Trends in Indian Exports

1. Trends in Indian Exports Course : Money, Banking & Public Finance Instructor : Dr. Prashanta Panda By PresenterMedia.com

2. Content Layout Topics 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

3. 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.

4. Special Focus Initiatives (SFI) *The Indian scenario post 1991 TECHNOLOGY UPGRADATION EPCG 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 .

5. 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 Council 2. Indian Institute of Foreign Trade 3. Indian Institute of Packaging 4. Export Promotion Councils, Commodity Boards and Authorities 5. Federation of Indian Export Organizations 6. Indian Council of Arbitration 7. India Trade Promotion Organization Institutional support Assistance from Govt. of India Steps taken to assist exporters

6. Indian Forex Reserves [ 1992- 2013 ]

7. Indian Exports [by value in INR billion] ( 1992 – 2013 )

8. Indian Oilmeal Exports Iran 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

9. Food & Agro products Leather products Gems & Jewellery Textiles Readymade Garments Chemicals & Pharmaceuticals Engineering Goods Minerals & Metals Electronic Goods & IT/Service sector Indian Export Distribution A Sectoral/Industry-wise approach

10. Sectoral Distribution of Indian Exports Source : DGCI&S, Ministry of Commerce

11. 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.

12. 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 5 th largest in terms of production, consumption, export and expected growth .

13. 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)

14. Still chewing Onions!

15. Leather & Leather Products

16. India is the 3 rd 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.

17. 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

18. 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 J ewellery 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 TRENDS in the Sector Market Characteristics

19. Reason for 90% Gold Imports

20. 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

21. Trends in Indian Textile Export Rupee depreciation as a tool for boosting exports Ready-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

22. IT & Services Industry

23. Geographical Distribution of Indian Exports Europe: Following Products are exported to Europe 1 ) Mineral Fuel 2 ) Jewellery and Gems 3 ) Coal 4 ) Electronics such as television, sound recorders and others 5 ) 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

24. 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

25. 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 .

26. 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 1 st ) India requires 9 export documents to be cleared, while China needs 8, with good practice economies like France needing 2 .

27. Trade Agreements 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

28. Trade Barriers Quantitative Restrictions Import/Export Prohibitions Import/Export Licensing Export Subsidies Labour/Environment Standards Health Standards

29. 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.

30. 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 as food preservative chemical from India  (known as TBHQ)- widely used in Chinese food industry. 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 .

31. 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. O nce 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.

32. 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.

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