8/8/2019 GBM IEI (1)
1/28
International EconomicIntegration: Its effect on
the indian EconomySiddharth Biswas, Nidhi Sahadeva, Manisha Soni, Abhilasha Yadav n
priyanka priya
8/8/2019 GBM IEI (1)
2/28
Outline
Brief Description about the economicintegration.
Different Economic integrations with India. Benefits to India from
SAARC
SAFTA
BRIC ISFTA
8/8/2019 GBM IEI (1)
3/28
8/8/2019 GBM IEI (1)
4/28
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.
8/8/2019 GBM IEI (1)
5/28
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
8/8/2019 GBM IEI (1)
6/28
Contd
Comprehensive Economic Partnership Agreement(CEPA) with
South Korea, Japan, Sri Lanka, Thailand , Malaysia.
EU India FTA.
8/8/2019 GBM IEI (1)
7/28
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
8/8/2019 GBM IEI (1)
8/28
Agriculture and Rural advancement.
Economic and cultural
Biotechnology
Energy
Environment
SAARC: Areas of Cooperation
8/8/2019 GBM IEI (1)
9/28
SAARC: Contd
8/8/2019 GBM IEI (1)
10/28
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.
8/8/2019 GBM IEI (1)
11/28
Country-wise Share (%) in Intra-SAARCExports in 2008
Bangladesh
Bhutan
India
Maldives
Nepal
PakistanSri Lanka
8/8/2019 GBM IEI (1)
12/28
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
8/8/2019 GBM IEI (1)
13/28
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.
8/8/2019 GBM IEI (1)
14/28
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.
8/8/2019 GBM IEI (1)
15/28
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%.
8/8/2019 GBM IEI (1)
16/28
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.
8/8/2019 GBM IEI (1)
17/28
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.
8/8/2019 GBM IEI (1)
18/28
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 $1.8 trillion, & will cover
investment & services, in addition to trade in goods.
Indias tea imports are low, but had increased significantly until FY2005.
Quantitative restrictions on tea imports were removed from 2001.
Indias tea imports are estimated to have declined significantly from 31.8 mkgsin FY2005 to around 18.7 mkgs in FY2006.
But from 2003-2008 the tariff rate significantly higher comparative to other
SAARC countries.
8/8/2019 GBM IEI (1)
19/28
ISFTA: its effects. According to India-Sri Lanka Free Trade Agreement (ISFTA) which was
signed in 1998, Sri Lankas exports to India increased at an annual rate of
60% during the period 2000-2005 & reached a peak of US$ 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.
8/8/2019 GBM IEI (1)
20/28
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.
8/8/2019 GBM IEI (1)
21/28
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.
8/8/2019 GBM IEI (1)
22/28
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.
8/8/2019 GBM IEI (1)
23/28
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).
8/8/2019 GBM IEI (1)
24/28
8/8/2019 GBM IEI (1)
25/28
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
8/8/2019 GBM IEI (1)
26/28
8/8/2019 GBM IEI (1)
27/28
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.
8/8/2019 GBM IEI (1)
28/28
Thank You