Trade in India

Although India has steadily opened up its economy, its tariffs go on to be high when compared with other countries, and its investment norms are still restrictive. This leads some to observe India as a ‘rapid globalizer’ while others still see it as a ‘greatly protectionist’ economy.

Till the early 1990s, India was a closed economy: average tariffs exceed 200 percent, quantitative restrictions on imports were extensive, and there were stringent restrictions on foreign investment. The country began to cautiously reform in the 1990s, liberalize only under conditions of extreme necessity. 

Since that time, trade reforms have fashioned remarkable results. India’s trade to GDP ratio has increased from 15 percent to 35 percent of GDP stuck between 1990 and 2005, and the economy is now among the fastest growing in the world.

Average non-agricultural tariffs have fallen below 15 percent, quantitative restrictions on imports have been eliminated, and foreign investments norms have been relaxed for a number of sectors.

India however retain its right to protect when need arises. Agricultural tariffs average between 30-40 percent, anti-dumping measures have been liberally used to protect trade, and the country is among the few in the world that continue to ban foreign asset in retail trade. Although this policy has been somewhat relaxed recently, it remains significantly restrictive.

Nonetheless, in recent years, the government’s stand on trade and investment policy has displayed a marked shift from protecting ‘producers’ to benefiting ‘consumers’. This is reflected in its Foreign Trade Policy for 2004/09 which states that, "For India to become a major player in world trade ...we have also to facilitate those imports which are necessary to stimulate our economy."

India and USA trade

India is now aggressively pushing for a more liberal comprehensive trade regime, especially in services. It has assumed a leadership role among developing nations in global trade negotiations, and played a critical part in the Doha negotiations.

This study finds that the competitiveness of India’s horticulture sector depends critically on efficient logistics, domestic competition, and the ability to comply with international health, safety and quality standards. The study is based on primary surveys across fifteen Indian States.

A third study, dealing with barriers to the movement of professionals is under preparation.

The Bank has also held a number of workshops and conferences with a view to providing different stakeholders with a forum to express their views on trade-related issues

The study concludes that to sustain the dynamism of India’s services sector, the country must address two critical challenges: externally, the problem of actual and potential protectionism; and domestically, the persistence of restrictions on trade and investment, as well as weaknesses in the regulatory environment.

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As a number of research institutions in the country provide the direction with good, just-in-time, and low-cost analytical advice on trade-related issues, the World Bank has focused on providing analysis on specialized subjects at the Government’s request.

In the last three years, the Bank has been working with the Ministry of trade in a participatory manner to help the country develop an informed strategy for domestic reform and international negotiations.

Given the sensitivity of trade policy and negotiation issues, the Bank’s role has been confined to providing better information and analysis than was previously obtainable to India’s policymakers.

India is an important trade partner for the EU and a growing worldwide, power. It combines a sizable and growing market of more than 1 billion people with a growth rate of between 8 and 10 % - one of the fastest growing economies in the world. Although it is far from the closed market that it was twenty years ago, India still also maintains substantial tariff and non-tariff barriers that hinder trade with the EU. The EU and India hope to increase their trade in both goods and services and investment through the Free Trade Agreement (FTA) discussions that they launched in 2007. Negotiations are expected to be concluded in early 2012.

In particular since the early 1990s, India has embarked on a process of economic reform and progressive integration with the global economy that aims to put it on a path of rapid and sustained growth. Per capita incomes more than doubled during the period 1990-2005. In parallel, EU-India trade has grown impressively and more than doubled from €28.6billion in 2003 to over €67.9 billion in 2010. EU investment to India has more than tripled since 2003 from €759million to €3 billion in 2010 and trade in commercial services has tripled from €5.2billion in 2002 to €17.9 billion in 2010. However, India's trade regime and regulatory environment still remain comparatively restrictive and in 2009 the World Bank downgraded the Indian rankto165 from 120 in 2008 (out of 183 economies) in terms of the 'ease of doing business'. In addition to tariff barriers to imports, India also imposes a number of non-tariff barriers in the form of quantitative restrictions, import licensing, mandatory testing and certification for a large number of products, as well as complicated and lengthy customs procedures.

In 2004 India became one of the EU's "strategic partners". Since 2005, the EU-India Joint Action Plan, revised in 2008, aims at realising the full potential of this partnership in key areas of interest to India and the EU.

The EU and India have in place an institutional framework, cascading down from the annual EU-India Summit, to a senior-official level Joint Committee, to the Sub-Commission on Trade and to working groups on technical issues such as technical barriers to trade (TBT), sanitary and phytosanitary measures (SPS), agricultural policy or industrial policy. These are the fora where a number of day-to-day issues, such as EU market access problems, are discussed 

o assist India in continuing its efforts to better integrate into the world economy with a view to further enhancing bilateral trade and investment ties, the EU is providing trade related technical assistance to India. €13.4million were allocated through the Trade and Investment Development Programme (TIDP) funded from the Country Strategy Paper (CSP) 2002-2006. At present, the follow-up programme to the TIDP is being designed and will be funded by the Country Strategy Paper 2007-2013.  

A successful conclusion of the Doha round would contribute significantly to a more open and stable environment for trade and investment for both the EU and India. India is also a major player in the DDA negotiations and, as a leader of the group of (advanced) developing countries known as the G20, has been one of the "G4", along with the EU, US and Brazil.

A free trade agreement with India offers great promise for New Zealand businesses. India is already one of our fastest growing markets, with New Zealand exports having tripled over the last decade” said Mr Groser.

New Zealand's exports to India were valued at NZ$630 million in 2009, a 280% increase on our 2001 exports to India and overall bilateral trade between India and New Zealand grew 180% between 2001 and 2009, from NZ$353 million to NZ$985 million. 

he British East India Company was an English and later (from 1707) British joint-stock companyformed for pursuing trade with the East Indies but which ended up trading mainly with the Indian subcontinent.

The East India Company traded mainly in cotton, silk, indigo dye, salt, saltpetre, tea and opium. The Company was granted a Royal Charter in 1600, making it the oldest among several similarly formed European East India Companies. Shares of the company were owned by wealthy merchants and aristocrats. The government owned no shares and had only indirect control. The Company eventually came to rule large areas of India with its own private army, exercising military power and assuming administrative functions. Company rule in India effectively began in 1757 after the Battle of Plassey and lasted until 1858 when, following the Indian Rebellion of 1857, the Government of India Act 1858 led to the British Crown assuming direct control of India in the new British Raj.

India trade

The Company was dissolved in 1874 as a result of the East India Stock Dividend Redemption Act passed one year earlier, as the Government of India Act had by then rendered it vestigal, powerless and obsolete. Its functions had been fully absorbed into official government machinery in the British Raj and its private army had been nationalized by the British Crown. In the modern era, its history is strongly associated with corporate abuse, colonialism, exploitation, and monopoly power.

his time they succeeded, and on 31 December 1600, the Queen granted a Royal Charter to "George, Earl of Cumberland, and 215 Knights, Aldermen, and Burgesses" under the name, Governor and Company of Merchants of London trading with the East Indies. For a period of fifteen years the charter awarded the newly formed company a monopoly on trade with all countries east of the Cape of Good Hope and west of the Straits of Magellan. Sir James Lancaster commanded the first East India Company voyage in 1601.

Initially, the Company struggled in the spice trade due to the competition from the already well established Dutch East India Company. The Company opened a factory in Bantam on the first voyage and imports of pepper from Java were an important part of the Company's trade for twenty years. The factory in Bantam was closed in 1683. During this time ships belonging to the company arriving in India docked at Surat, which was established as a trade transit point in 1608.

In the next two years, the Company built its first factory in south India in the town of Machilipatnam on the Coromandel Coast of the Bay of Bengal. The high profits reported by the Company after landing in India initially prompted King James I to grant subsidiary licenses to other trading companies in England. But in 1609 he renewed the charter given to the Company for an indefinite period, including a clause which specified that the charter would cease to be in force if the trade turned unprofitable for three consecutive years.

The Company was led by one Governor and 24 directors, who made up the Court of Directors. They, in turn, reported to the Court of Proprietors which appointed them. Ten committees reported to the Court of Directors.

India trade