MARKETING

The Indian Economy
Current economic indicators
India and the WTO
             Export and Import (Eexim) policy
             Exports
             Imports
             Tariff Liberalisation
             Exim Policy 2001-2002
             Exim Policy 2002-2007 

India stands as a vibrant and diverse country whose economy is increasingly integrating with the world economy. The sweeping economic reforms undertaken in the last decade have had far reaching consequences. The large and growing market, developing infrastructure, sophisticated financial sector, flexible regulatory environment, incentives, stable polity and strong economic outlook make India an attractive investment destination. The business environment here is considered conducive for achieving high level of sustainable growth.

The solidity of the Indian economy is evident from its stability in the backdrop of a ecessive Asian market. The latest estimates of the Central Statistical Organisation (CSO) project Gross Domestic Product (GDP) growth of 5.2 percent during 2000-01. India has entered the new millennium with a strong and robust financial outlook. Average annual real GDP accelerated from 5.4 percent during the 12 year period ending 1991-92 to 6.4 percent during 1992-1993 through 2000-2001. The overall growth performance of the industrial sector during 2000-01 is expected to be somewhat lower than that of the previous year. However, combined with the continued performance of the services sector, particularly of the information technology sector, the Indian economy is expected to achieve a healthy growth of 6 percent.
Agriculture
The agriculture sector, for so long the main-stay of the Indian economy, now accounts for only about 20 percent of GDP, yet employs over 50 percent of the population. For some years after independence, India depended on foreign aid to meet its food needs, but in the last 35 years, food production has risen steadily, mainly due to the increase in irrigated areas and widespread use of high-yield seeds, fertilizers and pesticides. The country has large grain stockpiles (around 45 million tonnes) and is a net exporter of food grains. Cash crops, especially tea and coffee are the major export earners. India is the world's largest producer of tea, with annual production of around 470 million tonnes, of which 200 million tonnes is exported. India also holds around 30 percent of the world spice market, with exports around 120,000 tonnes per year. Real growth rates in GDP for agriculture and allied activities slowed down considerably to 0.9 per cent in 2000-01. With a view to strengthening the sector, building infrastructure for handling, transportation and storage of food grains has been granted "infrastructure status" and will be eligible for a tax holiday. Further, processors of food and vegetables are exempted from excise duty.
Rural Markets
Rural areas, where nearly 70 percent of Indians live, have witnessed rapid market growth in recent times, driven largely by agricultural growth, income redistribution, and inroads made by audio-visual media. The rural share of the market for durable goods has grown steadily over the last few years, from 54.2 percent in 1989-90 to 57.9 percent in 1995-96, and in items such as bicycles, mechanical wrist watches, radio/ transistors etc. the share of the rural market was in excess of 75 percent.

India, along with 110 other countries, ratified the results of the Uruguay Round by signing the Final Act at Marrakech on April 15, 1994. This has far reaching implications for the country as a whole, as also for global trade and economic growth. As a result of the Marrakech Accord, expansion of global trade is expected to be between US$ 200 billion (OECD estimates) and US$ 745 billion (GATT estimates). The largest increases are expected in clothing (60 percent), agricultural, forestry and fishery products (20 percent) and processed foods and beverages (19 percent) - areas where India has a competitive advantage. Accordingly, India is striving to increase its share in world trade in these areas. Even at India's current share of global trade, the Marrakech Accord offers additional export opportunities of US$ 1.5 to 3.5 billion annually over and above the normal growth. The immediate aim for India (as per the EXIM policy announcement on 31 March 2001), is to achieve at least 1 percent share of global trade by 2004. The total world export volume expected by the year 2004 is US$ 7.5 trillion; hence for India to achieve its target, it would need to export worth US$ 75 billion, up from the current level of US$ 43 billion, which roughly works out to an 18 percent growth rate.

The new Export & Import Policy ("EXIM") announced by the Government for the year 2001-2002 seeks to complete the process of India's integration with the global economy by removal of quantitative restrictions and seeks to provide fresh direction to exports by setting up Agricultural Export Zones and providing special benefits to SEZ. The new EXIM policy is outward looking and liberal and is the logical conclusion to India's commitments under the WTO agreement.

Export of goods is allowed freely, except for few restricted items. Exports are the major focus of India's trade policy, and a thrust area in the new economic policy of the country. The export promotion package compares favourably with incentives offered anywhere in the world. It makes a special effort to attract foreign investors to set up EOUs and units in SEZs. Export profits are exempt from income tax, and are computed in the proportion of export turnover to total turnover. However the tax exemption to be phased out over a period of 5 years commencing financial year 2000-01.

Most goods are freely importable on payment of specified customs duty. A small number of goods fall in the prohibited/restricted list of Imports. Such restrictions are generally on grounds of national security, health and environmental protection. There are no quantitative restrictions on import of capital goods and intermediates. Further, import of second hand capital goods older than 10 years is permitted only against import licenses. Raw materials, intermediates, components etc. meant for manufacture of goods for export, can be imported duty free against an advance licence. Input - output norms have been laid down to determine the amount of duty free import of inputs allowed for specified products to be exported. Issue of duty free licence under this scheme is subject to specified value-addition norms and export obligations. New capital goods may be imported under the Export Promotion Capital Goods (EPCG) scheme. These capital goods may be imported at a concessional basic customs duty rate of 5 percent. However, this concession is subject to an export obligation to be fulfilled over a specified period.

The current trade policy is characterised by rationalised tariff levels and removal of quantitative restrictions. There has been a consistent decline in the rates over the past 7 years, from peak rates of 350 percent in June 1991 to 35 percent in 2000-2001. Most capital goods imports attract a basic customs duty at the rate of 25 percent. Import duties on equipment are lower for projects in specific sectors.

Primacy to Promotion of Agro Exports
The government will give primacy to promotion of agricultural exports so that India can position herself to take advantage of the expected liberalisation of the world agricultural trade. Our farmers are expected to have great opportunities in the context of the on-going negotiations on agriculture at the WTO. As the third largest producer of food in the world, India can play a significant role in the international trade on agriculture. The government is planning to evolve an appropriate agricultural export policy in the near future.
Agro export efforts would be reorganised on the basis of specific products and specific geographical areas. A beginning would be made by focussing specially on areas where there is a convergence of these two factors and make these zones as Regional Rural Motors of Indian export economy. The move will be initiated in respect of apples from Himachal Pradesh and Jammu & Kashmir, the alphonso mangoes from the Konkan areas of Maharashtra (the list is not exhaustive; but only illustrative) and any other such zones that the State Governments may identify and sponsor in respect of the specific cash crops. The emphasis will be on end to end development of export specific products. Department of Commerce will supplement the efforts of State Governments in facilitating such agri exports. There are also many agriculture regions which have constraints in fully participating in international trade because of various critical gaps including information on prices, demand, quality standards, etc. Efforts will be made to fill these gaps and play an important role of not only transmitting the international signals to the farmers but also encouraging and enabling them to respond to those signals through the states. The EXIM Policy schemes like Duty Exemption Scheme and the Export Promotion Capital Goods Scheme are being made applicable to the agro sector as well. 'Internationalisation' of our agriculture will have several implications: The terms of trade, which have for long been in favour of industry, are expected to shift in favour of agriculture. It is estimated by some economists that every one per cent switch will divert about Rs.8500 crore additionally in favour of agriculture and that about US $20 billion (over Rs.60,000 crore) will be transferred to the agriculture sector from the non-agriculture sector in the next few years. This additional rural purchasing power will create a phenomenal effective demand. If our farmers are equipped to rise to the occasion, we shall be able to make a mark in the international trade on agriculture with this farm-to-port approach.

Export restrictions like registration and packaging on certain agricultural products to Russia removed.
Restrictions on export of all cultivated varieties of seed, except jute and onion removed.
To promote export of agro and agro based products, 20 Agri Export Zones have been
notified.
Transport subsidy for export of fruits, vegetables, floriculture, poultry and dairy products made available.
3% special DEPB rate for primary and processed foods exported in retail packaging of 1kg or less introduced.