indias foreign policy 2

INTERNATIONAL BUSINESS OF INDIA

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WHAT IS INTERNATIONAL BUSINESS

International business means carrying on business activities beyond national boundaries.

These activities normally include

• transaction of economic resources• international production• foreign investment especially, foreign direct investment

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NEED OF INTERNATIONAL BUSINESS

• To import the goods that are not produced domestically• To export the goods that are produced over and

above the domestic requirements• To encourage foreign direct investment to build

the resource gap• Micro-economic level importance

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INDIA AND GLOBAL TRADE

India had a significant share in the world trade at the time of independence. However, since then there was a regular decline in India’s share in the world exports till 1980. From 1950 to 1980 the percentage declined from 2 to 0.4. It, how ever improved to about 0.8 by 1997. It reached 0.83% in 2003 and rose to 1.45% in 2008.

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THE BREAK-UP OF FOREIGN TRADE IN TERMS OF EXPORTS & IMPORTS

(RS.CRORES)

Year Export Import BOT

1995-96 106353 122678 -16325

1996-97 85623 97111 -1488

1997-98 126286 151553 -25267

1998-99 101850 132447 -25267

2002-03 255137 297206 -42067

2003-04 291582 353976 -62394

2004-05 356625 481950 -125190

2005-06 456418 660408 -203990

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EXPORTS AS A % 0F NATIONAL INCOME

YEAR IN %

1960-61 6.8

1970-71 3.8

1980-81 5.4

1990-91 7.2

1996-97 9.6

1997-98 8.4

1998-99 8.0

1999-00 8.5

2000-01 8.8

2001-02 8.7

2002-03 9.0

2007-08 17

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EXPORT STRATEGY

• Imports will increase and to finance them , we need higher exports earning.• It is not advisable to depend on external

assistance to finance imports.• Debt-servicing burden is ever mounting,

necessitating increased export earning.

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FOREIGN TRADE POLICY (2004-09)

OBJECTIVES (i) to double our percentage share of global

merchandize trade within 5 years (ii) to use trade expansion as an effective

instrument of economic growth and employment generation.

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ACHIEVEMENTS OF FOREIGN TRADE POLICY (2004-09)

Looking back, we can say with satisfaction that the UPA Government has delivered on its promise.

In the last five years ;• our exports witnessed robust growth to reach a level of US$

168 billion in 2008-09 from US$ 63 billion in 2003-04. • Our share of global merchandise trade was 0.83% in 2003;

it rose to 1.45% in 2008 as per WTO estimates. • On the employment front, studies have suggested that

nearly 14 million jobs as a result of augmented exports in the last five years.

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EXPORT BY REGION( IN RS.CRORES)

0

50000

100000

150000

200000

250000

300000

350000

400000

Europe Africa America Asia &ASEAN

CIS &Baltics

OtherRegion

Apr-Feb 2008

Apr-Feb 2009

Share – 52%Growth – 29%

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IMPORT BY REGION (IN RS.CRORES)

0

100000

200000

300000

400000

500000

600000

700000

800000

Europe Africa America Asia &ASEANH

CIS &Baltics

OtherRegion

Apr-Feb 2008Apr-Feb 2009

Share – 61%Growth – 36%

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TOP FIVE COMMODITIES OF EXPORT

0

20000

40000

60000

80000

100000

120000

Petroleum Gems &Jewellery

TransportEquipment

Machinery&

Instruments

Drugs &Chemicals

Apr-Feb 2008Apr-Feb 2009

Growth –87%

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TOP FIVE COMMODITIES OF IMPORT

0

50000

100000

150000

200000

250000

300000

350000

400000

PetroleumProducts

ElectronicGoods

Machineryexcept

Electronic

Gold Pearls

Apr-Feb 2008Apr-Feb 2009

Growth – 38%

Growth – 99%

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FTP (2009 – 2014)

The short term objective of current FTP is :• To arrest and reverse the declining trend of exports and to

provide additional support especially to those sectors which have been hit badly by recession.

• The government is likely to set a policy objective of achieving an annual export growth of 15% with an annual export target of US$ 200 billion by March 2011.

• In the remaining three years of this FTP i.e. upto 2014, the country should be able to come back on the high export growth path of around 25% p.a.

• By 2014, the govt. expects to double India’s exports.

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SPECIAL FOCUS INITIATIVES

With a view to continuously increasing our percentage share of global trade and expanding employment opportunities , 13 special focus initiatives have been identified. Government of India shall make concerted efforts to promote exports in these sectors. These sectors are…

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(1) MARKET DIVERSIFICATION

• In this policy, focus is on diversification of Indian exports to other markets, specially those located in Latin America, Africa, parts of Asia and Oceania. The initiatives taken under this policy are..• 26 new countries have been included under

Focus Market Scheme.

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(2) TECHNOLOGICAL UPGRADATION

Such initiatives include :• EPCG Scheme at zero duty has been

introduced for certain engineering, electronic products, plastics, handicrafts, etc.• To encourage value added manufacture

export, a minimum 15% value addition on imported inputs has been stipulated.• A number of products including automobiles

have been included for incentives under Focus Product Scheme.

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(3) SUPPORT TO STATUS HOLDERS

The Government recognized ‘Status Holders’ contribute approx. 60% of India’s goods exports. To incentivise and encourage the status holders, additional duty credit scrip @ 1 % of the FOB of past export shall be granted for specified product groups.

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(4) AGRICULTURE AND VILLAGE INDUSTRY

• Vishesh Krishi and Gram Udyog Yojana• Import of inputs such as pesticides are

permitted for agro exports.• New towns of export excellence with a threshold

limit of Rs 150 crore shall be notified.

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(5) HANDLOOMS

• Specific funds are earmarked under MAI / MDA Scheme for promoting handloom exports.• Duty free import of old pieces of hand knotted

carpets on for re-export after repair is permitted.• New towns of export excellence with a threshold

limit of Rs 150 crore shall be notified.

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(6) HANDICRAFTS

• Specific funds are earmarked under MAI / MDA Scheme for promoting handicraft exports.• New towns of export excellence with a threshold

limit of Rs 150 crore shall be notified.

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(7) GEMS AND JEWELLERY

• Import of gold of 8 k and above is allowed subject to import being accompanied by an Assay Certificate specifying purity, weight and alloy content.• Duty free import entitlement of commercial

samples shall be Rs. 300,000.• Import of Diamonds for Certification/ Grading &

re-export by the authorized offices/agencies of Gemological Institute of America (GIA) in India or other approved agencies will be permitted.

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(8) LEATHER AND FOOTWEAR

• Duty free import entitlement of specified items is 3% of FOB value of exports of leather garments during preceding financial year.

• Re-export of unsuitable imported materials such as raw hides & skins and wet blue leathers is permitted.

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(9) MARINE SECTOR

• Imports for technological upgradation under EPCG in fisheries sector (except fishing trawlers, ships, boats and other similar items) exempted from maintaining average export obligation.

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(10) ELECTRONICS AND IT HARDWARE MANUFACTURING

INDUSTRIES• Expeditious clearance of approvals required from

DGFT shall be ensured.• Exporters /Associations would be entitled to

utilize MAI & MDA Schemes for promoting Electronics and IT Hardware Manufacturing industry exports.

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(11) SPORTS GOODS AND TOYS

• Sports goods and toys shall be treated as a Priority sector under MDA / MAI Scheme. • Applications relating to Sports Goods and

Toys shall be considered for fast track clearance by DGFT.

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(12) GREEN PRODUCTS AND TECHNOLOGIES

• India aims to become a hub for production and export of green products and technologies. To achieve this objective, special initiative will be taken to promote development and manufacture of such products and technologies for exports. To begin with, focus would be on items relating to transportation, solar and wind power generation and other products.

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(13) INCENTIVES FOR EXPORTS FROM THE NORTH EASTERN REGION

• In order to give a fillip to exports of products from the north-eastern States, notified products of this region would be incentivized .

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CONCLUSION

International Business plays a crucial role in the economic development of a nation as it leads to industrialization, employment and reduction of scarcity of consumer goods. Our share of world trade has significantly increased over the years. At present, International Business opportunity in India exists in areas like IT, Telecom, R&D, Infrastructure, Retailing, etc. Sectors like health, education, housing, water resources, SMEs are untapped and offer huge scope.

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