Trends in Indian Exports

Course : Money, Banking & Public FinanceInstructor : Dr. Prashanta Panda

By PresenterMedia.com

•Content LayoutTopics to be covered in the presentation

Foreign Trade Policy

Sector wise distribution of Indian Exports

Region wise distribution of Indian Exports

Concepts of Trade - Export

Vasishta

Mit, Miraj, Hari

Ishaan, Shreyes

Vasishta

Dev

Indian Exports Post 1991 & Relation with Indian Foreign Exchange Reserves

•Foreign Trade Policy The Union Commerce Ministry, Government of India announces the integrated Foreign

Trade Policy (FTP) for every five year period. <EXIM policy> [ 2009 – 2014]* Short Term Objectives:To arrest and reverse the declining trend of exports; and To provide additional support to those sectors which have been hit badly by recession in

the Developed World.

* Medium term Policy Objectives :To achieve an Annual Export growth of 15% with an Annual Export Target of US$ 200 billion

by March 2011. To achieve an Annual Export growth of around 25% by 2014. To double India’s exports of goods and services by 2014.

* Long Term Objective :To double India’s share in Global Trade by 2020.

SPECIAL FOCUS INITIATIVES (SFI)

*The Indian scenario post 1991

TECHNOLOGY UPGRADATIONEPCG Scheme

1. Obligation under EPCG scheme relaxed. 2. To aid technological up gradation of export sector, EPCG Scheme at Zero Duty has been introduced. 3. Export obligation on import of spares, moulds etc. under EPCG Scheme has been reduced by 50%.

Announcements for MDA & MAI:Higher allocation for Market Development Assistance (MDA) and Market Access Initiative (MAI) has been announced.

Towns of Export Excellence (TEE)The following cities have been recognized as towns of export excellence (TEE)Handicrafts : Jaipur, Srinagar and Anantnag Leather Products : Kanpur, Dewas and Ambur Horticultural Products: Malihabad

Extension of Income Tax Exemption to EOU Income Tax exemption to 100% EOUs units under Section 10B and 10A of Income Tax Act.

EXPORT COMPONENT SUPPORT

• Trade Fairs and Exhibitions• Export Risk Insurance• Finance• Quality control and Pre-shipment

Inspection• Institutional Assistance• India Brand Equity Fund

1. Export Inspection Council2. Indian Institute of Foreign Trade3. Indian Institute of Packaging4. Export Promotion Councils,

Commodity Boards and Authorities

5. Federation of Indian Export Organizations

6. Indian Council of Arbitration7. India Trade Promotion

Organization

INSTITUTIONAL SUPPORT

•Assistance from Govt. of IndiaSteps taken to assist exporters

INDIAN FOREX RESERVES [ 1992- 2013 ]

INDIAN EXPORTS [BY VALUE IN INR BILLION] ( 1992 – 2013 )

Indian Oilmeal ExportsIran as the largest importer

• Oilmeal – bird/animal feed• Uncertainty over India’s

largest export market – Iran• 30% exports to Iran• 3.55% increase in the

period April – August 13’• Advantage to Indian

exporters – Rupee denominated trade with Iran

1. Food & Agro products2. Leather products3. Gems & Jewellery 4. Textiles5. Readymade Garments6. Chemicals & Pharmaceuticals7. Engineering Goods8. Minerals & Metals9. Electronic Goods & IT/Service sector

• Indian Export DistributionA Sectoral/Industry-wise approach

•Sectoral Distribution of Indian Exports

Source : DGCI&S, Ministry of Commerce

•Food & Agricultural Products

Agro processing defined as a set of techno- economic activities, applied to all the produces, originating from agricultural farm.

Agro-processing enhance socio-economic impact specifically on employment and income generation.

India is the worlds largest producer of food next to China.

Value addition of food products is expected to increase from 8% to 35% by the end of 2025.

Companies have adapted various strategies to maintain and increase their market share in India. Counter the threat of low priced competition.

It has reengineered its cost to lower its own fixed cost structure.

In mass segment, Britannia introduced biscuit packs at lower price. Haldirams – Competitive pricing and labor intensive projects. Nestle – Continuously launched new products.

India is its 5th largest in terms of production, consumption, export and expected growth.

Strengths Round the year

availability. Vast domestic

market. Diversification of

agricultural sector.

SWOT Analysis of Food & Agro sector

Weaknesses Perishable goods High transportation costs Huge storage facilities (Cold Storage, Go downs, Granaries)

•Still chewing Onions!

•Leather & Leather Products

India is the 3rd largest producer of leather in the world after China and Italy.

The leather industry occupies a place of prominence in the Indian economy on account of its massive potential for growth, exports and employment.

The export of leather and leather products gained momentum during the past two decades. There has been a phenomenal growth of exports from Rs. 320 million in the year 1965-66 to Rs. 69558 million in 1996-97.

Moreover industry employs over 2.5 million people and accounts for US$2.4 billion of exports in 2004-05 with most of it being exports to developed countries.

India is engaged in sourcing manufacturing processing

which involves ,• cutting• polishing • selling precious

gemstones and metals such as diamonds, gold and platinum.

•Gems & Jewellery Cut/polished diamonds, Gold and precious stones

Low labour cost Availability of skilled craftsmen Rising disposable income Favorable Govt. policies

Abolition of Gold Control Act in 1992 Rise in the number of working women Jewellery design, refining, model making,

jewellery manufacturing, gemmology Increasing credibility through Kimberley

Process Certification Scheme (KPCS) Changes in tastes and preferences through

awareness

Gems & Jewellery – Sector Overview

Unorganized Sector

Labour Intensive

Working Capital - Intensive

Raw Material - Intensive

TRENDS in the Sector

Market Characteristics

•Reason for 90% Gold Imports

• Textiles & Readymade Garments 30% of total exports, 20% of National production, 21% workforce

employment Pre 1949

- Cotton manufacturing began in 1200 B.C- Flourished in ancient times from China to Cape of Good Hope- High demand in Europe from 1794-1824, and levy of heavy import duties for goods from India

From 1950 – 1990- 1950, Govt restriction on export of cotton fabric > high export duties & quotas- Since 1955, cost of production increased compared to TIGER economies due to their modernization

Post 1991 era- Exports doubled from 91-92- Entire decade of increased export growth rate- 2001-02 exports declined due to decrease in demand from importing countries & competition from China, Bangladesh

• Trends in Indian Textile ExportRupee depreciation as a tool

for boosting exportsReady-made garments will

drive the growth in other segments of textiles and hence, overall textiles export would be better this year

High cost of production in China – steep rise in labour cost – causing shift in textile orders to India

US contributes 20% to Indian ready-made garment exports

• IT & Services Industry

• Geographical Distribution of Indian Exports

Europe: Following Products are exported to Europe1) Mineral Fuel2) Jewellery and Gems3) Coal4) Electronics such as television, sound recorders and others5) Iron and Steel

Reasons for Exports is due to India has significant sources of coal (fourth-largest reserves in the world), bauxite, titanium ore, chromite, natural gas, diamonds, petroleum, and limestone.

Due to high demand of jewellery and gems in Europe India is exporting high amount of Jewellery and Gems in Europe

Televisions and other electronic goods are also exported mainly because the production cost of electronic goods in Europe is quite high as compared to Asia or any other continent. India mainly exports to Germany, France, Spain & England.

*Exports to Europe

• Exports to North American Countries India exports Basmati rice to north American Countries. Basmati rice

being novel product is characterized by its unique grain size, aroma and cooking qualities. Being high value product, it has got good export demand. Hence, the export has been very high and exports have been steadily growing.

However the export to other countries remains constant with slight fluctuation from year to year. India's major markets for basmati rice exports have been Saudi Arabia, Australia, Austria, Belgium, Bahrain, France, Germany, U.K., Denmark, U.S.A., Canada, Belgium , Kuwait, Italy, Oman, Yemen, Netherlands, Jordan, Indonesia etc. In fact, Saudi Arabia traditionally has been the largest market for Indian basmati rice.

Other Product which is Exported by North American Country’s is Coffee. reason being, India accounts for about 4.5 % of world coffee production.

Industry provides employment to 6 lakh workforce. It was seen from the exports figures that India exports major portion of green coffee instead of processed coffee. It is exported to Countries like Costa Rica, USA, Canada, Cuba , Guatemala and other north American Countries

• Indian Exports to African countries Commodities such as crude oil, diamonds, refined petroleum products,

coffee, sisal, fish and fish products, timber, cotton are exported. Cotton produced in Africa is exported mainly to Asia, where nearly 80% of

the world’s cotton fibre is processed into yarn, with China and India leading the way. The cotton sector provides income for millions of people in Africa, especially those living in rural areas, and is an important source of foreign exchange earnings. ITC’s efforts in this sector are aimed at boosting Africa’s competitiveness and establishing stronger links with cotton importers in Asia.

Fish, and fish products came close, followed by oil cakes, cashew kernels, and cotton. In 1992-93 fish and fish products became the main agricultural export, followed by oil meals, then cereals, and then tea. The share of fish products rose steadily from less than 2 % of all agricultural exports in 1960, to 10 % in 1980, to around 15 % for the 3-year period ending in 1990, and to 23 % in 1992. The contribution of tea in agricultural exports fell from 40 % in FY 1960 to around only 13 % by 1992.

This is Because India is Because India is Agro-Based country.

• Concepts of Trade - Export

Factors affecting trade (Export-Import)

• High risk business, vulnerable to changes (economic, political, social)• Lost or damaged goods in transit• Natural Disasters/Calamities• Ability to absorb burden of financial losses• Bankruptcy and political turmoil• Ease of doing business index is an index created by the World Bank

India ranks 132. (Singapore 1st) India requires 9 export documents to be cleared, while China needs 8, with good practice economies like France needing 2.

• Trade Agreements

Trade Agreements

PTA

FTA

Customs Unions

(CU)

Common Markets

(CM)

Economic Unions

(EU)

CECA/CEPA

CECA - Comprehensive Economic Cooperation Agreement> Reduce tariffs (custom/import duty)> Start with CECA, evolve to CEPA> India has CECA with Malaysia, Singapore, ASEAN

CEPA – Comprehensive Economic Partnership Agreement> Reduce tariffs + cooperation in trade services & investment> India has CEPA with Japan, South Korea & Sri Lanka

• Trade Barriers

Trade Barriers

Non-tariff barriers

Tariff barriers

Quantitative RestrictionsImport/Export ProhibitionsImport/Export LicensingExport Subsidies

Labour/Environment StandardsHealth Standards

•Dumping & Countervailing Duty (CVD)

Dumping is an informal name for the practice of selling a product in a foreign country for less than either (a) the price in the domestic market, or (b) the cost of making the product. The WTO Agreement :# does not regulate the actions of companies engaged in "dumping". # focuses on how governments can or cannot react to dumping — it disciplines anti-dumping actions, and it is often called the “Anti-dumping Agreement”.

Countervailing Duty (CVD) According to the WTO system, the Agreement on Subsidies and Countervailing Measures (SCM) allows the country to impose extra duty on dumped products in case a country finds evidence of dumping.

• Cases of Dumping and CVD+ USA has imposed a countervailing duty (~6%) on Indian frozen shrimps, because Indian shrimp gets plenty of subsidies from Indian government for shrimp farming and export and hence Indians are able to dump shrimps to USA and hurt USA’s local shrimp businessmen.

+ Country Which Indian export was slapped Anti-Dumping duty

China

Recently China also started Anti-dumping investigation on Indian exports such as1.food preservative chemical from India (known as TBHQ)- widely used in Chinese food industry.2.Optical fiber imports from India after allegations from the local Chinese industry that they were being sold at artificially low prices.

Thailand Indian steel

Indonesia Against two leading Indian steel firms: Jindal and Essar.

We’ve slapped anti-dumping duty on steel wheels imported from China used in commercial vehicles.

Under probe: US, China, Malaysia and Taiwan: Because They’re exporting solar equipment to India at ridiculously low prices and was bleeding the desi industry. Similar issue with glassmakers and electric cable manufacturers from those countries.

Voluntary Export Restraints (VER) This type of trade barrier is "voluntary" in that it is created by the exporting country rather than the importing one. A voluntary export restraint is usually levied at the behest of the importing country, and could be accompanied by a reciprocal VER. For example, Brazil could place a VER on the exportation of sugar to Canada, based on a request by Canada. Canada could then place a VER on the exportation of coal to Brazil. This increases the price of both coal and sugar, but protects the domestic industries.

Once the ban is imposed and IF we want to get the ban revoked, then - We’ve to invite their food inspectors/specialists to India, let them check our premises - We’ve to bear all the cost of their accommodation, travel expenses etc.

• Solutions for Indian Export Industry

Negotiation Government needs to expedite the negotiations with US, EU, China and Japan, to lift restrictions on Indian fruit/food/marine exports into these countries.

Foreign Offices •Encourage importing countries (primarily USA, EU, Japan) to set up offices in India for certification of export consignments

Certification APEDA already supports the cost of quality certification programs such as HACCP and Eurepgap for grapes and peanuts. More food-items should be included in this scheme.

FSSAI•Food Safety and Standards Authority of India.•FSSAI needs to harmonize the differences between Codex standards and Indian food standards.

Indegenous Labs

•Encourage food testing laboratories in India to obtain accreditation from international agencies. Given high cost of international accreditation, Government can incentivize laboratories by part funding these costs.

Zoning •Government should introduce certification zoning systems: e.g. pesticide free zones, organic production zones, disease free zones to facilitate high value exports from India

Sample Cost• Exporters to US/EU are first required to their samples to the importing country to get trade-approval. Government should provide financial assistance to small/medium exporters for this.

Thank You