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International EconomicIntegration: Its effect on

the indian EconomySiddharth Biswas, Nidhi Sahadeva, Manisha Soni, Abhilasha Yadav n

priyanka priya

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Outline

Brief Description about the economicintegration.

Different Economic integrations with India. Benefits to India from

SAARC

SAFTA

BRIC ISFTA

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Overview

Economic integration refers to trade unificationbetween different states by the partial or full abolishingof customs tariffs on trade taking place within theborders of each state.

Objective-An increase of welfare of the membercountries.

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Indias Economic Integrations

and FTA SAARC( founded in 1985 )

South Asian Association for Regional Cooperation Objective- economic, technological, social, and cultural

development emphasizing collective self-reliance.

BRIC:an economic block ( trading association)

BIMSTEC (Bangladesh, India, Myanmar, Sri Lanka,Thailand Economic Co-operation).

ASEANIndia Free Trade Area (AIFTA) SAFTA( South Asian Free Trade Area )

India-Gulf Cooperation Council (GCC) Free Trade Agreement

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Contd

Comprehensive Economic Partnership Agreement(CEPA) with

South Korea, Japan, Sri Lanka, Thailand , Malaysia.

EU India FTA.

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INDIA'S TRADE AGREEMENTSAT AGLANCE

Existing Ongoing FTAs /PTAs underStudy and

Consideration

Bankok AgreementGlobal System of TradePreferences (GSTP)

SAARC Preferential TradingAgreement (SAPTA)India-Sri Lanka FTAIndia - Thailand FTAIndia Singapore ComprehensiveEconomic Cooperation (CECA)Indo-Nepal Trade TreatyIndia-Mauritius PTA

India-Chile PTA

Indo-ASEAN CECASouth Asian Free TradeAgreement (SAFTA)

BIMSTEC (Bay of BengalInitiative for Multi-SectoralTechnical & EconomicCooperation)India - MERCOSUR PTA

Gulf Cooperation Council (GCC)ChinaSouth Korea

JapanMalaysiaPakistanSouthern African Customs Union(SACU)EgyptIsraelRussia

Australia

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Agriculture and Rural advancement.

Economic and cultural

Biotechnology

Energy

Environment

SAARC: Areas of Cooperation

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SAARC: Contd

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SAARC Association and effects India now is expected to play an increasingly important

role in both regional & global economic affairs.

While estimates of intra-SAARC trade varies, it is fair toassume that the figure touched close to $550 million in2009.

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Country-wise Share (%) in Intra-SAARCExports in 2008

Bangladesh

Bhutan

India

Maldives

Nepal

PakistanSri Lanka

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Inward FDI Flows in South Asia (USD Mn)

0

10,000

20,000

30,00040,000

50,000

60,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

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GCC-gulf cooperation council Trade with India reached $64 billion in 2009, much higher than

expected.

Presently India imports crude oil, plastic, coal and iron steel.

Whereas GCC imports rice, tea, fabrics, cotton and wide

variety of machinery.

India's IT products and services export to the GCC is growing at

above 30% rate annually.

GCC investors can also make use of their capability build up in

related high profit sectors like commercial real estate, hotel

construction in India.

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Cont

India is the third largest investor after UK and Japan, constituting

11% of total FDI flow into the country.

India meets 70% of its energy needs through imports and GCC has

been the principal oil source for India.

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SAFTA(South Asian Free Trade Area)

Zero customs duty on the trade of practically all products in theregion by end 2016.

Enhancement of foreign investment among Saarc nations

Free trade fuels economic growth, investment, creates jobs,and raises incomes.

World Bank has estimated that it has lifted more than 300

million people out of poverty.

India has the largest share in total intra-SAARC exports, i.e.,74.4%.

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Though in terms of FDI inflows to the region, there has been

significant improvement (It increased by 40% in 2008 as

compared to 2007), around 80%of to goes to India.

In terms of intra-regional FDI, India is the largest investor in

South Asia.

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AIFTA

The formalization of ASEAN-India Free Trade Agreement (AIFTA) covering the

goods sector marks an important step towards Indias deepening trade links with

its partners in the Asian region.

There are three sets of tariff reduction schedules. For the first set of products in

the category, tariffs would be reduced by India, Brunei Darussalam, Indonesia,

Malaysia, Singapore, Thailand to 5% by 2016.

While for the second set of products, tariffs would be eliminated by 2019.

Tariffs on 5 products, viz. crude palm oil, coffee, black tea, pepper, which have

been in the much opposition to the AIFTA, particularly from Kerala, have been

included in the category of Special Products.

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Contd Tariffs on these products would be reduced by one-half from the level prevailing

in 2008 by 2019 with the exception of pepper, which would see the level of tariff

protection come down by around 27% during the same period.

The ASEAN-India free trade area is expected to create a large market of 1.5

billion people, with a combined present GDP of $1.8 trillion, & will cover

investment & services, in addition to trade in goods.

Indias tea imports are low, but had increased significantly until FY2005.

Quantitative restrictions on tea imports were removed from 2001.

Indias tea imports are estimated to have declined significantly from 31.8 mkgsin FY2005 to around 18.7 mkgs in FY2006.

But from 2003-2008 the tariff rate significantly higher comparative to other

SAARC countries.

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ISFTA: its effects. According to India-Sri Lanka Free Trade Agreement (ISFTA) which was

signed in 1998, Sri Lankas exports to India increased at an annual rate of

60% during the period 2000-2005 & reached a peak of US$ 566 in 2005.

Much of the increase in trade was based on Copper & Vanaspathi

(vegetable oil). These accounted for over half of the total exports to India by

2005.

The export of these products increased not necessarily due to Sri Lanka

having comparative advantage in the production but due to tariff arbitration

by Indian manufacturers who invested in Sri Lanka.

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Contd Trade disputes led to India restricting the volume of

vanaspathi imports by imposing quotas & canalization.

As a result, Vanaspathi exports from Sri Lanka to Indiaceased. Copper exports were also scrutinized.

With price regulations imposed by India to prevent the misuseof rules of origin criteria governing the ISFTA, copper exportsfell sharply from US$ 145 million in 2005 to a mere US$ 13

million in 2008.

As a result of low exports of copper & vanaspathi in the lastfew years, Sri Lankan exports to India fell to 5% from a peakof 9% in 2005.

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Contd.. As for imports in Sri Lanka from India, the numbers have increased steadily

from 8.5% in 1995 to 17% in 2005 to 25% in 2008.

The major imports such as vehicles & vehicle parts, mineral fuels & oils areunder Sri Lankas negative list, & products such as textiles &pharmaceuticals items have duty free access under the general tariff regimeof Sri Lanka.

This increase in Indian investment is a visible indirect benefit of the ISFTA.

India is now countrys second largest investor, investing US$ 126 million in

2008, second only to Malaysia( which invested US$ 150 million in 2008).

The number of projects too increased from 18 in 1999 to 83 in 2006, withmajority of recent Indian investment being in telecommunications, retailsservices, energy, hospitality trade & air transport services.

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BRIC: its effects.. BRIC Nations, the annual income of a threshold of $ 3000, will

double within three years & reach 800 million people within adecade.

India scores below the other three BRIC nations, & is currentlyranked 110 out of a set of 181 countries.

Under BRIC if we assume that if India reaches the stated goal of 5%

share of global trade by 2020 & maintains this through 2050.

Then, it could be exporting $157 bn-worth of goods & services toChina by 2020.

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Indias has relied on domestic markets more than exports,

consumption more than investments, service more than

industry, & high tech more than low skilled manufacturing.

With current growth rates & implement further reforms, the

Indian economy could be the worlds fourth largest by 2030 &

second largest by 2050, (Standard Bank).

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Projected Economic Growth

Country/Group Name 2008 2009 2010 2011 2012 2013

World 3.9 3.0 4.2 4.7 4.8 4.7

Major advanced economies (G7) 1.2 0.1 1.7 2.7 2.5 2.2

Newly industrialized Asian economies 4.0 3.2 4.7 4.9 4.9 4.9

Emerging and developing economies 6.9 6.0 6.7 6.9 6.9 6.9

Brazil 5.2 3.5 4.4 4.0 4.0 4.0

China 9.7 9.2 9.8 10.0 10.0 10.0

India 7.9 6.9 7.7 7.9 7.9 8.0

Russia 7.0 5.5 6.0 6.0 5.7 5.5

Estimated economic growth rates - GDP at constant

prices annual % change 20082013

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BRIC: India wants US jet fighters India is turning to US defense products to

secure its borders. The desire for a closer

defense partnership comes as New Delhiconsiders an US$11B deal to buy 126multi-role combat fighter jets to rearmIndias out-of-date air force and boostdefense capabilities against Pakistan andChina.

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Thank You