Review of the year 2010

EXPORTS / FTP

India’s exports have registered a growth of 26.8% during November 2010, at US $ 18.9 billion. During the period April-November 2010, exports have reached a level of US $ 140.3 billion at a growth of 26.7% while the imports were US $ 222 billion with a growth of 24% and a trade deficit of US $ 81 billion. India’s imports in November 2010 were US $ 27.8 billion, up by 11.2%. During April-November 2010, the following sectors have done well viz., engineering, gems & jewellery, petroleum and its products, leather & leather products, carpet, plastics & linoleum, cotton yarn, chemicals etc.

An export target of US $ 200 billion has been set for the year 2010-11. With the present growth trend, we are on course to achieve the export target for 2010-11. There has been minor improvement in the GDP Growth rate of US, one of our major export destinations. IMF has also projected a growth rate of 3.3% in GDP in 2010 and 2.9% in 2011 for US in comparison to the negative growth in 2009.

In the Foreign Trade Policy 2009-14, it has been stated that India’s merchandise exports is expected to reach US $ 200 billion in 2010-11. In order to meet these objectives, the Government planned to follow a mix of policy measures including fiscal incentives, institutional changes, procedural rationalization,enhanced market access across the world and diversification of export markets. Improvement in infrastructure related to exports; bringing down transaction costs and providing full refund of all indirect taxes and levies became the three pillars, which would support to achieve the target.

Government has put emphasis on market diversification as our traditional exports have been hit badly due to their concentration in US and EU Regions. Since the announcement of FTP, 2009-14, focus had been to diversify our markets more into developing countries of Africa, Latin America and some parts ofOceania. A recent preliminary study conducted by Federation of Indian Exporters (FIEO) revealed that the schemes, particularly the Focus Market Scheme (FMS) and Market Linked Focus Product Scheme (MLFPS) have played a key role to diversify the India’s export base. Out of the 27 new countries added under FMS in August 2009, exports to 15 countries registered impressive growth despite the global slowdown.

SPECIAL ECONOMIC ZONES

The main objectives of the SEZ Act are: (a) generation of additional economic activity; (b) promotion of exports of goods and services; (c) promotion of investment from domestic and foreign sources; (d) creation of employment opportunities; and (e) development of infrastructure facilities. The overwhelming response to the SEZ scheme is evident from the flow of investment and creation of additional employment in the country. The SEZ scheme has generated tremendous response amongst the investors, both in India and abroad. In addition to earning of foreign exchange and development of infrastructure, SEZs have also created a significant local area impact in terms of direct as well as indirect employment, emergence of new activities, changes in consumption pattern and social life, human development facilities such as education, healthcare etc.

So far, formal approvals have been granted for setting up of 580 SEZs out of which 367 have been notified. Out of the total employment provided to 6,20,824 persons in SEZs as a whole 4,86,120 persons is incremental employment generated. The total physical exports from SEZs as on 30th September, 2010 i.e. in the first two quarters of the current financial year, has been to the tune of Rs. 1,39,841 croreapproximately registering a growth of 55.8% over the exports of corresponding period of the previous financial year. The total investment in SEZs till 30th September, 2010 is Rs.1,76,148 croreapproximately, including Rs. 1,61,743 crore in the newly notified zones. 100% FDI is allowed in SEZs through automatic route. A total of 122 SEZs are making exports. Out of this 69 are IT/ITES, 16 Multi product and 37 other sector specific SEZs. The total number of units in these SEZs is 3,139.

RTAs/FTAs/PTAs

India has always stood for an open, equitable, predictable, non-discriminatory and rule based international trading system. RTAs, in India’s point of view, should be ‘building blocks’ towards the overall objective of trade liberalisation and should complement the multilateral trading system. In the past, India had adopted a very cautious and guarded approach towards RTAs and was initially engaged in only a few bilateral/regional initiatives, mainly through Preferential Trading Agreement (PTA) like the Bangkok Agreement (signed in 1975) to exchange tariff concessions in the ESCAP region, the Global System of Trade Preferences (GSTP – signed in 1988) to exchange tariff concessions among G-77 member countries, and the SAARC PTA (SAPTA – signed in 1993) to liberalise trade in South Asia. However, these engagements achieved limited results in terms of increasing trade volumes with the member countries. Recognizing that RTAs would continue to feature permanently in world trade, India got engaged with its trading partners/blocs with the intention of expanding its export market since early part of this decade and began concluding, in principle agreements to move, in some cases, towards Comprehensive Economic Cooperation Agreements (CECA) which covers FTA in goods, services, investment and identified areas of economic cooperation.

FTAs/PTAs under Negotiation:

S. No.	Name of the Agreement	Status
1	India - Japan CEPA	Negotiations completed. The proposed agreement covers the areas of Goods, Services, Investment, Intellectual Property Rights, SPS/TBT.
2	India - EU BTIA	Negotiations launched on 28th June 2007 in the areas of Goods, Services, Investment, Sanitary and Phyto-sanitary Measures, Technical Barriers to Trade, Trade Facilitation and Customs Cooperation, Competition, IPR & GIs. Etc Eleven rounds of negotiations held till date
3	India - ASEAN CECA – Services and Investment Agreement	Negotiations on Trade in Services and Investment are under way. 9 meetings of Negotiating Groups have been held so far. Negotiations targeted to conclude by March 2011.
4	India – Sri Lanka CEPA	FTA in goods implemented from March 2000. Negotiations on Investments and Services underway.
5	India - Thailand CECA	Early Harvest Scheme on 82 items implemented. Meeting of the Trade Negotiating Committee are now being resumed. Next meeting scheduled in Dec 2010.
6	India - Malaysia CECA	Negotiations concluded. CECA is expected to be signed by January 2011 and implemented with effect from 1st July, 2011.
7	India - Mauritius CECPA	Negotiations are at a standstill since the tenth round held on October, 2006.
8	India EFTA BTIA	6th Round of negotiations were held during Nov 11-12, 2010. Next round expected to take place in Feb. 2011
9	India - New Zealand FTA / CECA	Three rounds of bilateral negotiations held so far.
10	India –Israel FTA	First Round of negotiations took place in May 26, 2010.
11	India - Singapore CECA	Second review launched in May, 2010. Target to be completed by Mid 2011.
12	India - SACU PTA	4th round of negotiations held in Oct 2009 in New Delhi.
13	Indian Mercosur PTA	The PTA is being expanded by widening product coverage and deepening preferences. Second meeting of Joint Administrative Committee on India-Mercosur PTA took place in June 2010.
14	India – Chile PTA	The PTA is being expanded by widening product coverage and deepening preferences. Second meeting for expansion of the India-Chile PTA took place in August 2010.
15	BIMSTEC CECA	18 meetings of the Trade Negotiation Committee (TNC) have taken place. Texts of the agreements on trade in goods, customs cooperation and trade facilitation have been finalized. Negotiations on the agreements on service and investments are continuing.
16	India - GCC Framework Agreement	The 2nd round of Negotiations held in September, 2008.
17	India – Canada FTA	Inaugural round of negotiation took place in Nov 2010

FTAS in Pipeline:

S. No.	Engagement	Status
1	India - Australia	JSG Report submitted in May 2010.
2	India - Indonesia	JSG Report submitted in Sept 2009. Note sent to PMO for consideration of the TERC to initiate the negotiations
3	India – Turkey FTA	The third meeting of the JSG was held in Delhi in the 2nd half of October 2010. During this meeting discussions were held on Chapters on Goods, Services, and Investments.
4	India - Egypt FTA	Revised proposal for setting up of a JSG to examine the feasibility of an FTA under preparation.
5	India - Russia	4th Joint Task Force (JTF) meeting held in Moscow, onMay 16-17, 2010 . Fifth meeting of the JTF to be held in Oct 2010
6	Trilateral FTA between India-MERCOSUR – SACU	Trade Ministers of India and the member countries of MERCOSUR and SACU met in Geneva on 30th November 2009 to explore the possibility of a Trilateral Preferential Trade Agreement.
7	India - China	JTF report finalized in October 2007. Internal decision not to proceed with the FTA
8	Indian Ocean Rim-Association for Regional Cooperation	India opposed participation in the proposed PTA on the grounds that India has separate trade agreements with most IOR-ARC members.