product in the SAARC region. Due to India’s larger industrial base, Indian companies are obtaining most of their value adding-inputs from cheap domestic source.
The European Union countries are India’s largest trading partner. India’s import from these parts of world is much higher than that of the SAARC region. This is because of some factors like the issue of payments and lack of trade related facilities. Formal banking facilities are not only inadequate in the region but also very time consuming. Traders have to wait for several days before their payments can be released.
The inadequate transport and transit systems that have been in existence between India and her neighboring countries have led to high transportation costs in the region. One major hurdle in road transport between India |
|
dynamic instrument for stimulating intra–regional investment and trade. The SAFTA agreement came into effect on 1 st January 2006 with aim of reduction of tariffs for intra-regional trade among the member countries of SAARC. Tariff concessions under the article 7 of the agreement are effective from 1 st July 2006 with the exception of 1 st August 2006 for Nepal. Pakistan and India are required to bring down their tariff to 0-5 % by 2013, Sri Lanka by 2014 and Bangladesh, Bhutan, Maldives and Nepal by 2015. India and Pakistan has 884 and 1183 sensitive items respectively. The first phase of the agreement was over in December 2007. Tariffs are to be reduced in two equal annual installments, to 20 % for India, Pakistan and Sri Lanka and 30% for Bhutan, Bangladesh, Maldives and Nepal. Non-LDC’s (India, Pakistan and Sri Lanka) would reduce tariff on a margin of preference basis of 5% per annum. The second phase of SAFTA was started in January 2008. In this phase the LDC would reduce tariff to 0.5% within 8 years and non-LDC would do the same within 5 years. SAFTA will fully implement in 2016.
India: Global and Regional Trade
India accounts for about 76.6% of total population and 73.3% of total area of SAARC with the support of its manpower; India has attained virtual self efficiency in the production of component and equipment for power generation, textiles, construction, automobile, Electronics, chemicals and pharmaceuticals.
and Bhutan is the temporary blockages due to landslides. In the case of trade between India and Nepal, the terrain in Nepal makes building and maintaining roads not only difficult but expensive as well. Even with respect to transit modalities several bottlenecks have been identified: port congestion, excessive documentation, delays results low percentage for trading.
India’s share with SAARC countries of its total trade with world rose to 3.32 percent in 2003–04 from 1.50 percent in 1990–91. Export and import grew by 16.46 and 11.12 per cent, respectively, from 1990-91 to 2003-04.
India’s import from SAARC countries is quite low. It was just US $ 56 million in 1975 which grows to only US $ 105 million in 1984 and further to only US $ 182 in 1995 again it goes down in 1993 at about US $ 96 million only. India’s trade liberalization policy shows a record growth of its import from SAARC countries in 2000 for US $ 363 million. India’s total trade with SAARC members was US $ 382 million in 1985, which increased up to US $ 1714 million in 1995; again the trend goes upward to US $ 2368 million in 2000. India’s trade with SAARC region goes up to 19% for the year 2006-2007 according to an analysis by PHD chamber of commerce and industry (PHDCCI).
|
| |
In rupee term it has increased by 17% Rs 10,396 crore. Sri lanka has emerged as India’s largest trading partner (Sri Lanka– India have already free trade agreement before signing of SAFTA) in SAARC. With a growth of 64% in bilateral which stood at Rs 4,304 crore during the period, the island nation has taped the potential of the Indian economy to its own economic advantage. The share of top five items in India’s import from SAARC countries is around 53 per cent, while the same for Pakistan is 71.2 % and for Bangladesh 73.8 per cent. |
India’s trade with SAARC countries was concentrated around a few items, though the share of manufactures in total exports has recorded a phenomenal rise during the period from 1998 to 2003 the share of top five items in export to SAARC is around 48.5 per cent. The share of top five items in India’s export includes cotton yarn fabrics (21%), transport equipment (10%), rice (9%), Machinery and instrument (6%), drugs and fine chemicals (5%).
India’s Trading Arrangements
Since 1991, the Indian economy has been undergoing constant and drastic economic reforms. These reforms have resulted in a shift from the inward-oriented policy of the past to an outward-looking one. Although this process of reform had started in the mid-1980s, it suffered interruptions a few times owing to an over-cautious approach and several other factors. A long-term trade policy, for three years, was announced in 1985 by the government and some concrete steps towards liberalisation were taken within the framework of economic reforms. Presently, the two main documents namely, (a) Export and Import Policy, and (b) Handbook of Procedures, summarise the policy, process and procedures of export and imports for five years: April 2002 to March 2007. The import and export policy determines in great detail the import procedures that are applicable to specific products, license, importers entitlement as well as other details relevant for the imports of goods and commodities. India had taken bold initiative to boost the trade within the reason by unilaterally lifting all quantitative restrictions maintained on balance of payments reasons preferentially for SAARC countries from August 1, 1998. Over 2000 products from the restricted list were placed on OGL for SAARC countries, substantially enhanced their access to the Indian market.
• Some missions have business centre, which are available for meetings and use by visiting businessmen and delegations
• Some missions have published business guides and market surveys for specific products.
• some missions can help in hotel bookings, engagement of interpreters and such other requirements.
The embassies offer the following services to foreign business: • Provide information on India; and the opportunities for investment and business with India.
• Facilitate contacts with Indian Government, business and Chambers of Commerce and industry
• Provide list of exporters, business directories and statistics India has regional trade agreement with all the member states of SAARC except Pakistan. Despite of that, economic co-operation has been improved between these two states. Some of the conflict point between them has to be solved. Pakistan has not granted most favored nation (MFN) status to India, where as the later has given such status to imports from Pakistan.
Addressing to the SAARC business leader’s conclave at Mumbai on February 2007, the World Bank managing director Graeme Wheeler said that “India-Pakistan trade has the potential. To cross $ 9 billion in next five years from the current $ 1 billion if barriers such as inadequate infrastructure, corruption, and red-tape are addressed.” It is estimated that informal trade between these two countries is 4 times higher than that of the official trade. Bilaterally, INDIA has free trade agreement with five member states of the SAARC. Inaugurating a seminar at New Delhi on 21 st November 2007, Mr. Jasiram Ramesh, minister of state for commerce, announced that “ India would undertake a review of the 744 items in sensitive list of export more or less, the same set of goods, mainly primary agricultural commodities like jute, tea, cotton, and textiles, garments. Now, by gradual change of time, horizontal specialization within industries has emerged. Therefore, potential for complementary trade has been increased among them. So there is more scope for intra-SAARC trade, especially with India. Emerging as a major producer of life based materials and information technology service.
Conclusion
Now, India is concentrating to grow-up its regional trade by co-operating its immediate neighbours, as they are also the SAARC member states. As a member of SAARC, India is unilaterally helping its member states by libralising its foreign trade policy to attain the aim of SAFTA. During the 14 th SAARC summit at New Delhi, Prime minister of India announced that “as an immediate step, India is announcing a unilateral liberalization of visas for students, teachers, professors, journalists and patients from SAARC countries. Let us aim to double the intra-SAARC flow of tourists in the next five years. Increase in the flow of tourist will create the possibilities of employment in the region. India also hopes that difficulties related to the full operationalisation of SAFTA will be |
|
As sub-regional co-operation is permitted by SAARC, India is expanding its regional trade by effective mechanism of economic cooperation through sub-regional cooperation, more specially, the Growth Quadrangle (BBIN-GQ) of Bangladesh, Bhutan, India and Nepal. A project led approach to cooperation and communication, energy, trade and investment facilitation and promotion. These projects are supportive of complementary to the national plans of the four concerned countries. The Asian Development Bank has funded these projects under framework of sub-continental growth quadrangle. During 2-3 rd April 2007, 14 th SAARC summit at New Delhi on, Indian prime minister announced that “As the largest country in the region, India is ready to accept asymmetrical responsibilities, including opening her markets to her South Asian neighbors without insisting on reciprocity. Before the end of the current year, India will allow the Least Developed Countries among its South Asian neighbors duty free access to its markets. It will also further reduce the sensitive list in respect of these countries.”
Trade promotion by Embassies
The Indian embassies attach importance to trade promotion work as a part of the focus on economy diplomacy.
Indian and foreign businesses are invited to contact the Indian embassies for information and support.
The embassies provide the following services and support to Indian business • Provide general market information as well as specific information on products, companies and statistics
• Facilitate contacts and meetings with importers, exporters, trade and industry associations and government authorities • Guidance about business practices and strategies
• Business libraries of the missions have catalogues and directories
export (largely in the area of agriculture and textiles), adding, that “we are currently working on a review of the negative list particularly with regard to least developed countries in the south asian region– Bangladesh, Bhutan, Nepal, Maldives, and Afganistan.”
Being a full-fledge member of SAARC, Afganistan’s economic engagement with India will receive a major boost from this year (2008). Afganistan will receive the benefit of zero import duty by India on 4536 tariff lines. It is estimated that India-Afgan trade would rise from US $ 1 billion in the next five years. Responding to the observation by Dr. Amit Mitra, secretory general, FCCI, Mr. Jairam Ramesh said that investment is the key to increase trade in the region. “what we need to import, you don’t export.” This is true to the letter.
Complementarily between the trading partners is an important factor for growing up of trade–data among them. Trade complementary exist when supply capacity of a particular country matches well the demand capability of the trading partner and the supply capability of the trading partner matches well with the demand potential of the former. The associated chambers of commerce and industry of India (ASSOCHAM) suggested that future projections of trade could be achieved if trade competitiveness among SAARC countries was turned into “trade complementaries” for which political will of all countries was essential. In a statement issued by the ASSOCHAM president at New Delhi on December 2005, he proposed that trade complementary could be created by way of setting up joint ventures in SAARC region in which the interest of each partner should be equally protected. ASSOCHAM also maintains that though there were many trade reforms in the SAARC region, and most SAARC countries have libralised trade in the recent years, the proportion of intra-regional trade is still quite modest. SAARC countries resolved and that all member states will be in full compliance of SAFTA provisions in letter and spirit.”
References:
1. /pressrelease /2007/04/04.htm
2. The Hindu, December 31, 2005, p. 17
3. The Hindu, January 1, 2006, p.9
4. www.thehindubusinessline.com/ 2005/11/06/ stories/2005110602-760300.htm 5. Roy.J., ’Regional integration in south asia’, Financial Express, September 28.
6. Roy J., 2005, “How can India lead south asia”, Financial Express, March 10 7. Thakurta guha paranjoy, “South Asia : Burying Quarrels for Regional Free Trade,” Bilaterals.org, January 16, 2006.
8. www.saarc-sec.org/safta
9. http://commerce.nic.in / foreign trade
policy
10. FICCI / seminar n ding business with Afganistan / November 21, 2007 /media division
11. C. Rajamohan, “The Business of SAARC”, The Hindu, January 5, 2002.
12. The Hindustan Times, February, 2007
13. DATA SURCE : DGCI &S, CALATTA |
|
Facebook
Twitter
Linkedin