International Trade in India

News Related to International Trade in India

Business outline for India

Main Industry Sectors

India is the world's fourth agricultural power. Agriculture contributes to about 20% of the GNP and employs close to two-thirds of the active population. The main agricultural products are: wheat, millet, rice, corn, sugar cane, tea, potatoes and cotton.  India is also the second producer of cattle, third producer of sheep and fourth in fishing production. 

Coal is the country's main energy source (India is the third largest world producer of coal). In the manufacturing industry, textile plays a predominant role. In terms of size, the chemical industry is the second largest industrial sector (12% of the GNP).

The services sector is the most dynamic part of the Indian economy.  It contributes to more than half of its GDP, and it does not employ but a third of its active population.  The software sector, which grows rapidly, is boosting the export of services and modernizing the Indian economy.

Economic Overview

India is amongst the world's 10 largest economies. The average GNP growth rate was 9.4% in average over the period 2006-07. This growth rate dropped during the global recession, the crisis affected India by the increase of risk aversion, a withdrawal of foreign capital and the drop of global demand.  However, India was a country that quickly got out of the crisis, its growth was stimulated by private consumption and by the state's expenditures.  From 5.7% in 2009, the growth has jumped up and it is expected to reach 9.7% in 2010 according to the estimations. 

The government has established as its priorities to continue the reforms that will allow to sustain the growth, to modernize the economic structure and to fight against poverty.  Programs concerning jobs, health, education, infrastructures and rural communities have also been announced.  The pursuit of a re-balance in public finance is also projected, the objective is to bring the deficit to 5.5% of the GDP. 

India remains a poor country: the GDP per capita is low, almost 25% of the population still lives below the poverty line and the inequalities are very strong.

FDI in Figures

Thanks to its many assets, especially a high specialization in services, with skilled, English-speaking and inexpensive labor force, and a potential market of one billion inhabitants, India is a country that welcomes more and more foreign investment.  The inflow of FDI in India registered a record of  USD 40 billion in 2008, and the FDI has remained, since then, very stable.  In the context of the global economy crisis, the foreign investors tried to limit their exposition in the surging markets.  However, there was not a decline of FDI in India.  According to the UNCTAD report, India is placed in third position in terms of FDI inflows in 2009.

FDI Government Measures

The government has set up tax and non-tax incentives to establish new industrial entities in specific sectors, which include energy, ports, highways, electronics and software. The government has also created special areas dedicated to export, called export-processing zones (EPZs) or special economic zones (SEZs), to encourage foreign investment.
The central government development banks and state industrial development banks offer medium to long-term loans and sometimes invest their own capital in new projects.
However, the government has set sector-specific ceilings on foreign assets in certain industries, such as basic and cellular telecommunications services, banking, retail and civil aviation.
For more details visit: Investment Commission of India.

Country Strong Points

- A three-tiered democratic system that ensures a stable polical environment;
- a well developed administration and an independent judicial system;
- a vast geography making India a repository of resources;
- an unparallel resource of an educated, hard-working and skilled work force, which includs engineers, management personnel, accountants and lawyers;
- a ever growing consumer base making it one of the world's largest markets for manufactured goods and services;
- a dynamic and robust financial system consisting of a comprehensive banking network, a number of financial institutions both at the national and State levels as well as a vibrant financial market;
- an economy that will continue to grow despite the international economic crisis.

Country Weak Points

- The corruption (particularly at the federal level)
- political pressures;
- restricted FDI in certain sectors;
- the weakness of infrastructures;
- inadequate security & safety in certain areas.

Foreign Trade Overview

India was a protectionist state for a long time, but the country has become progressively more open to international trade.  It has recently signed free trade agreements with South Korea and the ASEAN, and has entered into negotiations with several partners (EU, MERCOSUR, Australia, New Zealand, South Africa). 

India recorded a high commercial deficit due to the price rise of raw materials which increased the import invoices.  In regards of exports, they have recorded a lower progression during the last recent years due to the rise of the rupee in relation to the dollar (most of the exports are drawn up in dollars) and the decline of the global demand.  During the economic crisis, exports dropped at a slower rhythm than imports, creating a reduction of the commercial deficit. 

The main trade partners of India are the European Union, the United Arab Emirates, China and the United States.