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World Trade
The International Trade Journal of
Research and Information Report
WORLD TRADE CENTRE
MUMBAIVol. 12 No. 5 October-December 2011
ContentsEDITORIAL 2
FOCUS 3
National Manufacturing Policy
CURRENT RESEARCH 11
WORLD ECONOMY 19
INDIA & WORLD MARKETS 21
INDIAN ECONOMY 25
INDIAS FOREIGN TRADE 27
WTO HIGHLIGHTS 30
WTC MUMBAI EVENTS 33
ChairmanMr. Kamal M. Morarka
Vice ChairmenMr. Vijay G. Kalantri
Capt. Somesh C. BatraMr. Sharad P. Upasani
Executive DirectorMr. Y. R. Warerkar
Editorial BoardMr. Y. R. Warerkar, Editor/Publisher
Ms. Debjani Chowdhury, Joint Director-ResearchMr. A. O. Kuruvila, Deputy Director-Research
Mr. Bhalchandra Akut, Deputy Director-Finance & AccountsMs. Khyati Naravane, Assistant Director-Trade Promotion
Ms. Rohini Salve, Sr. Officer-Legal & Secretarial
The information contained in this Journal has been reviewedfor accuracy and is deemed reliable but is not necessarily
complete and cannot be guaranteed. The views expressed inthe articles appearing in this Journal are those of the authors
and do not necessary reflect the views of the Centre
Printed atUnion Press
13 Homji Street, 16 Horniman Circle,Fort, Mumbai 400 001.
Editorial OfficeM. Visvesvaraya Industrial Research and Development Centre
(Member : World Trade Centres Association Inc.)Centre 1, 31st Floor, World Trade Centre
Cuffe Parade, Mumbai 400 005 (India)Tel. : 6638 7272 Fax : 91-22-2218 8385
E-mail : [email protected] : www.wtcmumbai.org
For Private Circulation
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From the Editors Desk
The current issue of WTRIR contains salient features and examines issues and concerns
of the National Manufacturing Policy (NMP). The policy proposes to raise the share of
manufacturing output in GDP from the current 15% to 25% in next 20 years. While
population in India will continue to grow, the expanding domestic market will also grow.
Since, the wages in India are lower than those in Organisation of Economic Cooperation
and Development (OECD) member countries or even in Taiwan or in China which are
the manufacturing hubs in the world, the growth of employment in India with the growing population will not
have as large incidence of wage costs as with OECD member countries.
NMP has suggested planning large scale investments in manufacturing zones and building infrastructure
like Delhi Mumbai Industrial Corridor. The new policy is based on the ability of the Indians to contribute to
creation of wealth. A skilled workforce of large population is a dividend, but an untrained and unproductive
labour is a drag on the economy. So the emphasis in the next 20 years should be on the need to
vocationalising our schools and colleges as West Germany did after the World War II.
India is friendly with FDI, is IPR-complaint and trade oriented as the last two decades of reforms have
shown. India has also to its credit sustainable models involving private developers in providing electricity,
roads and port facilities. These factors would help attract foreign investment and boost manufacturing.
The issue also contains a note on Industrial Developement and Environmental Issues which are important
aspects and emphasises that in the 12th Five year Plan the low carbon inclusive growth is one of the key
pillars of the five year plan.
The issue carries an article on Malta Gateway to Europe, North Africa and Middle East. With its strategic
location, Malta is seeking to exploit many new opportunities which have arisen in the context of EU membership
and the increased visibility it has given. The new foreign policy of Malta is set out with this aim in mind.
The current issue also carries a note on Emerging Prospects in India-EU Co-operation, which is again an
important subject as Eurozone is in the grip of acute sovereign debt crisis. While, we do trust that these
topics will be of great interest to you, we wish you a very Happy and Prosperous New Year 2012.
Y. R. Warerkar
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The Government of India hasannounced a national manufacturing
policy with the objective of enhancing
the share of manufacturing in GDP to
25% within a decade and creating 100
million jobs. It also seeks to empower
rural youth by imparting necessary skill
sets to make them employable.
Sustainable development is integral to
the spirit of the policy and
technological value addition in
manufacturing has received special
focus.
The share of manufacturing in Indias
GDP has stagnated at 15-16% since
1980 while the share in comparable
economies in Asia is much higher at
25 to 34%. Inadequate physical
infrastructure, complex regulatory
environment and inadequate
availability of skilled manpower haveconstrained the growth of
manufacturing in India. Recognizing
that the manufacturing sector has a
multiplier effect on the creation of jobs,
even in allied sectors, the government
has brought out this policy.
The policy is based on the principle of
industrial growth in partnership with the
States. The Central Government will
create the enabling policy frame work,provide incentives for infrastructure
development on a Public Private
Partnership (PPP) basis through
appropriate financing instruments, and
State Governments will be encouraged
to adopt the instrumentalities provided
in the policy.
Salient Features of the National Manufacturing Policy
The proposals in the policy aregenerally sector neutral, location
neutral and technology neutral except
incentivization of green technology.
While the National Investment and
Manufacturing Zones (NIMZs) are an
important instrumentality, the
proposals contained in the Policy apply
to manufacturing industry throughout
the country including wherever
industry is able to organize itself into
clusters and adopt a model of self-
regulation as enunciated.
The National Manufacturing Policy is
to bring about a quantitative and
qualitative change with the following
six objectives:
i. Increase manufacturing sector
growth to 12-14% over the
medium term to make it the
engine of growth for the economy.
The 2 to 4 % differential over the
medium term growth rate of the
overall economy will enable
manufacturing to contribute at
least 25% of the National GDP by
2022.
ii. Increase the rate of job creation
in manufacturing to create 100
million additional jobs by 2022.
iii. Creation of appropriate skill sets
among the rural migrant and urban
poor to make growth inclusive.
iv. Increase domestic value addition
and technological depth in
manufacturing.
v. Enhance globalcompetitiveness of Indian
manufacturing through
appropriate policy support.
vi. Ensure sustainability of growth,
particularly with regard to the
environment including energy
efficiency, optimal utilization of
natural resources and
restoration of damaged/
degraded eco-systems.
In order to achieve these goals:-
i . Foreign inves tments and
technologies will be welcomed
while leveraging the countrys
expanding market for
manufactured goods to induce
the building of more
manufacturing capabilities and
technologies within the country;
ii. Competitiveness of enterprises
in the country will be the guiding
principle in the design and
implementation of policies and
programmes;
iii. Compliance burden on industry
arising out of procedural and
regulatory formalities will be
reduced through rationalizationof business regulations.
iv. Innovation will be encouraged
for augmenting productivity,
quality, and growth of
enterprises; and
v. Effect ive consultat ive
mechanism with all stake
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holders will be instituted to ensure
mid-course corrections.
The following industry verticals will be
given special attention:
i. Employment intensive industries:
Adequate support will be given to
promote and strengthen
employment intensive industries
to ensure job creation. Special
attention will be given in respect
of textiles and garments; leather
and footwear; gems and jewellery;
and food processing industries
ii. Capital Goods:
A robust economic growth would
necessitate a strong demand for
capital goods. Such growth would
create a strong and continuing
demand for capital goods. The
capital goods industry, which is the
mother industry for manufacturing
has not grown at the desired pace.
A special focus will be given to
machine tools; heavy electrical
equipments; heavy transport,
earth moving and mining
equipments.
iii. Time bound programmes will be
initiated for building strong
capacities with R&D facilities and
also to encourage growth and
development of these capacities
in the private sector while
strategically strengthening thepublic sector to complement the
private initiatives where essential.
iv. Industr ies with strategic
significance:
A strategic requirement of the
country would warrant the launch
of programmes to build national
capabilities to make India a major
force in sectors like aerospace;
shipping; IT hardware and
electronics; telecommunication
equipment; defence equipment;
and solar energy. Mission mode
projects will be conceptualised in
each of these sectors, recognizing
the fact that a mission on solar
energy has already been launched
under the National Action Plan on
Climate Change.
v. Industries where India enjoys a
competitive advantage:
Indias large domestic market
coupled with a strong engineering
base has created indigenous
expertise and cost effective
manufacturing in automobiles;
pharmaceuticals; and medical
equipment. The concerned
ministries will be formulating
special programmes to
consolidate strong industry base
to retain the global leadership
position.
vi. Small and Medium Enterprises :
The SME sector contributes about
45% to the manufacturing output,
40% of the total exports, and
offers employment opportunities
both for self-employment and
jobs, across diverse geographies.
A healthy rate of growth shall be
ensured for the overall growth of
the manufacturing sector as also
the national economy by policy
interventions in areas like
manufacturing management,
including accelerated adoption of
Information technology; skill
development; access to capital;
marketing; procedural
simplification and governance
reform.
vii. The National Manufacturing
Competitiveness Programme,
being implemented by M/o MSME
will be strengthened, and therecommendations of Task Force
on MSME for creation of a
separate fund with SIDBI,
strengthening of NSIC,
modification of lending norms and
inclusion of lending to MSMEs
under priority sector lending will
be given due regard in taking
appropriate measures.
viii . Public Sector Enterprises:
Public Sector Undertakings,
especially those in Defence and
Energy sectors, continue to play
a major role in the growth of
manufacturing as well as of the
national economy. A suitable
policy framework will be
formulated in this regard to make
PSUs competitive while ensuring
functional autonomy.
Specific policy instruments have
been conceptualized to achieve
the objectives stated above.
These instruments which are
outlined in greater detail in Part-B
of the Policy document broadly
cover the following areas:-
i. Rat iona li za ti on and
simplification of business
regulations;
ii. Simple and expeditious exit
mechanism for closure of sick
units while protecting labour
interests;
i ii. Financial and institut ional
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development, including green
technologies;
iv. Industrial training and skill up
gradation measures;
v. Incentives for SMEs;
vi. Special Focus Sectors;
vii. Leveraging infrastructure
deficit and government
procurement - including
defence;
viii . Clustering and aggregation :
National Investment and
Manufacturing Zones
(NIMZs);
ix. Trade Policy.
Global experience of
manufacturing has shown the
advantages of clustering and
agglomeration as it enhances
supply chain responsiveness
provides easier access to market,
talent and substantially lowers
logistic costs. Though thegovernment has been executing
multiple schemes for promoting
industrial clusters, full benefits of
agglomeration are yet to be
realized. One of the key
instruments to catalyze the growth
of manufacturing will be
establishment of National
Investment and Manufacturing
Zones (NIMZs) which will be
developed in the nature of green
field industrial townships,
benchmarked with the best
manufacturing hubs in the world.
These will also help us to meet the
increasing demand for creating
world-class urban centres in India,
while will also absorb surplus
labour by providing them gainful
employment opportunities. These
NIMZs will seek to address the
infrastructural bottleneck which
has been cited as a constraining
factor for the growth of
manufacturing.
A comprehensive exit policy will
be put in place which will promote
productivity while providing
flexibility by removing rigidity in
the labour market and ensuring
protection of workers rights as laid
down in the statute.
The growth of manufacturing has
to come hand in hand with the
concerted thrust on skill
development programme. The
National Skil l Development
Initiative launched by the
Government of India has provided
a renewed thrust to build
productive capacities. This Policy
seeks to make skill development
integral to productive enterprise in
the country which would besupported by robust government
institutions.
The thrust with regard to labour
management will be to encourage
unions and employers to develop
better institutional arrangements
in the states, and within production
units, through dialogue and
consultation. The stress will be on
rationalisation in employment lawsand in shop floor practices.
Manufacturing management will
be given a focused attention as it
will facilitate improvement of
productivity, quality and
competitiveness of manufacturing
enterprise. Industry will be
encouraged to collaborate with
higher educational institutions to
develop curricula for grooming
graduate engineers and
supervisory managers for various
facets of manufacturing.
In the context of sustainable
development and in order to drive
the greening of manufacturing
operations and to explore the
emerging technologies in this
area, which offer opportunities to
build local and global leadership,
the government will take recourse
to both regulatory as well as
market based policy interventions.
Government would prescribe
emission and discharge
standards, excluding green house
gas emissions, and the choice of
technologies to meet the
standards would be decided by the
project promoters. The
Government will provide
continuous incentives, monetary
and otherwise, to encourage
polluting entities to reduce
releases of harmful pollutants to
ensure that the standards are
complied with.
Land has emerged as a major
constraint for industrial growth in
recent years. The Government will
take measures to make industrial
land available, which is critical for
sustained industrial growth
through creation of land banks by
States; digitization of land and
resources maps; and programmes
for utilization of lands locked
under non productive uses,
including defunct or sick
industries.
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SMEs to Benefit from National Manufacturing Policy
Two decades after launching of
reforms and liberalization in India in
1991, and when the countrys annual
GDP having clocked in an average
growth of 8.6 per cent per annum inthe last six years, the second highest
after China, the Government has
decided to draft and launch a new
manufacturing policy (NMP) which
would raise manufacturing
contribution to GDP from the present
16 per cent to 25 per cent by 2025.
The policy also aims to raise the
countrys employment potential from
the current 0.5 million to 1 million peryear.
The NMP is said to have been drafted
with industry inputs and also received
tacit approval of Finance and
Commerce Ministers. The policy is
expected to undergo further
consultations, before being presented
to the Cabinet for a final approval.
The most striking feature of the policy
is the proposal for setting up National
Manufacturing and Investment Zones
(NMIZs) equipped with world-class
infrastructure.
Key Objectives
The NMP is based on the following
four key objectives:
1. To promote investments in the
manufacturing sector and to makethe country a hub for both
domestic and international
markets
2. To increase the sectoral share of
manufacturing in GDP by 25 per
cent in 2022
3. To double the current
employment level in the sector,
and
4. To enhance the globalcompetitiveness of manufacturing.
Today manufacturing sector accounts
for hardly 16 per cent of the GDP.
However the newly-drafted
manufacturing policy suggests raising
it to 26 per cent in the next five years
and the policy hopes to generate 10
million jobs in the manufacturing
sector. Considering the recent drop in
GDP growth following debt crisis ineuro area the new manufacturing
policy deserves rapid implementation.
With manufacturing sector losing
some of its earlier sheen in China with
the latest Chinese growth plan laying
emphasis on boosting domestic
consumption than achieving growth,
time seems to be right for India to
launch a grand manufacturing plan.
It is imperative for the manufacturingsector to grow at a faster rate to
provide a boost to the economy. India
should no longer grow at 7 per cent.
It has to grow at 11-12 per cent from
20012-13 onwards. Time is opportune
for this. Already, slowly and steadily,
almost unnoticed, a transformation of
long-term significance is taking place
in the countrys economy. Indian
manufacturing is already started
diversifying sans any policy initiativebut because of conditions on the
ground that global players are already
using them to their advantage.
Overtaking Services Sector?
With a host of firms from Japanese
automakers to telecom-equipment
producers moving to India, the new
manufacturing policy could help in
speeding up overtaking of services
as the engine of growth. This is
desirable as services-led companiesare vulnerable to global financial
upheavals. The world knows what
happens to countries that decide to get
rich quickly through services-led
economic growth. Iceland is a case in
point. A traditional cod-fishing
economy with high level of stability, it
could not resist the temptation that
global finance threw its way to
become a superstar, the crowning
example of financial services
inspired prosperity, only to come to
grief when Lehman Brothers
collapsed The morality tale is yet to
conclude with Portugal becoming the
latest victim of globalization of
services.
On the other hand, countries that have
strong manufacturing base, such as
emerging economies like India and
China could, with the help of efficient
and preventive monetary and
exchange controls, contain the
contagion unleashed by Wall Street
on the world.
With the German engineering major,
Siemens, planning to make India the
global hub for manufacturing its key
steel equipment, it joins the growing
ranks of firms eyeing the country as
a launching pad for supplies to Asian
markets. India has manufacturing and
engineering expertise and its size
offers it a strategic advantage for
servicing markets from Myanmar
down to Australia and West Asia, if
necessary. The Asia-Pacific region is
the epicenter of economic expansion
at the moment.
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Anecdotal evidence suggests that
India may well be on its way to
becoming a global manufacturing hub.
The pace seems to have increased at
a time when the Western economies
have yet to witness a pick up
investments in their own economies.
Poised to overtake China?
A couple of years ago, Capegemini
Consulting Services undertook a
survey of 340 firms form among
Fortune 500 global manufacturing
companies and, in its report, observed
that India could well overtake China
as a global manufacturing hub. Most
of the respondents stressed that Indiawas large on their radar screen for
outsourcing manufacturing over the
next three to four years.
On India overtaking China, The
Economist recently commented:
Autocrats in Beijing are contemptuous
of India for its messy, indecisive
democracy. But they must see it as a
long-term rival - especially if it
continues to tilt towards America. Asrecently as the early 1990s India was
as rich, in terms of national income
per head. China then hurtled so fast
and so far ahead. it seemed that India
could never catch up. But Indias long-
term prospects now look stronger.
While China is about to see its working
age population shrink, India is enjoying
the bulge of in manpower which
brought sustained booms elsewhere in
Asia. It is no longer inconceivable thatits growth could outpace Chinas for a
considerabl e time. It has the
advantage of democracy at least as
a pressure valve for discontent. And
because India does not threaten the
West, it has powerful friends both on
its own merits and as a counterweight
to China.
License - Quota Raj is over
Since the last two decades of reforms
and liberalization (1991-2011) India
has come a long way in reorganizing
of its manufacturing sector in the
economy and the NMP bearstestimony to this. The pre-reform era
industrial policy was deeply
entrenched in license-quota-permit raj
through its all-embraci ng and
exasperating system of industrial and
import licensing, monopoly controls,
pricing and distribution controls, high
tariff structure, burdensome and
cascading indirect taxes and
dominance of public sector
investments. These have since beenprogressively dismantled and
rationalized. In the second decade of
liberalization 2001-2011, the concept
of public-private sector participation
(PPP) was introduced and this has
given a fillip to the infrastructure
development.
However, Indias current
manufacturing growth pales into
insignificance compared to Chinas,especially in infrastructure. While India
was talking about maintaining 9 per
cent GDP growth, China was already
achieving 15 per cent factory growth.
While Indias manufacturing was 14-
15 per cent in GDP, its south-eastern
neighbours like China, Thailand,
Malaysia and South Korea are reaping
factory growth between 26 per cent
and 40 per cent.
With an aim to secure global
dominance in trade, no doubt Chinas
strategy was bold and aggressive.
Initially it kept wages low and put a
squeeze on domestic consumption. It
deliberately kept its currency
undervalued to ensure price edge in
global trade.
NMIZs Islands of Excellence
Now, coming back to NMP, the most
important feature the proposal for
setting up National Manufacturing and
Investment Zones (NMIZs) equipped
with world-class infrastructure. NMIZsare supposed to create islands of
excellence which will promote
manufacturing activities by reducing
constraints imposed by inadequate
infrastructure, rigid labour laws and
procedural bottlenecks.
A recent World Bank study clubs India
with countries that have very rigid
labour laws and hire and-f ire
regulations. The industry circumventsthese constrains by outsourcing its
activit ies which leads to
informalization of labour force. The
countrys labour laws, therefore,
restrict the potential of formal
manufacturing facilities. Also the
industry has become more reliant on
capital-intensive means of production
as it does not have enough flexibility
to hire and fire. This is clearly an
undesirable development in a labour-surplus country. The inability of
manufacturers to cut workforce during
a recession worsens their financial
stress and hampers their ability to
come out of downturn.
Another stumbling block for the growth
of manufacture is lack of clear-cut land
acquisition policy. According to an
industry report, projects worth US$ 500
billion were held up because assignedland for the project was delayed on
environmental and other issues. Now
that the UPA government had
promised to come out with a
transparent labour laws and land
acquisition policy major hurdles in the
growth of manufacturing may be over
soon.
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Entrepreneurial Spirit
India is known for its entrepreneurship
and there are millions of entrepreneurs
largely in the small-scale
sector.However Indias manufacturing
growth pales into insignificance.Any manufacturing policy is not worth
its salt if it does not care for taking
advantage of this entrepreneurial
spirit. It is heartening to know that the
government plans to exempt the sales
of a house or any other asset from
capital gains tax if the proceeds are
used to set up a business. Such a
concession in the proposed
manufacturing policy would only help
to swell the number of entrepreneurs.
NMP is likely to prove a dream-cum-
true for the small and medium-scale
entrepreneurs (SMEs). It is all set to
make their life a little easy. If NMP
sets out to do what it has stated, SMEs
will see a reduced burden of regularity
compliances, will have better access
to technology and finance and would
enjoy select incentives.
SME Sector to Benefit Most
The SME sector, which accounts for
45 per cent of the countrys output and
40 per cent of exports, appears all set
to benefit. Incentives for the sector
include mandatory procurement
policy for SMEs and the draft FDI
Retail Policys insistence on 30 per
cent procurement from small
industries may cumulatively improve
the prospects of small entrepreneurs.
NMP will also help to improve the
credit channels available for SMEs. It
will explore the option of including
manufacturing SMEs in the priority
sector lending category of banks.
How this will help SMEs? Granting
the priority sector status will require
banks to mandatorily allocate a certain
proportion of their priority lending to
this segment thus improving borrowing
prospects of SMEs.
The policy will also give a boost to
SMEs in using improved technology.
SMEs will have access to patent pool
created by the government through
Technology Acquisition &
Development Fund. SMEs may also
choose to get reimbursement for
technologies that they acquire up to
Rs 20 lakh.
Land which is a crucial resource for
SMEs to carry out their manufacturing
business is too expensive especially
in areas which have infrastructure
access. The proposed clusters of
special manufacturing zones may if
the state concerned desires so allot a
certain percentage of land in the zones
to SMEs. Such space whether leased
out of sold can be expected to be fairlypriced compared to the existing
market rates. The pooled
infrastructure facilit ies already
available in such zones will also
reduce fixed costs for small players.
The policy also sets out to reduce the
burden of SMEs in complying with
regulations by setting up organizations
that will look into compliance of routine
issues such as provident fund,
employees state insurance pension
schemes and so on for a small fee.
While the above are some of the direct
benefits that manufacturing policy
expects to provide, budding
entrepreneurs will also do well to look
out the business opportunities arising
from this policy.
Industries that make LED, solar energy
equipment, fuel- efficient transport
system, IT hardware, IT-based security
system and hybrid electric
automobiles will stand to gain from the
governments procurement policy,
provided there is local value additions/
use of technology by the companies.
An uptick in demand arising from
government procurement may provide
room for more players.
The policy will also provide incentives
for production of certain equipmentand devices. This will include
equipment to reduce energy
consumption such as energy-
conservative lighting technologies,
smart-grid solutions equipment to
produce renewable energy, from solar,
wind, hydro or geo-thermal sources.
Production of energy-storages for use
with electric or hybrid motor vehicles
and those used for water conservationwill also be encouraged.
Besides an incentive of 10 per cent
subsidy on capital cost and five per
cent interest reimbursement on
nominal rates charged by lenders will
be given. While these are not
necessarily targeted at SMEs some of
the businesses may well be compact
enough to and fit in SME bill. Together
with thrust of on increased financing
options, these technology-intensive
industries may become more
penetrable segments of SMEs.
Since National Manufacturing Policy
wants each of State Government to
have their state manufacturing
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policies, NMP is poised to create more
jobs and help to de-risk
unemployment. Incremental job
security could be coupled with a
degree of differentiation between old
and new workers.
Recent Research Publications
1. Growth Drivers for Indian MSMEs : Policies, Competitiveness and Opportunities(2011)
2. Indian Food Processing Industry : Changing Contours (2011)
3. Strategic Approach for Green Energy Development in India (2010)
4. WTO in the New Millennium -- An Update of Doha Round (2010)
5. Enhanced Soft Power and Indias Cultural Exports (2010)
6. India and Innovation : The Present and Future (2009)
7. Maximizing Gains from Higher Education Exports (2009)
8. Floriculture Exports from India-Current Status and Prospects (2009)
9. Geographical Indications-Its Evolving Contours (2009)
10.Export Competitiveness of Maharashtra (2008)
11.Prospects for the Indian Food Processing Industry (2008)
12.Prospects for Animation and Gaming Industry in India (2008)
13.Containerization, Multimodal Transport & Infrastructure Development in India (2007)
14.Export Marketing Strategy for Herbal Products & Ayurvedic Drugs (2007)
15.Export Potential for Indian Casting & Forging Industry (2007)
The manufacturing policy, when
approved for implementation should
also have provisions for rationalization
and simplif ication of business
negotiations, simple and expeditious
exit mechanism for closure of sick
units, financial and institutional
For Placing your Order : E-mail : [email protected]
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mechanisms for technology
development and skill up gradation,
incentives for small industries,
government procurement including
defence and trade policy.
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Current Research
New areas have been brought under
industrialization after independence of
our country as per the policy of the
Govt of India (GOI) for balanced
regional development. The
establishment of industries at locations
has no doubt, brought about material
wealth. Besides, these units have
provided direct employment
opportunities, modern amenities,
better health and education facilities
to the local population. However, the
industrialization has led to the
degradation of environment due to
industrial pollution. With the operating
industries, a cent per cent pollution
free environment is a myth. It is neither
possible nor necessary. It is
imperative, to ensure, that each of
these industrial units does cause, the
least possible pollution. A number ofindustries in the public sector and
corporate sector have adopted
effective pollution control measures
while a significant number of industries
especially small and tiny sectors have
yet to adopt adequate pollution control
devices.
Utilization of Waste
The problems of accumulation ofindustrial waste have assumed
significant proportions while their
utilization aspects had been neglected
for quite long. Some headway in this
regard has since been reported.
Scientists have been researching
worldwide towards development of
Industrial Development and Environmental Issues
Dr S.C.Lahiry*
innovative recycling techniques.
Products like flyash cement, fly ash
block, recycled tiles, recycled
aluminium, recycled steel,
environment friendly paints, bamboo
based products,etc are available in
India.It is, therefore, of paramount
importance to step up commercial
utilization of industrial waste which
could be accomplished by involving
the industries, users, concerned State
and Central Govt. Departments.
Industries have to be made
responsible to do recycling of their
waste, on a regular basis, through
legislation and strict enforcement.
Hazardous industrial waste presents
immediate or long-term risks to
humans, animals, plants, or the
environment. It requires special
handling for detoxification or safedisposal.
Green Technology
Time has come to preserve our
environment and replenish those
which have been destroyed. People
are more conscious about the
environment now and are aware of the
different kinds of environmental
hazards that could affect our future.The rising sense of green among
people has led to cost savings and
creating sustainable living. According
to the Indian Green Building Council:
A green building is one which uses
and provides healthier spaces for
occupants as compared to
conventional building. The concept of
Green Building is pacing up, some
projects go Green to get a cutting edge
in the market over others, while some
go green for tax incentives offered by
the Govt, and some largely for a
growing environmental concern.
Adoption of Clean Technology
Indias Twelfth Five Year Plan, to belaunched on 1st April, 2012 will have,
as one of its key pillars, a low carbon
inclusive growth. This shows Indias
resolve to ensure that its growth
process is sustainable and based on
low carbon principles. This goal will
require necessary sector specific
actions to reduce emissions intensities
in 12th Five Year Plan
onwards.(Report of Expert Group on
Strategies for Low Carbon Inclusive
Growth, Planning Commission, May
2011). The Report indicates that in
2007 the largest chunk of emissions
was from electricity generation
amounting to 719.31 million tons of
CO2-eq which represented 65 percent
of the total CO2 equivalent emissions
from the energy sector. The energy
sector emitted 58 percent of CO2
equivalent in the year. CO2 reductionon long term and sustainable basis
through adoption of advanced
technologies of utilization of coal for
power generation like Super Critical
Technology (SCT), Integrated
Gasif ication Combustion Cycle
(IGCC), Fludized Bed Combustion
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(FBC) / gasification and so on have
been underway. The GOI has
launched supercritical power
programme on the lines of the USA,
Japan, Germany, Korea and Russia.
Currently SCT is under installation at
Sipat (Bilaspur) and Barh (Bihar)
thermal power plants of National
Thermal Power Corporation (NTPC).
NTPC and State Power Utilities in
addition, have proposed to set up a
no of 600/800 MW power stations
based on SCT. Its advantage is higher
efficiency and saving fuel resources.
The Kyoto Protocol on Climate
Change
The Kyoto Protocol is an international
agreement seeking to stabilize Green
House Gas (GHG) concentrations in
the atmosphere at a level that would
minimize interference with the climate
system. The major feature of the Kyoto
Protocol is that it sets binding targets
for 37 industrialized countries and the
European community for reducing
GHG emissions .These amount to an
average of five per cent against 1990
levels over the five-year period 2008-
2012. India is not required to reduce
emission of GHG under the Protocol.
However, India is vulnerable to climate
change and is striving for having a fair
and equitable global agreement for
minimizing the risk of climate change.
It may be noted that formerEnvironment Minister of India
Mr.Jairam Ramesh had announced
that India would reduce the emissions
intensity of its GDP by 20-25 percent
over the 2005 levels by the year 2020,
through pursuit of proactive policies.
However Indias more flexible
approach has not worked in pursuing
developed countries undertaking
emission mitigation commitments. In
the ensuing Durban Summit( to be
held in Dec2011) on Climate Change,
let developed countries pledge strong
emission reduction targets given in
Kyoto Protocol agreements before
ourselves taking on greater
responsibility of a legally binding
nature.
*Dr S.C.Lahiry was former Chief
Executive in Haryana Environmental
Management Society.
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Malta - Gateway to Europe, North Africa and Middle East
Prepared by
Mr. Pankaj Muthe
Regional Leader (India), Malta Enterprise India Office
1. Economy
The Maltese economy has
weathered the global recession
relatively well, as recognized by
the International Monetary Fund
in its latest Article IV Consultation
Report. The brief recession
experienced in Malta in 2009 was
mainly due to the exogenous
shocks that affected negatively
domestic developments in light of
the openness of the local
economy. The developments in
the Maltese financial sector have
been underpinned by
conservative funding models and
modest leverage ratios,
consequently the Central Bank of
Malta did not have to intervene in
any financial institutions. The
Government was very prompt to
set up a task force to assist the
companies that were experiencing
difficulties due to the recession to
invest in new lines of operations
and retrain their workers to ensure
their sustainability. Through such
action, the effects of the crisis
were largely contained and Malta
managed to keep its
unemployment levels at one of the
lowest rates in the EU whilst itreturned to economic growth
almost immediately.
As part of its strategy, the
Government identified a number
of key pillars of the economy
such as tourism, high value added
manufacturing including
electronics and pharmaceuticals,
ICT, financial services, education
and training, aviation, creative arts
and gaming, as well as healthcare
and provides tailor-made
assistance to ensure the sectors
in question maintain their positive
performance. The assistance
provided includes a myriad of
incentives and schemes to
facilitate investment, as well as
capacity building not only in termsof infrastructure but also in terms
of education and training to ensure
a highly-skil led workforce is
always available.
During the second quarter of 2011,
the Maltese economy in real terms
expanded by 2.8 per cent, on an
annual basis. This rate of
economic growth was slightly
higher than that recorded in the
first quarter of 2011, which stood
at 2.3 per cent. The real growth
rate recorded by the Maltese
economy for the second quarter
was 1.1 percentage points higher
than the average real growth rate
recorded in the EU27, which
amounted to 1.7%.
2. Trade with the WorldIn 2010, the exports generated by
the Maltese economy recovered
considerably when compared to
the recessionary period of 2008
and 2009. Indeed, exports from
Malta increased to 2.2 billion in
2010 from 1.7 billion in the
previous year. Nevertheless,
Malta remains with a trade
balance deficit in view of the fact
that it has limited natural
resources and thus most of the
required goods or materials have
to be imported.
The value of imports to Malta in
2010 stood at 3.7 billion, up from
3.1 billion in the previous year.
Maltas main trading partners are
found within the European region,
particularly within the EU of which
Malta is also a member state.
Other important markets are
located in Asia, but also in North
Africa and the Middle East.
The services industry is by far the
major contributor to the economy
in Malta. Indeed, the various
sectors within the servicesindustry collectively generated
78.8 per cent of the countrys
Gross Value Added in 2010. On
the other hand, the manufacturing
industry contributed 15.8 per cent
of the Gross Value Added
generated in Malta in the past
year.
Malta will seek to strengthen and
promote relations with existing
and emerging major economies,
with the aim of increasing the
presence of Maltas goods and
services in these markets and
attracting inward investment to
Malta. Efforts will focus on
consolidating Maltas economic
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and political relationships with
existing major economies such as
the EU and the US, but also
targeting new and emerging
economies such as India, China,
Brazil and South Africa.
Besides opening the way for a
Single Home European Market of
over 500 million consumers, upon
EU membership Malta also
subscribed to the EUs
Commercial Policy and became
party to all of the EUs preferential
third country trade agreements. Of
particular importance to Malta are
the Free Trade Agreements that
the EU has negotiated with the
Euro-Med region - Algeria,
Morocco, Tunisia, Egypt, Israel,
Lebanon, Palestinian Authority,
Jordan, Syria, and Turkey, the
latter via-a-vis Customs Union
arrangement. Other free Trade
Agreements include those withthe
Western Balkans, Norway and
Switzerland, South Africa, Mexico
and South Korea.
In addition, the EU is negotiating
Free Trade Agreements with
MERCOSUR and has also
resumed talks with the aim of
concluding Free Trade
Agreements with the Gulf
Cooperation Council. Talks are
also underway for the EU to
negotiate Free Trade Agreements
with various other countries
including Ukraine, India, Malaysia
and other ASEAN countries. As
an EU member, Malta also grants
preferences to imports originating
in developing countries including
India and in least developed
countries through the Generalised
System of Preferences.
Maltas major exports were
electrical machinery and
equipment, which exceeded 1
bill ion in 2010. Other major
sectors for exports included
pharmaceutical products, mineral
fuels and oils or products thereof,
printed books and newspapers, as
well as toys, games and sports
requisites.
In view of the fact that most goods
exported by Malta are
characterized by a high level of
import content, the main sectors
for imports are rather similar and
comprise either raw materials orelse the base product which is
then used in the value adding
processes applied in Malta.
Indeed, during the past year most
imports were within sectors such
as electr ical machinery and
equipment, mineral fuels and oils
or products thereof, aircraft and
parts thereof, machinery and
mechanical appliances, as well as
plastics.
3. Relations between Malta and
India
Malta and India established
diplomatic relations in 1965. Since
then, a fr iendly relat ionship
continued to grow as the two
countries explored avenues for
collaboration in the political,
economic, cultural and
educational fields. To further
strengthen its relations with India,
Malta opened a High Commission
in New Delhi in 2007. Malta also
has Honorary Consulates in
Chennai and Kolkata. India is
represented in Malta through its
embassy in Tripoli, Libya. It also
has an Honorary Consulate in
Valletta.
Despite the considerable
geographical and demographic
differences, Malta and India sharea parallel in history and both have
English as an official language. In
addition, the two democracies
share common values and sit
together in several multilateral
fora, such as Commonwealth, the
United Nations and other agencies
for the promotion of international
peace and stability.
Over the years, there has been
substantial interaction between
Malta and India, which has helped
in identifying common objectives
and aspirations. The two countries
are appreciative of the multitude
of opportunities that arise through
greater co-operation. This
interaction includes regular
political and trade visits between
the two countries.
Malta and India enjoy a number
of similarities in the economic
dimension. As India excels in
technological areas such as ICT,
pharmaceuticals and health care,
Malta is also a prominent
European hub in such fields. In
fact, avenues for co-operation
such as business and research
exchanges stimulate both sides.
Throughout the years relations
between Malta and India have led
to growing converging interests
which helped in laying down solid
foundations for the build-up of a
strong continuous and friendly
relationship.
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4. Trade with India
Trade between Malta and India
increased considerably in 2010
when compared to the previous
two years. Indeed, exports from
Malta increased by 200 per centfrom 3.3 million in 2009 to 9.9
million in 2010, of which the
greater share was made up of
organic chemicals, wood or
paperboard, as well as machinery
and mechanical appliances.
Likewise, imports to Malta from
India registered a significant
increase and doubled up over the
previous year to reach 70 million
in 2010, with most goods being
organic chemicals and
pharmaceutical products.
5. Important Policies
Maltas foreign policy sets out the
aim of contributing in a world that
has shrunk into a global village
through creative participation in a
way that brings long-term
prosperity and welfare to all
countries, particularly those
bordering the Mediterranean Sea.
With its strategic location in close
proximity to Europe, North Africa
and the Middle East, Malta is
seeking to exploit other new
opportunities which have arisen
from the context of EU
membership and the increased
visibility it has given Malta by
harnessing its geo-political
relevance and position itself as a
dual gateway to its neighbouring
markets.
New emerging major economies
such as India and China are
amongst those that can most
benefit from this factor by taking
advantage of Maltas high
propensity to trade, which has
throughout the years enabled it to
develop excellent facil it ies
including extensive transhipment,
maritime and aviation services, as
well as enacting legislat ion
facilitating increased exchanges.
Indeed, despite its small size
Malta has a dynamic economy
based on international trade and
international business, with a well-
diversified offering based on
export trade, a vast servicesindustry including ICT, financial
services and a well-developed
tourist industry, as well as an
advanced manufacturing base
that amongst others comprises a
sound pharmaceutical industry
and bio-medical technologies.
More than 200 international
companies have established
manufacturing operations inMalta, with their continued
investment providing enough
proof to the quality and
productivity levels that can be
achieved and to the countrys
capability to adapt to demands of
high technology production
methods.
Malta has also devised economic
plans which are designed to
provoke greater economic activity
by incentivising work and
stimulating demand, placing the
flexibility, innovation capabilities
and adaptability of its workforce
at the core of its strategy. Amongst
others, Maltas targets are to
achieve higher productivity and
greater competitiveness; cut
down on bureaucracy and
improve efficiency to further
enhance the business-friendly
environment; improve existing
levels of education and training;
as well as move up the value
chain with greater focus on
higher-value-added goods and
services.
The Government is also
committed to place the
environment at the centre of its
policies, working with both the
private sector and civil society toinstil a sustained national
environmental conscience.
The fact that many international
companies have chosen Malta as
their relocation base signifies that
Malta has its cards in order to
attract high value added yielding
operations to its shores. One
good testimony to describing
Malta as a reliable investmentlocation is to highlight the
success stories operating in
Malta the track record of some
high profile companies, like the
German companies Playmobil
and Lufthansa Technik,
consolidates the argument that
Malta is truly the place to do
business.
6. Investment Opportunities
While the corporate tax rate in
Malta stands at 35% - which is
also the maximum rate for
individuals - Malta has a single
imputation system through which,
upon distribution of dividends,
shareholders may benefit from a
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refund that effectively reduces
their tax rate to 5%.
Tax liability can be further reduced
through a mechanism of tax
credits that Malta Enterprise
grants to enterprises in selectedsectors. Such companies may
claim tax credits equivalent to
30% or 50% (depending on its
size) of either the cost of capital
investment including plant,
machine and equipment or of
employees wages.
Additionally, Malta has signed
double taxation agreements with
almost 60 other countries,
including India. The Business
Promotion Act and the Malta
Enterprise Act are also noteworthy
as they provide for the wide range
of assistance, schemes and
incentives available for investors
who wish to set up and who
operate in Malta, while the Small
Business Act which is currently
being drafted will seek to improve
even further the business-friendly
environment for SMEs.
Malta Enterprise the
Governments Corporation
responsible for the promotion of
trade and investment as well as
economic development in Malta
administers a wide range of
schemes and incentives aimed at
enhancing even further the
business-friendly environment
and encourage investment,
increased application of R&D and
innovation processes, assist in the
internationalisation efforts and
sustain competitiveness.
Additionally, the Corporation also
assists enterprises operating in the
country through European
programmes or networks it
represents Malta. Among others,
it also manages European funds
which Malta obtains for the local
enterprises. For a full list of
schemes and incentives, visit
http://support.maltaenterprise.com
There are no limitations on the
repatriation of profits from Malta.
Moreover, repatriation of profits is
tax free as Malta does not charge
any withholding taxes on payment
of dividends to non-residents. Inaddition, interest and royalties
paid to non-residents are also free
of tax, increasing the potential for
efficient tax planning. The
absence of transfer-pricing rules,
thin capitalization regulations,
CFC regulations or annual wealth
taxes is an added bonus to
investors.
7. Maltas key benefits
Maltas strategic geographic
location within the Mediterranean
Sea together with its sophisticated
business environment and cultural
links with North African markets
and the Middle East make it an
ideal hub for trading, distribution
and marketing operations between
the three continents.
Amongst others, many foreign
companies are now looking at
Malta as their first choice location
to invest in view of its economic,
political and social stability,
excellent language skills and a
highly esteemed work force, an
efficient tax system, competitive
cost structures with low social
costs and competitive labour
costs, as well as an attractive
incentives package all within a
country renowned for its excellent
quality of life and safe
environment.
8. Important Contacts
1. Malta Enterprise Head Office
W : www.maltaenterprise.com
T : +356 25420000
2. Malta Enterprise India Office
13, Business Centre, 1st Floor,
Centre One Building,
World Trade Centre, Cuffe
Parade, Mumbai-400005
T : +91 2266387350
3. Malta High Commission in India
N60, Panchsheel Park, New Delhi
110 017, India
T : +91 1147674900E : [email protected]
4. Indian High Commiss ion
accredited to Malta
Nafleen Area, Near Fashloom
Roundabout,
PO Box 3150, Tripoli, Libya
T : +218 (21) 340 9288/89
5. Hon. Consulate of India in Malta67, Canon Road, Santa Venera,
SVR 9037
T : +356 21222346
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Introduction
Indias economic engagement with the
European Union (EU), the 27-nation
bloc., is time-tested and based on
shared complementarities. The EU is
Indias foremost trading partner and
together India and the EU constitute a
huge 1.7 billion market. India EU
economic co-operation spans in
diverse areas and continues to expand
with considerable gains for both sides.
Both India and the EU have now
decided to formalize a Free Trade
Agreement with a view to steer our
bilateral co-operation to the next
higher level.
EU India FTA
India is hopeful of concluding a
comprehensive free trade agreement
with the European Union in the near
future, perhaps early 2012, as thenegotiations are in advanced stage
with the 27-nation bloc. India is in talks
with the EU since June 2007 for
liberalizing trade in goods, services
and investments through a
Broadbased Trade and Investment
Agreement (BTIA). The FTA would
involve slashing of duties on over 90
per cent of the trade and opening up
of the mutual markets for services andinvestment.
The FTA is a potential game-changer
and a key tool for enhancing two-way
trade and investment and bringing the
bilateral relationship to a new level.
Undoubtedly, over time India will gain
from better access to European
Emerging Prospects in India - EU Economic Co-operation
byDebjani Chowdhury
Joint Director-Research, World Trade Centre Mumbai
markets and by the stimulus the
agreement will give to the transfer oftechnology and know-how and to
inward investment in agriculture,
manufacturing, services and
infrastructure. The Agreement will
support Indias own agenda for export
growth, inclusive development,
modernization and closer integration
into global markets.
Bilateral Trade
Bilateral trade between the European
Union and India continues to rise
steadily. Total two way trade in goods
and services in 2010 reached 86
billion. Some 80% of bilateral trade is
in goods; it increased by 28% in 2010
to reach a value of 68 billion. The
rest is trade in services, which
increased less quickly in 2010- but still
at a double digit rate of 12% - to reach
18 billion. 2010 therefore marked a
strong recovery in bilateral trade flows
from the slow-down seen in 2009,
which was largely triggered by the
global economic crisis. Moreover, the
positive trend has been maintained in
the first half of the current year with
two- way trade in goods reaching 41
billion, an increase of no less than 23%
over the first half of 2010. Indian
exporters are also benefiting from this
trend-so it would seem that for now
the slower rate of recovery in Europe
from the global crisis is not negatively
impacting demand for Indian goods.
FDI
The EU is one of the largest sources
of FDI for India. However, the FDI
inflows from the EU to India declinedfrom Euro 4 billion in 2007 to euro 3
billion in 2010. India has also emerged
as a major investor in the EU countries
with total investment from India
increasing from euro 1 billion in the
year 2007 to Euro 3.69 billion in 2008.
However, Indian inward investment to
EU in 2010 declined to 0.6 bill ion. It is
hoped that the FTA would strengthen
FDI inflows between India and the EUin the coming years.
Science & Technology
Science & Technology is one of the
key pillars for bolstering India & EU
co-operation. India and EU have
signed bilateral agreements which
include cooperation in the field of
Science & Technology in 2001 which
was renewed in 2007.
India has a long tradition in supporting
S&T development and the country has
centres of academic excellence with
a worldwide reputation. India has a
large and growing number of English
speaking skilled scientists and
engineers as well as technicians and
managers, whose actual and potential
contribution to S&T Development has
been recognized around the world.Further, both the public and private
sectors are engaged in raising R&D
expenditures. The goal is to more than
double the countrys R&D intensity
from 0.8% during the last 5 years to
2% by 2012.
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Under the framework of New INDIGO,
a project sponsored by the Ministry of
Science & Technology, Government of
India and several EU partner countries
both India and EU will work together
to create coherent synergy in Europes
partnership with India in Science,
Research & Technology. Regarding
Indias rising importance not only in
economical and political terms , but
also from a scientific point of view,
India has been identified a strategic
target country by the European
Commission. Long standing co-
operation between India and certain
European countries, especially
France, Germany and the UK is
vigorous and fruitful. Despite these
facts relationships with India in R&D
have not been harmonized so far at a
European level. There is l it t le
multilateral Science & Technology co-
operation between the European
Union and India and there is no
dedicated programme of cooperation
between these two scientific poles.
The aim of New INDIGO is to helpbridge these gaps and ultimately
provide the most relevant framework
to allow the scientific community and
institutions of India to access the
European Research and Science &
Technology area.
Infrastructure
There is enormous scope for India, EU
cooperation in the infrastructure
sector. Indias economic growth in the
future will be propelled by
infrastructure. The government of
India has undertaken an ambitious
programme to develop Indias
infrastructure, namely roads, railways,
ports, airports, telecom and urban
infrastructure with mammoth
investment of $500 billion in the next
few years. This opens up excellent
opportunities for joint India-EU
partnerships in various infrastructure
projects in India.
Eurozone Crisis
Eurozone is in the grip of acute
sovereign debt crisis. The crisis, with
its epicentre Greece, is gradually
spilling over to other nations in theEurozone. Greece remains the most
contentious issue. The sovereign
CURRENTRESEARCH
stress has moved from smaller
economies in the 17-nation eurozone
to some of the larger countries and
shaken world markets.
Eurozone is frantically attempting
Greeces bail out and a strategy torecapitalize the regions banks. At a
recent meeting, the Group of G-20
finance ministers called upon the
Eurozone to arrange a credible plan
for the recapitalization of Europes
banks and install a mechanism to
protect other countries from Greeces
woes. While global economy is
beginning to feel the impact of the
crisis, there is little doubt Eurozonecrisis will hurt Indias trade and
economic co-operation for some time
to come. Indian policy-makers need
to carefully watch the developments
in Europe and strategise to minimize
the damages to Indian businesses.
While this may be so in the short
run, Europe remains an important hub
for India to look at for greater
engagement in trade, investments,
services and transfer of technology.
Announces the Commencement of the new batches for the following Courses from January 2012
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World Trade Institute
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Euro Crisis Solution still Elusive
Europe stood divided on December 9
in a historic rift over building a fiscal
union to preserve the euro, with a large
majority of countries led by German
and France agreeing to move ahead
with a separate treaty, leaving Britain
isolated.
Twenty-three of the 27 leaders agreed
to pursue higher integration with
stricter budget rules for the single
currency area, but Britain said it could
not accept proposed amendments in
the EU treaty after failing to secure
concession for itself.
After 10 hours of talk, all 17 members
of the euro zone and six countries that
aspire to join resolved to negotiate a
new agreement, alongside the EU
treaty, with a tougher deficit and debt
regime to insulate euro zone against
the debt crisisEuropean Central Bank (ECB) feels
the decision a step forward for stricter
budget rules, which is necessary if the
17-nation euro zone is to emerge
stronger from two years of market
turmoil. Its going to be the basis for a
good fiscal compact and more
discipline in economic policy in the
euro area members.
Manufacturing Blues from
Europe to Asia
Manufacturing weakened from China
to Europe in November as the euro
regions debt crisis darkened the
outlook for the global economy.
Chinas manufacturing contracted in
World Economy
November for the first time since
February 2009 as the property market
cooled and Europes turmoil cut exportdemand. In Britain and the 17-nation
euro area, manufacturing shrank at the
fastest face in about two-and-half
month as the region edged towards
recession.
There is more evidence that the
global economic recovery is running
out of steam. It is clear that
manufacturing across a range of
countries is being effected by a
renewed slowdown in global trade.
Manufacturers are suffering as the
global economy cools. The
Organization for Economic and
Development (OECD) said that trade
in merchandise stalled in most major
economies in the third quarter. The
OECD cut growth forecasts for its 34
member-states during December to
reflect doubts that European monetary
union will survive the crisis.
While production slows in Asia and
Europe, it probably grew in November
in the U.S. at the fastest rate in five
months showing factories will keep
supporting expansion through the end
of the year.
The ISMs factory index rose to 51.8
in November from 50.8 in October.Fifty is the dividing line between
growth and contraction. Manufacturing
declined across Europe, according to
December 1st reports. In the U.K., a
gauge of factory output based on a
survey by Market Economies and the
Chartered Institute of Purchasing and
Supply fell to 47.6 from 47.8 in
October. New orders fell for a fifth
month.
A manufacturing gauge based on
survey of purchasing managers in the
euro region fell to 46.4, the lowest
since July 2009.
European companies are under
increasing pressure to cut across to
protect earnings as faltering global
demand erodes exports jut as euro
region governments toughen spendingcuts. Unemployment rose to 10.3 per
cent in October, the highest in more
than 13 years and the manufacturers
were most pessimistic in almost two
years in November.
Norways manufacturing contracted for
the first time in almost two years, while
Sweden slumped for a fourth
consecutive month as the export-
dependent Nordic countries sufferfrom falling demand for their products.
In Asia, the Purchasing Managers
Index for China fell to 49.0 in
November from 50.4 in October,
according to the Federation of
Logistics and Purchasing.
Chinas central bank on the night of
November 30 announced the first cut
in banks reserves requirements since
2008, moving two hours before the US
Federal Reserve led a global effort s
to ease Europes debt crisis. The
move will add about 370 billion yuan
(US$ 58 billion) to the financial system
and more reductions may follow as the
government seeks to boost growth.
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Big Economies Headed for a
Slowdown, says OECD
Highlighting increasing signs that
growth momentum is dwindling across
the board, Organization for Economic
Co-operation and Development(OECD) said that none of the worlds
major economies will escape a
slowdown.
The OECDs composite leading
indicator (CLI) for its members fell for
the seventh straight month to 100.4 in
September, down from 100.9 in August
and hitting the lowest reading since
December 2009.
Readings for individual countries and
big developing world economies were
broadly lower at levels indicating
slowdowns, and were in many cases
below their long-term averages.
The OECD CLIs are designed to
anticipate turning points in economic
activity relative to trend a turnaround
in an indicator tends to precede turning
points in economic activity by around
six months. The Group of Sevens CLI
fell to 100.6 in September from 101.1
in August while the reading for the euro
area dropped to 99.1 from 99.9, well
below its long-term average of 100.
Japans CLI remained above its long-
term average of 100 with a reading of
101.6, but it was still down from 102.0,
suggesting an economic recovery
after its March earthquake andtsunami disaster is losing steam.
Economic momentum in the United
States eased only slightly, according
to the OECDs indicator, which fell to
101.2 from 101.5.
The Chinese economy also showed
only marginally weaker activity with a
reading of 99.8, down from 99.9.
Among other emerging market
economies, Brazils CLI fell to 94.0
from 95.1 while Indias reading
decreased to 93.8 from 94.4. In a
report last month, the OECD slashed
its 2012 growth estimate for the US to
1.8%.
Japan Returns to Growth on
Export Rebound
Japans economy expanded for the
first time in four quarters as exports
recovered after the devastating
earthquake. Expansion is already
slowing because of weakening
overseas demand.
Gross domestic product (GDP) grew
at an annualised 6% in the three
months ended September 30, the
fastest pace in 18 months. At 543
trillion yen ($7 trillion), economic
output was back to levels seen before
the March 11 earthquake.
Japans return to growth after three
quarters of contraction was driven by
companies including Toyota Motor
making up for lost output from the
disaster. A sustained rebound will
depend on how much reconstruction
demand can offset a slowdown in
global growth as Europes debt crisis
damps global confidence and an
appreciating yen erodes profits.
Personal consumption rose 1% from
the previous three months in the thirdquarter, led by an increase in durable
goods purchases and exceeding
forecasts, and overseas shipments
advanced 6.2%. Japans rebound is
likely to slow to 2.1% this quarter,
according to the average forecast of
42 analysts surveyed by the Economic
Planning Association, a government
WORLDECONOMY
affiliated body. Expansions in Asian
nations from China to South Korea
to the Philippines are already
showing signs of cooling.
International Monetary Fund said that
Japan needed to swiftly implementreconstruction spending. It is
predicted that the pace of growth will
dip below 2% in the first half of 2012.
Japans economic growth will remain
elevated, mainly on domestic
demand. Companies plan to cut
machinery orders in the quarter
ending December 31, a government
survey showed, a sign growth may
slow even as government spendingfor reconstruction takes effect.
U.S. Manufacturing Activity
Remains Resilient.
In contrast to the contraction in
manufacturing activity in Europe,
manufacturing activity in the US
gathered pace in November. In a
release this morning, the Institute
of Supply Managements Manufac-
turing Purchasing Managers Index
rose to 52.7 in November from 50.8
in October the 28th successive
month of growth in manufacturing
activity. With stocks at relatively low
levels and US consumer and busi-
ness spending remaining resilient
amidst financial turmoil elsewhere,
manufacturing output is likely to
continue increasing in the months
ahead. Indeed, the new orders sub-index jumped to 56.7 in November
from 52.4, indicating that new manu-
facturing orders grew at a faster rate
in November compared to the pre-
vious month.
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India-Nepal Trade Increases by
36 %
The bilateral trade between India and
Nepal has increased from US$ 1985
mn in 2009-10 to around US$ 2700 in
2010-11 registering an increase of
around 36%. Exports from Nepal to
India have also grown from US$
452mn in 2009-10 to US$ 476mn in
2010-11 (an increase of around 5.3%).
Nepals hydro power sector is the key
factor for increased cooperation
between the two countries. It isestimated that sale of electricity from
the 40,000 MW hydropower potential
of Nepal can generate revenues of
more than 10 billion US$ per annum.
In the recent past, several Indian
private companies/Joint ventures
have been able to secure survey
licences for development of about
8,200 MW hydro power projects in
Nepal at an estimated cost of
Rs.82000 crores. The Government of
India has accepted the Nepalese
request for use of Vishakhapatnam
port and rail route through Singhabad
(India) Rohanpur (Bangladesh).
Nepals request for further facilitation
of Nepal- Bangladesh trade through
Kakarbhitta-Phulbari-Banglabandha
route had also been agreed.
India is considering providing Buyers
Credit to Nepalese Government
agencies for large project exports,
especially in the infrastructure sector
such as roads, bridges, railways,
power lines, sewerage plants, water
treatment plants and housing from
India. The credit can be provided
under National Export Insurance
Account (NEIA) through EXIM Bank
for a maximum period of 5 -8 years.
Indian firms are the biggest investors
in Nepal accounting for about 47.5%
of total approved foreign direct
investments. There are about 150
operating Indian ventures in Nepal
engaged in manufacturing, services
(banking, insurance, dry port,
education and telecom), power sector
and tourism industries. Indian joint
ventures in Nepal have contributed
significantly to increase in Nepals
exports to India. They also provide
direct employment to around 30,000
Nepali citizens and indirect
employment to more than twice that
number. Both Governments have
finalized the text of bilateral
investment protection and promotion
agreement. Mutually convenient dates
are being finalized for signing of the
same. Other agreements in the
advance stage of finalization aremotor vehicle agreement which
governs movement of vehicles and
direct buses on designated routes and
Double Taxation Avoidance
Agreement between the two countries.
India-China to Achieve Trade of
US$ 100 Billion by 2015
India and China are on course to
achieve the bilateral trade target ofUS$ 100 billion by 2015. Trade
between India and China has seen
exponential growth in the last few
years. As per the trade statistics of
DGCI&S the total trade volume has
gone up from US $ 2.3 billion in 2000-
01 to US $ 59.62 billion in 2010-11
(April-March).
But the trade deficit for the Indian side
has increased from US $ 9.1 billion in
2006-07 to US $ 20.8 billion in 2010-11. A balanced trade is needed for long
term, sustainable and harmonious
development of economic co-
operation between the two countries.
The area of drugs and
pharmaceuticals is an important
segment to diversify the bilateral trade
basket. Both sides need to work
aggressively towards removing
administrative bottlenecks and overly
restrictive regulatory measures, in
order to boost development of all
round co-operation in this area. The
renewable energy where Chinese
Government has fixed a target of 100
GW by 2020 is another area with great
potential for export from Indian side.
India- South Africa to Co-operate
in MSME Sector
In a recent bilateral meeting India and
South Africa, agreed to strengthen
bilateral co-operation in the MSME
sector. India offered to co-operate with
South Africa with respect to the
structural issues and the dovetailing
of IT into the handicrafts / handloom
sector, exchange of vocational
training, IT skills etc. South Africa
appreciated the development of this
sector in India, especially of ruralartisans, as well as the cluster model
adopted in many sectors.
The total trade between the two
countries in the F.Y. 2010-11 was US$
11.12 billion, much higher than
bilateral trade target of US $ 10 billion
by the year 2012, set during the visit
India & World Markets
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finance, electronics and software,
chemicals and fertilizers, renewable
energy and biotechnology.
Regarding investment India pointed
out the opportunities in Infrastructure
that cover the whole gamut ofinfrastructure including highways,
power plants, railways, airports, ports,
waterways, industrial facilities etc. The
government is committed to
developing infrastructure on a big
scale with active involvement of the
private sector working under a
predictable and stable regulatory
environment.
India too is an important investor in
Flanders (northern part of Belgium that
contains Brussels, Bruges, Ghent and
Antwerp). India has invested about
(1.2 billion euros) and has over 50
Indian companies. Indian investment
includes greenfield investments,
acquisitions and joint ventures. Year
2010 saw 8 new investment projects.
Indian investment is seen across
sector like ICT, pharma, transport &
machinery and equipment.
MFN Status for India by
December 2012
Taking the first step towards granting
the most favoured nation (MFN) status
to India, Pakistan has agreed to allow
import of all items, barring a few
hundred on the negative list that will
be ready by February 2012. This list,
too, will be phased out by the end of
year, resulting in grant of MFN status.
However, the joint statement issued
at the end of two-day trade secretary-
level talks did not say so in as many
words.
The negative list will be finalised and
ratified by February 2012. Thereafter,
all items other than those on the
of South African President Mr. Jacob
Zuma to India in June, 2010. A revised
bilateral trade target of US $ 15 billion
has been set for the year 2014 during
the meeting of Minister of Commerce
and Industry, Govt. of India and the
Minister of Trade and Industry, Govt.
of South Africa held on 10th January,
2011. The bilateral trade has shown a
growth of 21 % in the first four months
of the current Financial Year 2011-12,
viz. April to July, 2011. Bilateral Trade
during this period has reached US $
4.77 bn, with Indias exports to South
Africa as US $ 1,703 mn and imports
from South Africa as US $ 3,069 mn.
The trade balance was at presentheavily in favour of South Africa, and
there is need for reducing the same
while making all efforts towards
achieving the bilateral trade target.
The proposed finalization of the India-
SACU Preferential Trade Agreement
(PTA), will give a considerable boost
to the bilateral trade, and with the
Southern African region as a whole.
There is also substantial and healthy
growth in two way investment flows.
As regards South Africa, the
cumulative value of FDI stock (Indian
Investment in South Africa) would be
over US$ 6.7 billion. The South African
investments in India are also rising
steadily and are around US$ 2 billion.
There is need the two countries to
focus on specific sectors like auto
engineering, pharmaceuticals, IT,
diamond and mining sectors in orderto further enhance the growth in the
bilateral trade and investment.
India-Belgium Trade Registered
a Growth of 68%
Belgium is an important trading partner
for India and it is Indias 2nd largest
trading partner in the European Union.
There exists growing trade and
investment between the two countries
in the face of the global financial
slowdown (except in the year 2009-
10). Indo-Belgium trade in 2010-11
was US$ 14.90 billion which saw a
growth 52.44% over 2009-10. Exports
to Belgium in 2010-11 have registered
a growth of 67.49% at US $