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Annual Report 2010-2011
Commercial Relations and Trade Agreements

Trade diversification reflects an economy’s growing competitiveness resulting from its broadening productive base with processes getting more efficient, improving fundamentals, and its increasing willingness and capabilities to effectively integrate with the world economy. Asia and ASEAN region is India’s largest trading partner. During the period April- September 2010-11, Asia and ASEAN region accounted for about 58% of India’s trade (exports and imports). Europe and America, together, account for around 31% of India’s trade. Region – wise share of India’s Export and Import during April – September 2010-11 is shown in Chart 7.1 and Chart 7.2 respectively. India’s trade and the growth rate of India’s trade with major regions of the world are shown in Chart 7.3 and Chart 7.4 respectively.

I. Trade with Asia

a) South East Asia

ASEAN Region-General

India’s trade with ASEAN (Association of South East Asian Nations) countries viz. Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam stood at US$ 43.91 billion during the year 2009-10. Traditionally, India has an adverse balance of trade in the region. The major destinations for India’s exports in the region are Indonesia, Malaysia, Singapore, Thailand and Vietnam, while the major sources of imports are Indonesia, Malaysia, Singapore, Thailand and Myanmar.

Major Commodities of Export & Import – ASEAN

The Principal Commodities of export include Petroleum Products, Oil Meals, Gem and Jewellery, Electronic Goods, Cotton Yarn/RMG Cotton, Machinery and Instruments, Primary/Semi-Finished Iron & Steel, Transport Equipments, Marine Products, Drugs/Pharma, Inorganic/Organic/ Agro Chemicals, Dyes/Intermediates, etc.

The major commodities imported from this region are Coal/Coke/Briquettes, Vegetable oils, Petroleum Oils, Electronic Goods, Organic Chemicals, Machinery except Electrical Machinery, Professional Instruments, Wood and Wood Products, Non-Ferrous Metals, Metalifers Ores and Metal Scrap, etc.

Trade Promotion Activities

India currently has Joint Trade Committees with Brunei, Myanmar, Thailand and a Joint Working Group on Trade & Investment with the Philippines.

India has established an ASEAN India Business Council (AIBC). India also has Joint Business Councils (JBC), established at the business level, with Singapore, Malaysia, Indonesia, Thailand, Vietnam and Philippines. Meetings of JBCs are held between the business communities of both sides to discuss a wide range of issues of mutual interest for expansion of bilateral trade.

An India-ASEAN Business Fair is being organized in New Delhi from 2nd March to 6th March, 2011.

Engagements with ASEAN

In pursuance of India’s ‘Look East Policy’, a continuous dialogue is maintained with the ASEAN and the countries of South-East Asia. Summit level engagements, Ministerial meetings and official level discussions are held in order to fulfill the ‘Look East Policy’ agenda.

India and the ASEAN have signed the Trade in Goods Agreement under the broader framework of Comprehensive Economic Cooperation Agreement between India and the ASEAN, on 13th August 2009. Table 7.2 indicates the dates of enforcement of the Trade in Goods Agreement with respect to India and other countries. In the case of remaining two countries, it will come into force after they complete their internal requirements. The Agreement is expected to further boost bilateral trade and investment between India and the ASEAN. India and the ASEAN are currently negotiating Agreements on Trade in Services and Investment which are targeted to be concluded by March, 2011.

The Union Minister for Commerce and Industry, Shri Anand Sharma with the Trade/Commerce Ministers and Officials from the ASEAN Member States at the 8th AEM-India Consultations, in Da Nang, Vietnam on August 27, 2010.

Shri Anand Sharma, Commerce and Industry Minister exchanging the India-Malaysia Comprehensive Economic Cooperation Agreement with his Malaysian counterpart, Mr Mustapa Mohamed on 18th February, 2011 at Kuala Lumpur in the presence of Prime Minister of Malaysia, Mr Mohd Najib Tun Abdul Razak.

Table: 7.2
Trade in Goods Agreement between India and ASEAN countries

S. No Countries Date of coming into force
1
1. Malaysia, Singapore, Thailand 1st January 2010
2. Vietnam 1st June 2010
3. Myanmar 1st September 2010
4. India and Indonesia 1st October 2010
5. India and Brunei Darussalam 1st November, 2010
6. Lao PBR 24th January, 2011

India and Malaysia have concluded negotiations towards a Comprehensive Economic Cooperation Agreement (CECA). An agreement has been signed by both countries envisaging that the CECA would be implemented with effect from 1st July, 2011. Both countries are likely to sign the CECA in early 2011.

India and Indonesia set up a joint feasibility study of a Comprehensive Economic Cooperation Agreement (CECA) between the two countries in 2007. The Joint Study Group has submitted its Report in September, 2009.

Negotiations for the India –Thailand Free Trade Agreement are underway and both sides have agreed to conclude a comprehensive Free Trade Agreement including Trade in Goods, Services, Investment and Economic Cooperation as a ‘single undertaking’ by 2011.

Trade with Australia and New Zealand

India’s trade with Australia and New Zealand showed robust growth in recent years.

The principal commodities of export to Australia are diamonds and diamond jewellery, iron ore, wind power generating sets, refrigerators, cars, pharmaceutical products, electricity meters etc. Important items of import from Australia are gold, coking coal, copper ores, petroleum and LNG, chickpeas, alumina, wool etc.

The Principal Commodities of exports to New Zealand are parts of aeroplanes/helicopters/air craft engines, light oil and preparation, non-industrial diamonds fluorides of aluminium, zinc (not alloyed) etc. Important items of import from New Zealand are coal, wood, newsprint in rolls of sheets, apples, aluminium waste & scrap and wool etc.


Trade Promotion Activities

India has Joint Trade Committees with New Zealand, Fiji and a Joint Commission with Australia at the Ministerial level.

India has Joint Business Councils (JBC), established at the business level, with New Zealand and Australia. Meetings of JBCs are held between the business communities of both sides to discuss a wide range of issues of mutual interest for expansion of bilateral trade.

India and Australia set up a joint feasibility study of a Free Trade Agreement (FTA) between the two countries in 2008. The Joint Study Group has submitted its Report in May, 2010.

India and New Zealand have started negotiations for a Comprehensive Economic Cooperation Agreement (CECA)/Free Trade Agreement (FTA) between the two countries. Three rounds of negotiations between the two countries have been held so far.

B) North East Asia

India’s trade with the North East Asian region comprising of China, Japan, Republic of Korea, Hong Kong China, Taiwan China, Democratic People Republic of Korea, Macao and Mongolia stood at US$ 82.39 billion during 2009-10, which is a decline of 1.9% over the previous year. Exports to the North East Asia region were of the order of US$ 28.9 billion during 2009-10, registering a growth of 13.5% over the last year. However, imports from the region declined by 8.49% to US$ 53.49 billion during 2009-10. India’s major trading partners in the region are China, Japan, Hong Kong and Republic of Korea. Trade with North East Asian countries from 2006-07 to 2010-11 (April-June) is given in the Table 7.4:

Table: 7.4
Trade with North East Asian Countries

(Value in US$ million)

Year Exports Imports Total Trade Balance of Trade
2006-07
19359.8
31493.8
50853.6
(-) 12134.0
2007-08
26450.0
44755.4
71205.4
(-) 18305.4
2008-09
25449.1
58455.9
84005.0
(-) 33006.8
2009-10
28904.5
53491.5
82396.0
(-) 24587.0
2010-11 (April-Sept)*
15575.4
33001.9
48577.3
(-) 17426.5

Major items of export to the region are gems and jewellery, iron ore, Primary and Semi-finished Iron & Steel, Plastic and Linoleum Products, Cotton Yarn, Fabric Made Ups and Marine Products. Major items of import include Electronic Goods, Machinery, Organic Chemicals, pearls, precious and semi-precious Stones, Coal, Coke, Briquettes, Iron & Steel and Transport Equipment.

 

The Union Minister for Commerce and Industry, Shri Anand Sharma
with the Chinese Premier, Mr. Wen Jiabao, at the India-China Business
Co-operation Summit, in New Delhi on December 15, 2010.

China and India have agreed to endeavour to raise the volume of bilateral trade to US$ 100 billion by 2015. Trade with China has already crossed US$ 42.4 billion during 2009-10. Major items of Indian exports to China include iron ore, primary and semi-finished iron & steel, Plastic & Linoleum Products, Processed Minerals, Inorganic/Organic/agro Chemicals, Minerals and Ores, Drugs, Pharmaceutical and Fine Chemicals. Major imports from China include Electronic Goods, Coal, Coke, Briquettes, Organic Chemicals, Machinery and Medicinal & Pharmaceuticals Products.

Indian exports to Japan registered a growth of 19.9%, while imports from the country registered a decline of 14.6% during 2009-10 over that of the previous year. Major items of export to Japan include gems and jewellery, marine Products, Iron Ore, Petroleum, Crude & Products and Oil Meals. Major items of import from Japan are machinery, electronic Goods, Transport Equipment, Iron and Steel, Professional Instruments and Organic Chemicals. During the Japanese Prime Minister’s visit to India in August 2007, it was agreed that the two countries would work towards achieving an annual trade volume of US$ 20 billion by 2010. The actual trade flow during 2009-10 was US$ 10.36 billion.

Exports to Hong Kong, China accounted for 4.3% of India’s overall exports during 2009-10. During 2009-10 India’s exports to Hong Kong, China amounted to US$ 7.8 billion registering a growth of 18.5% over the last year. Imports from Hong Kong, China in 2009-10 amounted to US$ 4.7 billion, recording a decline of 26.6% per cent over the previous year. The major items of exports to Hong Kong are gems and jewellery, finished leather, electronic Goods, Marine products, Natural Silk Yarn, Cotton Yarn Fabrics Made Ups, Plastic & Linoleum Products and Petroleum: Crude & Products. The share of Gems and Jewellery in India’s exports to Hong Kong is about 80%. The major items of imports are Pearls, Precious & Semi-Precious Stones, Electronic Goods, Machinery, Gold, Silver and Cotton Yarn & Fabrics.
Indian exports to the Republic of Korea during 2009-10 amounted to US$ 3.4 billion registering a decline of 13.4% over the last year while Imports from Korea during 2009-10 amounted to US$ 8.5 billion registering a decline of 1.1%. Major items of exports are Petroleum Products, Cotton Yarn, Fabrics, Made Ups, Oil Meals, Minerals & Ores, Iron Ore, Primary and Semi-Finished Iron & Steel, Non-Ferrous Metals, and Drugs, Pharmaceuticals & Fine Chemicals. Major items of imports are Electronic Goods, Machinery, Transport Equipment and Iron and Steel.

Box: 7.1
Outcome of Chinese Premier’s Visit during 15-17 December, 2010
  1. Positively viewed the growing opportunities in the economic relationship and agreed to establish a Strategic Economic Dialogue to enhance macro-economic policy coordination, to promote exchanges and interactions and join hands to address issues and challenges appearing in economic development and enhance economic cooperation.
  2. Set a new bilateral trade target of USD 100 billion by 2015. The two sides agreed to take measures to promote greater Indian exports to China with a view to reduce India’s trade deficit. This includes support for Indian participation in China’s national and regional trade fairs, advancing of trade facilitation, enhancing exchange and cooperation of pharmaceutical supervision, stronger relationships between Chinese enterprises and Indian IT industry and speedier completion of phyto-sanitary negotiations on agro products.
  3. Agreed to expand cooperation in infrastructure, environmental protection, information technology, tele communications, investment and finance on a priority basis to draw on each other’s strengths and pursue mutual benefit and win-win results. India welcomed Chinese enterprises to invest and participate in India’s infrastructure development such as in roads, railways and in the manufacturing sector. The two sides agreed to encourage greater mutual investment and project contracting cooperation between businesses of the two countries, appropriately handle economic and trade frictions and differences and jointly oppose protectionism in all forms. They constituted an India-China CEO’s Forum to deliberate on business issues and make recommendations on expansion of trade and investment cooperation.
  4. Concluded a Memorandum of Understanding between the Reserve Bank of India and China Banking Regulatory Commission to increase banking and financial cooperation. India and China also agreed to grant permission to the banks of the other country to open branches and representative offices. Modalities will be worked out by the concerned authorities.

Trade Negotiations

a) India - Korea CEPA

A Comprehensive Economic Partnership Agreement (CEPA) between India and Republic of Korea was signed on 7th August, 2009. The CEPA came into force from 1st January, 2010. The first meeting of the Joint Committee at Ministerial level to review the implementation of CEPA was held on 20th January, 2011 in New Delhi.

b) India - Japan CEPA

A Comprehensive Economic Partnership Agreement (CEPA) between India and Japan was signed on 16th February, 2011.

c) India-China Joint Task Force (JTF) for RTA Feasibility

This Joint Task Force (JTF) of India and China was constituted to study the feasibility and the benefits of a possible China-India Regional Trading Arrangement (RTA). The JTF finalized its report in its sixth meeting held on 21st and 22nd October, 2007. The Prime Minister visited China during 13-15 January, 2008 and discussed the findings of this report with the Chinese Prime Minister. Both the Prime Ministers decided to refer the report for consideration to the Joint Economic Group (JEG) headed by the Trade and Commerce Ministers of the two countries. The report of India-China JTF was considered by the two Commerce Ministers at the 8th Session of India-China JEG held on 19th January, 2010 in Beijing. No decision was taken on the recommendations of the JTF.

I. Bilateral Trade Relations with countries in South Asia and Iran

(i) Afghanistan

India & Afghanistan signed the Preferential Trade Agreement on March 6, 2003 in New Delhi. This agreement would remain in force till either party gives to the other a notice for its termination. Under the Agreement, India has granted preferential tariff for 38 products from Afghanistan including raisins, dry fruits, fresh fruits and Spices whereas Afghanistan granted preferential tariff to 8 items from India including tea, Antisera and Medicines, Refined Sugar, Cement Clinkers and White Cement. Afghanistan was inducted as the eighth member of SAARC during the Fourteenth SAARC Summit held in New Delhi on 3-4 April 2007. India’s trade with Afghanistan has increased substantially from US$ 201.09 million in 2005-06 to US$ 588.74 million in 2009-10. The trend in trade between India and Afghanistan is given in Table 7.5.

Table: 7.5
Bilateral Trade with Afghanistan

(Value in US$ million)

Year Exports Imports Total Trade Balance of Trade
2005-06
142.67
58.42
201.09
84.25
2006-07
182.11
34.37
216.48
147.74
2007-08
249.21
109.97
359.18
139.24
2008-09
394.23
126.24
520.47
267.99
2009-10
463.55
125.19
588.74
338.36
2009-10 (April-Sept)
252.67
39.99
292.66
212.68
2010-11(April-Sept)*
172.03
35.27
207.30
136.75

* Provisional
Source: DGCI&S

(ii) Bangladesh

The Bilateral Trade Agreement between India and Bangladesh, renewed from time to time, provides for expansion of trade and economic cooperation, making mutually beneficial arrangement for the use of waterways, railways and roadways, passage of goods between two places in one country through the territory of the other, exchange of business and trade delegations and consultations to review the working of the Agreement at least once a year. The 7th meeting of the Joint Working Group (JWG) on trade between India and Bangladesh was held on May 6-7, 2010 at Dhaka in Bangladesh where the two sides had a detailed discussion on various bilateral trade issues. In the JWG meeting Indian side expressed its readiness to assist Bangladesh in strengthening the Bangladesh Standards and Testing Institute (BSTI). The Indian side informed that it is upgrading the 14 Land Customs Stations/Integrated Check Posts on India- Bangladesh Border at an estimated cost of 125 US$ million. The second meeting of Sub-group on improving of infrastructure was held in October 2010. The subgroup made recommendations for improving the infrastructure at Land Customs Stations on India-Bangladesh Border. A Memorandum of Understanding (MoU) on establishment of Border -Haats at Baliamari-Kalaichari (Pillar No. 1072) and Lauwaghar-Balat (Pillar No. 1213) at Meghalaya, India –Bangladesh border was signed on 23.10.2010 during the visit of Mr. Muhammad Khan, Commerce Minister, Bangladesh. Following commodities will be allowed to be traded in the Border Haats :

  1. locally produced vegetables, food items, fruits, spices;
  2. minor local forest produce e.g. bamboo, bamboo grass, and broom stick but excluding timber;
  3. products of local cottage industries like Gamcha, Lungi etc.;
  4. small locally produced agriculture household implements e.g., dao, plough, axe, spade, chisel etc.;
  5. locally produced garments, melamine products, processed food items, fruit juice, etc.

The commodities will be allowed to be exchanged in the designated Border Haats in local currency and/or on barter basis. Each individual will be allowed to purchase only as much of the locally produced commodities which are reasonable for bona-fide personal/family consumption. The estimated value of such purchases shall not be more than the respective local currency equivalent of US$50 (fifty) for any particular day.

Two agreements on Standard Operating Procedures (SoPs) namely (i) Procedure for monitoring of entry/exit of Nepalese vehicles through Phulbari- Banglabandha LCS and (ii) Procedure for monitoring of entry/exit of vehicles at Land Custom Station(LCS) on India-Bangladesh border were signed on 23.10.2010 during the visit of the Bangladesh Commerce Minister. India’s trade with Bangladesh has increased substantially from US$1791.39 million in 2005-06 to US$2688.43 million in 2009-10. The trend in trade between India and Bangladesh is given in Table 7.6.

(iii) Bhutan

The current Free Trade Agreement between India and Bhutan, namely ‘Agreement on Trade, Commerce and Transit’ was signed in New Delhi on 28th July, 2006 for a period of ten years with effect from 29th July, 2006. Under this Agreement India also provides transit facilities to landlocked Bhutan to facilitate its trade with third countries and movement of goods from one part of Bhutan to another through Indian Territory. The requirements of Bhutan are mainly met by imports from India. Commercial transactions are carried out in Indian Rupees and Bhutanese Ngultrum. India’s trade with Bhutan has increased substantially from US$187.94 million in 2005-06 to US$271.97 million in 2009-10. The trend in trade between India and Bhutan is given in Table 7.7.

iv) Iran

Iran has a strategically important location bordering Pakistan and Afghanistan and sitting atop the Persian Gulf and Hormuz Straits. Its rich deposits of oil and gas as well as other mineral resources, bolsters its important regional role. India’s core interest in the bilateral relationship with Iran includes its need for steady and undisrupted supply of crude oil and gas as well as acquisition of oil/gas fields for its energy security. Iran is also crucial for connectivity to Afghanistan and Central Asia. Iran is not a member of WTO, as on date. Hence, it is trying to enter into a number of FTAs and Preferential Trade Agreements (PTAs) with countries located in Asia, Africa and Europe.

India’s bilateral enagement with Iran may potentially be affected by the “Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010” which was signed into law by President Obama on July 1, 2010. The Act has broadened the scope of sanctionable activities to Iran’s energy and other sectors and has also sought to make sure that the sanctions are enforced. India’s trade with Iran has increased substantially from US$1890.81 million in 2005-06 to US$13394.02 million in 2009-10. The trend in trade between India and Iran is given in Table 7.8.

v) Maldives

The Bilateral Trade Agreement signed on 31st March, 1981 will remain progressively in force until it is modified or terminated by either country by giving three months’ notice to the other. The Agreement provides for Most Favoured Nation (MFN) treatment to each other in trade and merchant vessels, promotion of commercial and technical cooperation through exchange of delegations and participation in trade fairs and exhibitions and supply of essential commodities by Government of India to Government of Maldives on annual quota. All payments between India and Maldives are in freely convertible currency, subject to their foreign exchange regulations. India’s trade with Maldives has increased substantially from US$69.56 million in 2005-06 to US$83.49 million in 2009-10. The trend in trade between India and Maldives is given in Table 7.9.

vi) Nepal

A Treaty of Trade and the Agreement of Cooperation between the two countries was signed on 27th October, 2009 at Kathmandu, Nepal, by Shri Anand Sharma, Commerce & Industry Minister, and Shri Rajendra Mahato, Minister for Commerce & Supplies, Government of Nepal. The Treaty aims at improving bilateral trade between the two countries by increasing the mutually agreed points of trade, expansion in the list of items included for preferential trade, simplification of trade procedures, improving Nepalese supply capacities, provision of two level institutional mechanisms for problem resolution etc. An Inter-Governmental Committee (IGC) meeting on Trade, Transit and Cooperation to control unauthorised trade was held on 27-28 January 2010. The Indian delegation was led by Shri Rahul Khullar, Commerce Secretary. Both sides held detailed discussion on various bilateral issues. India’s trade with Nepal has increased substantially from US$ 1239.82million in 2005-06 to US$1985.92 million in 2009-10. The trend in trade between India and Nepal is given in Table 7.10.

vii) Pakistan

India and Pakistan have no formal trade agreement. India has granted MFN status to Pakistan but Pakistan is yet to reciprocate. Pakistan maintains a list of importable items from India, called Positive List, as notified from time to time. The present Positive List consists of 1938 items. Both countries have set up a Joint Study Group (JSG) at Commerce Secretary Level for adopting a strategy to boost trade and economic cooperation between the two countries. Apart from JSG, Commerce Secretary-level discussions on trade and economic cooperation are held within the framework of Composite Dialogue between the two countries.

Cross Line of Control (LOC) Trade from both Salamabad on the Srinagar-Muzaffarabad Highway and Chakkan-da-bagh on the Poonch Rawalkot axis from J&K on the Indian side to Chakoti and Rawalkote on the Pakistani side commenced from 21st October, 2008. A list of 21 items for trade was approved for trade from both sides. All these items have been allowed duty free passage. India’s trade with Pakistan has increased substantially from US$868.79 million in 2005-06 to US$1849.26 million in 2009-10. The trend in trade between India and Pakistan is given in Table 7.11.

Box: 7.2
Line of Control (LOC) Trade
Items of export to and import from Pakistan

Items for export from the Indian side are: Carpets, Rugs, Wall Hangings, Shawls And Stoles, Namdas, Gabbas, Embroidered items including crewel, Furniture Including Walnut Furniture, Wooden Handicrafts, Fresh Fruits and Vegetables, Dry Fruits including Walnuts, Saffron, Aromatic Plants, Fruit bearing plants, Dhania/Moongi/Imli and Black Mushrooms, Kashmiri Spices, Rajmah, Honey, Paper mache Products, Spring Rubberized Coir/Foam Mattresses/Cushion/Pillows & Quilts and Medicinal Herbs.

Items for export from the Pakistan side are: Rice, Jahnamaz and Tusbies, Precious Stones, Gabbas, Namdas, Peshawari Leather Chappals, Medicinal Herbs, Maize And Maize Products, Fresh Fruits and Vegetables, Dry Fruits including Walnuts, Honey, Moongi, Imli, Black Mushroom, Furniture Including Walnut Furniture, Wooden Handicrafts, Carpets and Rugs, Wall Hangings, Embroidered Items, Foam Mattresses, Cushions and Pillows, Shawls and Stoles.

viii) Sri Lanka

Sri Lanka has traditionally been an important export market for India. India-Sri Lanka Free Trade Agreement (ISLFTA) was signed on 28th December, 1998, which has been in operation since 1st March, 2000. Under this Agreement, both countries agreed to phase out trade tariffs from each other within a fixed time frame except for those items in the Negative List of each other. A Joint Study Group (JSG) was set up in April, 2003 to widen the ambit of ISLFTA to go beyond trade in goods to include services and to facilitate greater investment flows between the two countries. Report of JSG was submitted in October, 2003. Based on the recommendation and conclusion of the JSG, negotiations for a Comprehensive Economic Partnership Agreement (CEPA) were started in February, 2005 and concluded in July 2008, after 13 rounds of negotiations. On account of some reservations expressed by the Government of Sri Lanka, the Agreement could not be signed then.

After a gap of 2 years, both sides resumed discussions on implementation of issues of ISLFTA and agreed to take forward the process of signing a comprehensive agreement for economic cooperation. A Sri Lankan delegation led by the Director General, Commerce, Sri Lanka visited Delhi on 15-16 November 2010. As a follow up, an Indian delegation led by Joint Secretary, FT(SA) visited Colombo(Sri Lanka) on 23-24 December 2010 to review outstanding trade issues. Sri Lankan side has agreed to provide a revised draft framework for economic cooperation agreement after consultations with the stakeholders. It was also decided that different sub groups on pruning of negative lists, scheduling of investment and scheduling of services would work simultaneously and come out with the offers of the respective countries. India’s trade with Sri Lanka has marginally declined from US$ 2602.37 million in 2005-06 to US$ 2580.20 million in 2009-10. The trend in trade between India and Sri Lanka is given in Table 7.12.

III. South Asian Association for Regional Cooperation (SAARC)

South Asian Association for Regional Cooperation (SAARC), with India, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka as members, was established at the first SAARC Summit held on 4-8 December 1985. Afghanistan became its eighth member during the 14th SAARC Summit held in April 2007. India, Pakistan and Sri Lanka are categorized as Non-Least Developed Contracting States (NLDCSs) and Afghanistan, Bangladesh, Bhutan, Maldives and Nepal are categorized as Least Developed Contracting States (LDCSs).

The SAARC Preferential Trading Arrangement (SAPTA) provided a framework for exchange of tariff concessions and also for liberalization in para-tariff and non-tariff measures with a view to promoting trade and economic cooperation among the SAARC member countries. The Agreement on South Asian Free Trade Area (SAFTA) was signed during the Twelfth SAARC Summit held at Islamabad in January 2004 which came into force from 1st January 2006. SAFTA, inter alia, prescribes a phased Tariff Liberalization Programme (TLP) according to which all the member states would reduce their tariffs, at the MFN applied rate existing as on 1st January 2006, to zero to five percent within ten years of the agreement coming into force. This TLP would cover all tariff lines except those items kept in the Sensitive List by each country. With the SAFTA Agreement coming into force, there would be no more negotiations under SAPTA.

During the fourteenth SAARC Summit held in New Delhi on 3-4 April 2007 India, inter alia, unilaterally announced that before the end of 2007, India would allow the LDC countries of SAARC duty free access to its markets, and India would also further reduce the Sensitive List of SAFTA for these countries. In pursuance of this, India has notified tariff reductions to zero per cent for SAARC LDC countries under SAFTA, with effect from 1st January, 2008. India thus completed SAFTA TLP one year ahead of the stipulated three years from 1st January, 2006 for completion of TLP by the NLDCSs for LDCSs. India has also reduced its Sensitive List under SAFTA for these countries from 744 items to 480 items.

SAFTA Ministerial Council (SMC) consisting of Ministers of Commerce/Trade of the Member States is the highest decision making body of SAFTA and the SMC is supported by a Committee of Experts (COE) with nominees from member states. The fifth meeting of the COE and SMC was held on October 26- 27, 2009, and 28th October 2009 respectively at Kathmandu, Nepal.

India has developed a web based portal providing detailed information on current and updated import policies in respect of various products imported into India. It provides a one stop knowledge base for exporters in the SAARC region exporting different products to India. The portal also called the Compendium is freely accessible at the site address:-url:http://compendium.iift.ac.in/index.asp

The SAARC Agreement on Trade in Services (SATIS) was signed in the sixteenth SAARC meeting held in April 2010 at Thimpu in Bhutan. This marks the first step in expanding the scope of the SAFTA agreement which is essentially a goods agreement at present. The Sixth meeting of Expert Group on SATIS and Second meeting of the Working Group on Reduction in the Sensitive List under SAFTA shall be scheduled shortly by the SAARC Secretariat.

The recent trend in India’s trade with SAARC countries is indicated in Table 7.13.

Box 7.3
Highlights of Trade with SAARC
(During April – September, 2010-11)
  • Bangladesh was the largest trading partner of India in the SAARC region.
  • India has recorded a negative growth rate of exports with Afghanistan and Pakistan in SAARC region.
  • The lowest decline in growth of exports was recorded for Afghanistan at (-) 31.92%.
  • Except for Bhutan, India runs a trade surplus with all other trading partners.
  • For April-Sept. 2010-11

III. Trade with North America Free Trade Agreement (NAFTA)

The United States of America, Canada and Mexico are signatories to the North America Free Trade Agreement (NAFTA) (signed in 1994) and form one of the largest and the most important trading block of the world.

India-US Bilateral Trade

In 2009-10 USA was one of India’s largest trading partner and export destination. The bilateral trade for 2007-08 and the current year are given in Table 7.14.

The major items of export from India to the US are gems & jewellery, RMG Cotton Incl Accessories, drugs, Pharmaceuticals & Fine Chemicals, Machinery and Instruments, Manufactures of Metals etc.

The major items of import from USA to India are transport equipments, Machinery (except Elec. & Electronic), Electronic Goods, Fertilizers Manufactured, Pearls Precious Semi-precious Stones etc.

India-US Commercial Dialogue

During the visit of the US President to India, a document “India-US Relations: A Vision for the 21st Century” was released by the Prime Minister of India and the President of United States of America on 21st March, 2000 at New Delhi. To implement the Indo-US Commercial Dialogue envisaged in that document, the Minister of Commerce & Industry and Secretary, US Department of Commerce signed the India-United States Commercial Dialogue on 23.3.2000 at New Delhi. The Dialogue aims at facilitating trade and maximizing investment opportunities across a broad range of economic sectors, including IT, infrastructure, biotechnology and services. Issues taken up for discussion under the Commercial Dialogue are in the following four broad categories : exchange of information on standards, exchange of information on antidumping/trade defence mechanisms, exchange of information on IPR and focus on Small and Medium Enterprises (SMEs). The ‘Commercial Dialogue’ arrangement is reviewed every two years and has now been extended for a two year period from March 2010 to 2012.

India-US Trade Policy Forum

India-US Trade Policy Forum (TPF), announced during the visit of Prime Minister Dr. Manmohan Singh to the US in July, 2005, is a part of the overall Strategic Dialogue between India and the United States and is designed to expand bilateral trade and investment relations between India and the United States. The TPF is co-chaired by the Minister of Commerce & Industry and the United States Trade Representative. Discussions under the TPF are structured around five focus groups: Tariff and Non-Tariff Barriers; Agriculture; Investment; Services; and Innovation and Creativity.

Seventh Ministerial meeting of the TPF was held in Washington DC on 21st September 2010. During the meeting, all the focus groups under the TPF, held comprehensive discussions on a wide range of issues and, identified areas for future constructive engagement between the two trading partners.

A Private Sector Advisory Group (PSAG) was formed in April 2007 as an adjunct to the TPF to provide the TPF with views and advice from non-government trade and investment experts. The PSAG members offer independent recommendations and policy advice, and inject new ideas into the TPF dialogue. During the last TPF meeting, PSAG decided to undertake studies in sectors like technology, trade, urban infrastructure etc. The studies are expected to come up with specific recommendations for increasing bilateral trade and augmenting investment flows in both directions.

India-Canada Bilateral Trade

The bilateral trade between India and Canada during 2007 - 08 and the current year are given in Table 7.15.

The major commodities of export to Canada are RMG cotton Incl accessories, drugs, Pharmaceuticals & Fine Chemicals, Manufactures Of Metals, Gems & Jewellery, Machinery and Instruments etc. The major items of import from Canada are pulses, Fertilizers manufactured, Machinery (except electrical and electronic), Transport Equipments, pulp and waste paper etc.

Annual Ministerial Dialogue on trade and investment

Commerce and Industry Minister and Canada’s Minister for International Trade held the first Annual Ministerial Dialogue on trade and investment in Ottawa, Canada, on 24th September 2010. The meeting reviewed the India Canada trade and investment relationship.

India-Canada Trade Policy Consultation

The seventh India-Canada Trade Policy Consultations was held on 18th October, 2010 in New Delhi. Both sides noted the significant growth in bilateral trade between Canada and India in the recent years, as well as the need to further strengthen this relationship whose potential remains largely untapped. A number of issues of concern between the two countries were discussed during the meeting.

India-Canada CEPA

During the visit of Prime Minister of Canada, Mr. Stephen Harper to India during November 15-18, 2009, two countries announced the setting up of a Joint Study Group (JSG) that will explore the possibility of a Comprehensive Economic Partnership Agreement (CEPA) between India and Canada.

The JSG was mandated to undertake a detailed study of bilateral economic relationship between the two countries, covering among others, trade in goods and services, investment flows and other areas of economic cooperation and make comprehensive recommendations for enhancing bilateral economic engagements between the two countries.

The JSG in its report has concluded that a CEPA between the two countries is likely to increase bilateral trade both in goods and services and enhance linkages in investment flows, technology transfer, movement of natural persons, R&D etc.

Both countries have agreed to initiate negotiations towards a CEPA covering trade in goods, services and other areas of economic cooperation. The inaugural session of the negotiations was held in New Delhi on 16th November 2010.

India-Mexico Bilateral Trade

Details of the bilateral trade between India and Mexico since 2007-08 is given in Table 7.16.

The major commodities of export to Mexico are drugs, pharmaceuticals & Fine Chemicals, Manufactures of Metals, Transport Equipments, Inorganic, Organic, Agro Chemicals, RMG Cotton Incl Accessories etc. The major commodities imported from Mexico are Petroleum (crude and products), electronic goods, Transport Equipments, Plastic materials and Iron and Steel etc.

India Mexico Bilateral High Level Group (BHLG)

A Memorandum of Understanding (MOU) was signed between India and Mexico on 21 May, 2007 at New Delhi by Minister of Commerce and Industry and Minister of Economy, Mexico for the establishment of a Bilateral High Level Group on Trade, Investment and Economic Cooperation. This MOU envisages establishing a Bilateral High Level Group (HLG) on Trade, Investment and Economic Cooperation that shall meet once a year alternately in each country. The functions of the HLG mainly include promoting bilateral cooperation, maintaining liaison in the economic, commercial, technical and other related fields and information exchange. Under the BHLG six Working Groups have been created – (i) Trade Promotion (ii) Investment Promotion (including infrastructure) (iii) Custom Cooperation (iv) Services Promotion (v) Tourism Promotion and (vi) Industrial dialogue with private sector participation (Chemical-Pharma, Textiles and Bio-fuels sectors.)

The second meeting of the BHLG was held in Mexico City on April 22 – 23, 2010. The meeting was co-chaired by Commerce Secretary on the Indian side and Vice Minister for Foreign Trade, Ministry of Economy on the Mexican side. Bilateral issues of concern on trade and investment were discussed during the meeting under all the six working groups. The meeting also identified future areas of cooperation for expanding the trade and investment relationship between the two countries.

IV. Trade with Europe

The European Union (EU) presently consists of 27 countries viz. Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden and U.K.

Besides there is also a bloc of EFTA countries comprising of Switzerland, Norway, Iceland and Leichtenstein.

Turkey, Albania, Croatia, Bosnia and Herzegovina, Macedonia, Serbia while considered part of Europe Division, are neither a member of the EU nor EFTA blocs.

European Countries accounted for about 20.17% of India’s total trade during 2009-10. During 2010-11 (April –September), India’s trade with Europe increased by 17.74% as compared to the corresponding period in 2009-10 with exports increasing by 23.25% and imports by 13.87%. The top five items of India’s exports to Europe during the period were Petroleum (crude & products), Ready-Made Garments Cotton Including Accessories, Transport Equipment, Gems & Jewellery, Machinery & Instruments. The top five items of India’s imports from Europe were Pearls/Precious & semi-precious stone, Machinery (except Electrical & Electronics), Electronic Goods, Iron & Steel and Transport Equipment.

The Union Minister for Commerce and Industry, Shri Anand Sharma addressing the 11th India–EU Business Summit, on the sidelines of the India-EU Summit, in Brussels, Belgium on December 10, 2010.

Trade between India and Europe during the last five years is given in Table 7.17

The EU, as a bloc, is India’s largest trading partner and accounts for about 16% of India’s exports and imports. The relationship between the EU and India has matured substantially in recent years, from that of aid donor and recipient, to one of partnership with opportunities for mutual benefit. Today, the EU and India, as global actors in a multi-polar world, share a strategic partnership, of which commercial interaction forms a key component. The frequency and intensity of India’s contacts with the EU have grown exponentially since 2000. India’s engagement with EU in trade in goods has increased by more than three and a half times between 2000 and 2010.

Approvals for Foreign Direct Investment (FDI) from EU Member States during the period April, 2000 to December, 2010 were of the order of US$ 25.33 billion (source- DIPP website). UK, Netherlands, Germany and France are the major sources of FDI that have been approved. The share of EU in total FDI inflows in India is 20.05%. Top sectors attracting FDI inflows from EU are Services Sectors, Automobile Industries, Housing and Real Estate, Chemicals (other than Fertilizers) and Construction Activities.

India and EU have enjoyed healthy economic relations. These relations have been built on the foundations of (i) India-EU Cooperation Agreement on Partnership and Development which came into effect in August, 1994, (ii) India-EU Strategic Partnership Agreement (iii) Agreement on Scientific and Technological cooperation, 2002 (iv) Agreement on Customs Co-operation, 2003. India also has bilateral framework Agreements with a number of individual EU countries in areas of trade, investment and avoidance of double taxation. India has agreements for investment promotion and protection with 28 countries of Europe, including 20 countries of EU. Similarly, agreements for avoidance of double taxation exist with 28 countries of Europe, including 21 countries of EU.

India-EU bilateral relations are periodically reviewed at the official level by the India-EC Joint Commission, which last met on 29th September, 2010 at Brussels. Three Sub- Commissions namely Sub-Commission on Trade, Sub-Commission on Economic Cooperation and Sub-Commission on Development Cooperation and nine Joint Working Groups on agriculture and marine products, textiles, information technology & communications, consular matters, environment, steel, food processing industries, pharmaceuticals & bio-technology and TBT/ SPS issues are functioning. The Sub-Commission on Development Cooperation met on 27th September, 2010 at Brussels. The meetings of Sub-Commission on Trade and Sub-Commission on Economic Cooperation were held on 18th September, 2010 and 14th June, 2010 respectively in Delhi.

India’s trade with the EU is hampered by sanitary and phytosanitary standards, technical barriers, complex system of quota/tariff, use of antidumping/anti-subsidy measures against Indian products. These issues which have a bearing on market access for India’s exports to the EU are regularly taken up in the Joint Working Groups and Sub-Commission on Trade. The EU market has stringent quality norms and standards. Indian trade and industry need to meet these norms to increase the market share of Indian products in EU. Issues affecting trade with individual European countries are also taken up at the bilateral fora in the form of Joint Commissions. This continuous dialogue helps in creating an environment for enhancing bilateral trade and investment flows.

During the year 2010, Joint Commission meetings were held with Spain (9th Session on June 21 2010 at Madrid, Spain), France (16th Session held at Paris on 23rd-25th June 2010), UK (7th meeting held at Delhi on 19th January 2011), Czech Republic (8th session held in Delhi on 29-30th November 2010) , and Bulgaria (16th session in Sofia 8-9 April 2010). A Joint Commission was also held with Switzerland (12th session 1st October 2010) - from EFTA bloc.

In order to deepen and strengthen trade and investment relations between India and the EU, negotiations are currently underway for a Broadbased Trade and Investment Agreement. In September, 2005, the 6th India-EU Summit held in New Delhi decided to establish a High-Level Trade Group (HLTG) to explore ways and means to widen and broaden the economic relationship and explore possibility of a trade and investment agreement.

In October, 2006, the HLTG presented its report to the 7th India-EU Summit at Helsinki. The Summit decided that the two sides should enter into negotiations for the trade and investment agreement. 12 rounds of negotiations have been held. The first round was held on 28th -29th  June 2007 at Brussels and the 12th round was held from 26th – 28th January 2011 in India.

In order to strengthen the trade and investment relations with the European Free Trade Association (EFTA) countries comprising Switzerland, Liechtenstein, Norway and Iceland (non-EU member countries in Europe), an India-EFTA Joint Study Group (JSG) was established in December, 2006 to take a comprehensive view of bilateral economic linkages, covering among others, trade in goods and services, investment flows, and other areas of economic cooperation and to examine the feasibility of a bilateral broad based trade and investment agreement. The JSG recommended commencement of negotiations for a Broad based Trade and Investment Agreement (BTIA). Based on this, the negotiations commenced in October, 2008. Continuing with the efforts of the previous years to strengthen the trade and investment relations with EFTA countries, six rounds of negotiations have been held so far. The fifth and sixth round of negotiations were held during August 17-19, 2010 and November 11-12, 2010, during which Trade in Goods, Services, Investment and IPR (Intellectual Property Rights) were discussed.

India’s trade with EFTA countries has increased from US$ 10,581 million in 2006-07 to US$ 16,451 million in 2009-10, with average annual growth rate of 18.5% during the last three years.

To explore the possibility of a Free Trade Agreement (FTA) between India and Turkey, the India-Turkey Joint Study Group (JSG) has been set up. So far, three meetings of the JSG have been held and discussions are in final stages. The 4th round of Indo-Turkey JSG meeting was held in Ankara on 13-14 January 2011 during which the JSG report was discussed.

V. Trade with Commonwealth of Independent States (CIS)

The Commonwealth of Independent States (CIS) comprises the Russian Federation, Armenia, Azerbaijan, Belarus, Georgia, Moldova, Ukraine, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan (the last 5 countries jointly referred to as the Central Asian Republics). Bilateral trade with these countries is as shown in Chart 7.1 and Table 7.19

The CIS region had a share of 0.94 per cent in India’s exports and 2.12 per cent in its imports during 2009-10. The principal commodities of exports to the region include drugs and pharmaceuticals & fine chemicals, machinery & instruments, tea, coffee, transport equipments, RMG cotton including accessories, manufactures of metals etc. Important items of imports to India from this region are iron and steel, fertilizers, non-ferrous metals, petroleum, crude & products, silver, synthetic & reclaimed rubber, vegetable oils, newsprint, project goods, crude minerals, inorganic chemicals, metalifers ores and metal scrap etc.

Russian Federation

The Russian Federation, constituting a major portion of the former USSR, continues to be India’s most important trading partner in the region accounting for about 58% of India’s total trade with CIS region in 2009-10. During 2010-11, following meetings were held to discuss various issues concerning bilateral cooperation:

  • 4th Session of India-Russia Forum on Trade & Investment was held on 20th December, 2010 at New Delhi, under the Co-Chairpersonship of Shri R.P. Singh, Secretary, Department of Industrial Policy & Promotion from the Indian side and Mr. Stanislav Voskresensky, Deputy Minister of Economic Development from the Russian side.
  • 16th Session of the Indo-Russian Inter-Governmental Commission on Trade, Economic, Scientific, Technological and Cultural Cooperation was held on 18th November, 2010 in New Delhi under the Co-Chairmanship of Shri S.M. Krishna, Minister of External Affairs from the Indian side and Mr. Sergei Borisovich Ivanov, Deputy Chairman of the Russian Federation Government from the Russian side.
  • 16th Session of the India-Russia Working Group on Trade & Economic Cooperation of the Indo-Russian Inter-Governmental Commission on Trade, Economic, Scientific, Technological and Cultural Cooperation was held on 5th & 6th October 2010 in New Delhi under the Co-Chairmanship of Dr. Shyam Agarwal, Joint Secretary, Department of Commerce from the Indian side and Mr. S. V. Chernyshev, Director of the Department of the Countries of Asia and Africa, Ministry of Economic Development of the Russian Federation from the Russian side.
  • 4th meeting of India-Russia Joint Task Force (JTF) was held on 18th May, 2010 in Moscow under the Co-Chairmanship of Dr. Shyam Agarwal, Joint Secretary, Department of Commerce from the Indian side and Mr. G. N. Sarishvili, Director of the Department of the Countries of Asia and Africa, Ministry of Economic Development of the Russian Federation from the Russian side.

Central Asian Republics

Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, constitute the five Central Asian Republics in the CIS region. Department of Commerce is the nodal Department for the Inter-Governmental Commission (IGC) with Kyrgyzstan, Tajikistan and Uzbekistan. During 2010-11, following events were held:

2nd meeting of India-Kazakhstan Joint Working Group on the outstanding debt issue relating to tea was held from 25-26th January, 2011 in Astana, Kazakhstan under the co-chairmanship of Dr. Shyam Agarwal, Addl. Secretary, Department of Commerce from Indian side and Mr. Ruslan Dalenov, Vice Minister, Ministry of Finance of the Republic of Kazakhstan from Kazakhstan side.

1st meeting of India-Kazakhstan Joint Working Group on Trade and Economic Cooperation was held from 13-14th January, 2011 in New Delhi under the co-chairmanship of Dr. Shyam Agarwal, Addl. Secretary, Department of Commerce from Indian side and Ms. Zhanel Sabyrovna Kushukova, Director, Department of Trade Policy, Ministry of Economic Development & Trade of the Republic of Kazakhstan from Kazakhstan side.

The Union Minister for Commerce and Industry, Shri Anand Sharma meeting
the Prime Minister of the Russian Federation, Mr. Vladimir V. Putin,
in Moscow on June 19, 2010.

An Agreement between the Government of Republic of India and the Government of Turkmenistan on Trade and Economic Cooperation was signed by Mr. Anand Sharma, C&IM from Indian side and Mr. Hozamuhamet Muhammedov, Deputy Prime Minister from Turkmen side on 25th May, 2010 in New Delhi during the state visit of H.E. Mr. Gurbanbuly Berdimuhamedov, President of Turkmenistan.

Other CIS Countries

Other six CIS countries are Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. Ukraine is India’s second largest trading partner of the CIS region accounting for about 24% of India’s total trade with CIS region in 2009-10. Department of Commerce is the nodal Department for the Inter-Governmental Commission (IGC) with Azerbaijan.

Trade Promotion and other Activities

“Focus: CIS Programme” launched in 2003-04 now covers all the CIS countries. The programme seeks to increase interaction between the business entities of the two regions by identifying areas of bilateral trade and investment. The focus is on major product groups/ services for raising India’s exports to this region. The exports to the region are to be enhanced through combined efforts of various institutions of the Government of India and various Trade Promotion Organizations.

There is a regular exchange of delegations with CIS countries through participation in trade fairs of mutual interest and exchange of trade related information. 

Bilateral trade and economic cooperation between India and these countries is regularly reviewed through the meetings of Joint Commissions / Working Groups and Joint Business Councils. 

There is a regular interaction at the Governmental level for enhancing bilateral trade and economic cooperation.

Taking note of positive trends in bilateral trade between India and Russia, it was agreed to by both the Sides to achieve a bilateral trade target of US$ 20 billion by 2015.

Inter Governmental Commission/Joint Commission - with CIS Countries under Department of Commerce

India-Azerbaijan Inter Governmental Commission on Trade, Economic, Scientific & Technological Cooperation under the Co-Chairmanship of Minister of State for Commerce and Industry

India-Kyrgyzstan Inter Governmental Commission (IGC) on Trade, Economic, Scientific & Technological Cooperation under the Co-Chairmanship of Minister of State for Commerce and Industry

India-Uzbekistan Inter-Governmental Commission (IGC) on Trade, Economic, Scientific & Technical Cooperation under the Co-Chairmanship of Minister of State for Commerce and Industry.

India-Tajikistan Joint Commission on Trade, Economic, Scientific & Technical Cooperation under the Co-Chairmanship of Commerce secretary.

VI. Trade with Latin American and Caribbean Countries

Traditionally, relations between India and the countries of Latin America have remained close and cordial. However, commercial relations have not grown commensurately. The main reasons adversely affecting India’s trade with this region are: distance, language barriers, inadequacy in the exchange of information and the absence of economic shipping and air links.

The Latin American and Caribbean (LAC) region comprising 43 countries, accounts for about 5.23% of world trade (source: WTO 2009). Despite, India being not a significant trading partner, there is much scope for enhancing two-way trade between India and the LAC region. Over the years, India’s exports have been showing a continuously increasing trend as indicated in Table 7.20.

The India’s trade with the region increased from US$ 5656.22 million in 2005-06 to US$ 16613.82 million in 2009-10. India’s exports to the region has gone up from US$ 2993.47 million in 2005-06 to US$ 6210.42 million in 2009-10 showing a growth of 107%. The percentage share of India’s exports to Latin America in her global exports has increased from 2.90% in 2005-06 to 3.47% in 2009-10. However, India has been heavy negative trade balance with the region.

Three product groups viz. textiles, engineering products and chemical products constituted about 50 % of India’s exports to this region during 2008-09 and 2009-10. In the textiles sector, readymade garments, made-ups, fabrics, yarn, carpets, handicrafts etc. are fast moving export items. In the Engineering sector, automobiles, auto components, electrical appliances, machinery, computer software etc. have good scope for exports. In the Chemical products sector, bulk drugs, pharmaceuticals, dyes and intermediates, agrochemicals, plastic products, naphtha, resins, essentials oils, molasses and tyres for automobiles & bicycles are the important items.

Focus: LAC Programme

An integrated programme “Focus: LAC” was launched in November, 1997 which has been extended upto March, 2014 in order to consolidate the gains of the previous years and significantly enhance India’s trade with the LAC region. The main objective of the programme is to increase interaction between the two regions by identifying potential areas of bilateral trade and investments. Various incentives and export promotion measures have been designed and incorporated in this programme. In the Foreign Trade Policy announced in 2009, Latin America has been given special focus to diversify our trade basket and offset the inherent disadvantages for our exporters such as credit risk, higher freight cost etc. Under FTP 2009-2014, Double Weight Scheme for exports to all countries of LAC would continue. Sixteen new markets of LAC region have been incorporated under Focus Market Scheme (FMS). Thus, the total countries of LAC region now covered by the FMS are thirty one. Under the Market Linked Focus Product Scheme (MLFPS), thirteen markets have been identified, which include Brazil.

The Focus: LAC programme aims at focusing on the Latin American region, with added emphasis on the major trading partners of the region. In 2009-10, Brazil, Venezuela, Chile, Argentina, Bahamas, Colombia, Panama, Peru, Trinidad and Ecuador are India’s top ten trading partners in LAC region constituting approximately 85 % of the total trade with the region.

Institutional Mechanism

The following institutional arrangements already exist in relation to India’s trade relations with the countries of the Latin American region:

  • Indo-Argentine Joint Commission
  • Indo-Argentine Joint Trade Committee
  • Indo-Mexican Joint Commission
  • Indo-Brazilian Commercial Council
  • Indo-Cuban Joint Commission
  • Indo-Cuban Trade Revival Committee
  • Indo-Suriname Joint Commission
  • Indo-Guyana Joint Commission
  • Indo-Venezuela Joint Commission
  • India Brazil Trade Monitoring Mechanism
  • India – Trinidad and Tobago Joint Commission

In order to have increased frequency of interaction with important trading partners in the LAC region, efforts are made to hold the meetings of the Joint Commissions on a regular basis.

Commercial Staff in the Indian Missions

At present, fourteen Indian Missions are functioning in the Latin America region. However, there was no commercial post in any of these Missions to exclusively look after the trade related matters. Ten posts of Marketing Assistant in nine Missions in the LAC region have been provided to exclusively manage the trade related matters and to respond to queries of exporters and importers interested to undertake business with Latin America and vice versa. Efforts are being made to further strengthen these Missions for commerce and trade.

Sponsoring of Trade Delegations/ Organising Seminars/ Conferences/ Trade Fairs/ Exhibitions

The Confederation of Indian Industries (CII), the Federation of Indian Chambers of Commerce and Industry (FICCI), and Export Promotion Councils (EPCs) are sponsoring trade delegations for promotion of trade in the region, organizing seminars/ conferences and sector/ product specific seminars in different cities for the benefit of the local exporters and to sensitise them about the trade opportunities available in the LAC region. Vigorous efforts are also being made to ensure participation by EPCs, etc. in trade fairs to be held in Latin American countries since trade fairs act as an important tool for trade promotion.

Implementation of India-Chile PTA

A Preferential Trade Agreement (PTA) between India and Chile was signed on March 8, 2006. The said PTA came into force with effect from 17th August, 2007 in Chile and from 11th September, 2007 in India after completion of laid down formalities.

Under this PTA, India has offered tariff preferences on 202 tariff lines (as per 2007 HS ) at the 8 digit level to Chile with margin of preference (MoP) ranging from 10%- 50%, and Chile has offered tariff preferences on 296 tariff lines to India at the 8 digit level with MoP ranging from 10%- 100%.

India-MERCOSUR PTA

A Preferential Trade Agreement (PTA) between India and MERCOSUR (a trading bloc of Argentina, Brazil, Paraguay and Uruguay in South America region) was signed on 25th January, 2004 and annexes to this Agreement were incorporated on March 19, 2005. By this PTA, India and MERCOSUR have agreed to give tariff concessions, ranging from 10% to 100% to each other on 450 and 452 tariff lines respectively. India- MERCOSUR PTA came in to operation from 1st June, 2009.

ECGC Cover

The Export Credit Guarantee Corporation of India (ECGC) undertakes periodically a comprehensive review of the grading of the countries based on the methodology of risk scoring. As per ECGC Country Risk and Cover Policy on LAC region (reviewed as on 30.06.2010), sixteen Latin American countries have been placed in low risk categories of ‘A1’ and ‘A2’. No country has been placed in very high-risk category of ‘D’

Lines of Credit

EXIM Bank extends Lines of Credit (LOCs) to overseas financial institutions, regional development banks, sovereign governments and other entities overseas, to enable buyers in those countries, to import goods and services from India on deferred credit terms. The Indian exporters can obtain payment of eligible value from EXIM Bank, without recourse to them, against negotiation of shipping documents. LOC is a financing mechanism that provides a safe mode of non-recourse financing option to Indian exporters, especially to SMEs, and serves as an effective market entry tool

The EXIM Bank has currently extended fifteen lines of credit to banks/governments in the LAC region as given under (as on 13.12.2010):

Other Developments

  • CII organized the fourth “India – Latin America Caribbean (LAC) Conclave in April, 2010 in New Delhi. About 200 delegates representing India and LAC governments departments, business groups, financial institutions belonging to important sectors like Textiles, Food Processing, Chemicals, Engineering including Automotives and Energy (Oil, Gas) participated in the event. Fourteen LAC countries – Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El-Salvador, Mexico, Paraguay, Peru, Uruguay and Venezuela represented in the event.
  • CII organized Business Seminars in Brazil, Peru and Chile in Sept, 2010 coinciding with the visit of Minister of State (Commerce & Industry), to strengthen India’s trade ties with Latin America.
  • India Engineering Show (INDEE) was organized by Engineering Export Promotion Council (EEPC) in Colombia in October 2010 to showcase skills and technologies at international level and to strengthen the brand India in the LAC region.
  • In the series of “India Show”, one such event is proposed to be organized in Sao Paulo (Brazil) in March, 2011 by CII under aegis of Deptt. of Commerce to showcase India’s strength in manufacturing and services in overseas markets, especially in developed and emerging markets, to promote India as a favourable destination for trade and investment.

VII. Trade with Countries in Sub Saharan Africa (SSA) Region

Since independence India has had cordial and friendly trade relations with countries in Sub-Saharan Africa (SSA) Region, consisting of Eastern, Western, Central and Southern Africa. India’s trade with SSA Region since 2006-07 is given in the Table 7.22.

Total trade with countries in SSA Region during 2009-10 amounted to US$31022.10 million with exports amounted to US$10307.79 million and imports at US$20715.10 million. The total trade during April-September, 2010 (Provisional data) has been US$18710.12 million with exports at US$6995.94 million and imports amounting to US$11714.18 million. The corresponding figures during April-September 2009 were US$13880.80 million (total trade), US$4975.69 million (exports) and US$8905.20 million (imports) respectively.

Bilateral trade with West African countries was US$13,001.27 million during 2009-10 as compared to US$14,536.45 million during 2008-09. Transport equipment, Drugs, Pharmaceuticals & Fine Chemicals, Rice, manufactures of Metals and Machinery and Instruments were the major items of export. Metalifers ores & metal scrap, Cashew nuts, Wood and Wood products, Inorganic Chemicals and Fertilizers and Crude were the major items of import. Nigeria was the top most trading partner within this region with a trade of US$ 8,696.57 million during 2009-10 as compared to US$ 10,429.61 million during 2008-09.
Bilateral trade with countries in Southern Africa was US$ 13,500.89 million during 2009-10 as compared to US$ 10,357.56 million during 2008-09. Transport equipments, Drugs, Pharmaceuticals and Fine Chemicals, Machinery and instruments, primary and semi finished Iron and Steel and Rice were the major items of export. Gold, Metalifers, Ores & metal scrap, Inorganic Chemicals, Coal and Non-ferrous metals were the major items of import. South Africa was the top most trading partner within this region with a trade of US$ 7,733.00 million during 2009-10 as compared to US$ 7,493.86 million during 2008-09.

The Union Minister of Commerce and Industry, Shri Anand Sharma and the President of South Africa, Dr. Jacob Zuma at the Business Meeting, organized by the ASSOCHAM, CII and FICCI, in New Delhi on June 04, 2010.

 

Bilateral trade with countries of East Africa was US$3,900.67 million during 2009-10 as compared to US$ 4,863.22 million during 2008-09. Primary and semi finished Iron & Steel, Machinery & Instruments, Drugs, Pharmaceuticals & Fine Chemicals, Sugar and manufactures of Metals were the major items of export. Cashew nuts, Pulses, Metalifers Ores and metal scrap, Inorganic Chemicals and Spices were the major items of import. Kenya was the top most trading partner within this region with a trade of US$1,530.93 million during 2009-10 as compared to US$ 1,444.27 million during 2008-09.

Bilateral trade with countries of Central Africa was US$ 620.06 million during 2009-10 as compared to US$ 537.93 million during 2008-09, indicating a growth of 75.25%. Drugs, Pharmaceuticals & Fine Chemicals, Machinery & Instruments, Transport Equipments, manufactures of metals and Plastic and Linoleum products were the major items of export. Metalifers ores and metal scrap, Pulses, Cotton raw, Tea and Non-ferrous metals were the major items of import. Uganda was the top most trading partner within this region with a trade of US$220.31 million during 2009-10 as compared to US$ 237.10 million during 2008-09.

Preferential Trade Agreement (PTA) with Southern African Customs Union (SACU)

The Southern African Customs Union (SACU), the oldest Custom Union of the world, comprises of South Africa, Lesotho, Swaziland, Botswana and Namibia. India and SACU have expressed their intent to enter into a Preferential Trade Agreement (PTA) with the aim of promoting expansion of trade between the two parties and providing mechanism to negotiate and conclude a comprehensive Free Trade Agreement within a reasonable time. India and SACU have commenced negotiations for PTA in October, 2007 and five meetings of the negotiating teams have taken place so far. Fifth round of negotiations on India-SACU PTA was held in New Delhi on 7-8, October, 2010.

CECPA with Mauritius

A Comprehensive Economic Cooperation and Partnership Agreement (CECPA) aimed at boosting bilateral trade, investment and general economic cooperation between India and Mauritius is under negotiation.

“Focus Africa” Programme

The “Focus Africa” Programme was initially launched with focus on seven countries of Sub-Saharan African (SSA) Region, viz., South Africa, Nigeria, Mauritius, Tanzania, Kenya, Ghana and Ethiopia. With a view to further widen and deepen India’s trade with Africa, the scope of this Programme was further extended to include Angola, Botswana, Ivory-Coast, Madagascar, Mozambique, Senegal, Seychelles, Uganda, Zambia, Namibia and Zimbabwe, along-with the six countries of North Africa, viz., Egypt, Libya, Tunisia, Sudan, Morocco and Algeria. Under this Programme, the Government extends assistance to exporters, Export Promotion Councils etc. to visit countries in Africa and organize trade fairs. Government also sponsors African trade delegations to visit India. A number of export promotion activities were conducted by various Export Promotion Councils and Apex Chambers with grant under Market Development Assistance (MDA) and Market Access Invitation (MAI) Scheme. A mega event, ‘The India Show’ was held in South Africa from 29th August, 2010 to 1st September, 2010. The event, which was inaugurated by the President of South Africa and Shri Anand Sharma, Commerce and Industry Minister of India, consisted of an ‘Exhibition’ by major Indian companies showcasing Indian technology, products & services and expertise of India in various sectors, a meeting of the ‘India South-Africa CEOs Forum’, a ‘Doing Business with India Conference’ showcasing the business potential of India, ‘Cultural Programmes’ in Johannesburg and Durban to showcase India’s rich culture, an ‘India Food Week’ in Johannesburg exhibiting India’s cuisine and a ‘Fashion Show’ in Johannesburg. Another major event, ‘Namaskar Africa’, organized during 14 to 15 October, 2010 at Nairobi, Kenya, was inaugurated by Sh. Anand Sharma, Commerce and Industry Minister of India. The event consisted of an ‘India Exhibition’ and the ‘India-East Africa Business Forum’ with participation of business delegations from 12 East African countries.

Minister for Commerce and Industry, Shri Anand Sharma with the Foreign Minister of Ghana, Mr. Alhaji Muhammad Mumuni and Indian delegation members, in Ghana on September 03, 2010.

Bilateral Cooperation

Issues pertaining to trade and economic cooperation between India and African countries are reviewed through Joint Commissions and Joint Trade Committees (JTCs). Business to Business interactions have also been encouraged between Apex Indian Chambers and their African counterpart Chambers with a view to further enhance trade and investment relations between India and African countries. High level bilateral meetings and visits by trade and industry delegations are also organized with a view to strengthen trade and economic partnerships between India and African countries. High level delegations led by the Commerce & Industry Minister visited South Africa and Ghana during 29th August to 3rd September, 2010 and held bilateral meeting with their counterparts.

The 6th meeting of the India-Kenya Joint Trade Committee (JTC) was held in Nairobi on 12-13 October, 2010, which was co-chaired by Shri Anand Sharma, Hon’ble Minister of Commerce and Industry from the Indian side. During the meeting, both sides agreed to make all possible efforts to achieve a target of bilateral trade of US$ 2.5 billion in the next 3 years, up from the bilateral trade of US$ 1.5 billion in 2009-10. The key sectors identified for bilateral cooperation were agriculture including Agro-processing; Drugs and Pharmaceuticals; infrastructure development sectors like Road, Rail, and energy including generation, transmission and distribution of power, Airport; Information and Communication Technology (ICT); Oil & Gas; Manufacturing; and Healthcare.

VIII. Trade with countries in the West Asia & North Africa (WANA) Region

The West Asia and North Africa (WANA) region comprises 18 countries. These are (i) Six Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates), (ii) Six West Asian countries (Iraq, Israel, Jordan, Lebanon, Yemen and Syria) and (iii) Six North African countries (Algeria, Egypt, Libya, Morocco, Sudan and Tunisia).

The Union Minister for Commerce and Industry, Shri Anand Sharma inaugurated the ‘Namaskar Africa’ event, organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) in association with the Ministry of Commerce and Industry, at Nairobi, Kenya on October 14, 2010.

 

During April-September, 2010-11, India’s exports to the WANA region have gone up from US$ 17,924.33 million to US$ 22,470.92 million. Similarly, imports have also registered an increase from US$ 28,472.61 to US$ 40,490.75 million compared to the figures during the corresponding period of the previous year.

The United Arab Emirates (UAE) ranked first among the destinations for India’s exports in the WANA region and among the GCC countries. The other major destinations in the WANA region include Saudi Arabia, Israel, Egypt and Kuwait. The details of bilateral trade between India and countries of WANA Region during 2009-10 and 2010-11 (April-September) are given in Table 7.23.

The principal export products from India to the WANA region comprises of Gems & Jewellery, Petroleum (crude & products), manufactures of metals, Machinery and Instruments, Rice-Basmati, Transport equipments, Electronic Goods, Manmade Yarn, Fabrics, Made ups, Meat & Preparations, Primary and semi-finished Iron & Steel etc.

The principal imports from the WANA region consists of Petroleum (crude and products), Pearls and Precious/Semi-Precious stones, Gold, Fertilizers Manufactured, Organic Chemicals, Inorganic Chemicals, Metalliferrous Ores and Metal scrap, Artificial Resins, Non-ferrous metals, Fertilizers (crude) etc.

Institutional A rrangements

Issues pertaining to trade and economic cooperation between India and WANA countries are regularly reviewed in Bi-laterals, Joint Commission Meetings or Joint Trade & Economic Committee Meetings. Apex trade bodies like CII, FICCI, FIEO, ASSOCHAM etc. sponsor business delegations to various countries. Joint Business Council (JBC) arrangements also exist between apex trade bodies on the Indian side and counterpart organizations in WANA countries.

Recent developments/initiatives:  

a) Free Trade Agreement (FTA) with Israel

The Trade and Economic Relations Committee has approved for initiating negotiations with Israel for entering into a Free Trade Agreement. The first round of negotiations was held in New Delhi during the month of May, 2010. In this meeting, broad parameters for negotiations were finalized. The second round of negotiations is slated for February, 2011 in Jerusalem.

b) Indo-Syria Joint Commission Meeting

2nd Session of India-Syria Joint Commission Meeting (JCM) was held at Damascus on 19th June, 2010. The Commerce and Industry Minister of India co-chaired the JCM.

c) Indo-Oman Joint Commission Meeting

Shri Anand Sharma, the Commerce & Industry Minster co-chaired the 6th session of India-Oman JCM during 5-6 September, 2010 in Muscat.

d) “India show” in Dubai

Department of Commerce organised a mega event named “India Show” in Dubai during 8-10 June, 2010.

e) Bi-laterals meeting with Moroco and Egypt

Shri Jyotiraditya Scindia, Minister of State (Commerce & Industry) visited Morocco on 26-27 October, 2010 to address World Economic Forum meeting and also held bilateral meetings with Trade Ministers of Morocco and Egypt to explore the ways and means to enhance the bilateral trade.


 

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