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IMPACT OF THE World Trade Organization ON THE INDIAN ECONOMY

INTRODUCTION:

The World Trade organization was established to deal with all the major aspects of international trade and it had far
reaching effects not only on Indias foreign trade but also on its internal economy.

The impact of the WTO on the Indian economy can be analyzed on the basis and general concepts.
IMPACT:

The WTO has both favorable and non-favorable impact on the Indian economy.

FAVOURABLE IMPACT:
1) Increase in export Earnings:
Increase in export earnings can be viewed from growth in merchandise exports and growth in service exports:
Growth in merchandise exports:

The establishment of the WTO has increased the exports of developing countries because of reduction in tariff and
non-tariff trade barriers.
Indias merchandise exports have increased from 32 billion us $ (1995) to 185 billion u $ (2008-09).

Growth in service exports:


The WTO introduced the GATS (general Agreement on Trade in Services) that proved beneficial for countries like
India.
Indias service exports increased from 5 billion us $ (1995) to 102 billion us $ (2008-09) (software services
accounted) for 45% of Indias service exports)

2) Agricultural exports:
Reduction of trade barriers and domestic subsidies raise the price of agricultural products in international market,
India hopes to benefit from this in the form of higher export earnings from agriculture

3) Textiles and Clothing:


The phasing out of the MFA will largely benefit the textiles sector.
It will help the developing countries like India to increase the export of textiles and clothing.

4) Foreign Direct Investment:


As per the TRIMs agreement, restrictions on foreign investment have been withdrawn by the member nations of the
WTO.

This has benefited developing countries by way of foreign direct investment, euro equities and portfolio investment.
In 2008-09, the net foreign direct investment in India was 35 billion us $.

5) Multi-lateral rules and discipline:


It is expected that fair trade conditions will be created, due to rules and discipline related to practices like anti-
dumping, subsidies and countervailing measure, safeguards and dispute settlements.
Such conditions will benefit India in its attempt to globalize its economy.

UNFAVOURABLE IMPACT:
1) TRIPs
Protection of intellectual property rights has been one of the major concerns of the WTO.
As a member of the WTO, India has to comply with the TRIPs standards.
However, the agreement on TRIPs goes against the Indian patent act, 1970, in the following ways.

Pharmaceutical sector:
Under the Indian Patent act, 1970, only process patents are granted to chemicals, drugs and medicines. Thus, a
company can legally manufacture once it had the product patent.

So Indian pharmaceutical companies could sell good quality products (medicines) at low prices.
However under TRIPs agreement, product patents will also be granted that will raise the prices of medicines, thus
keeping those out of reach of the poor people, fortunately, most of drugs manufactured in India are off patents and
so will be less affected.

Agriculture
Since the agreement on TRIPs extends to agriculture as well, it will have considerable implications on Indian
agriculture.
The MNG, with their huge financial resources, may also take over seed production and will eventually control food
production.
Since a large majority of Indian population depends on agriculture for their livelihoods, these developments will have
serious consequences.

Micro-organisms:
Under TRIPs Agreement, patenting has been extended to micro-organisms as well.
This will largely benefit MNCs and not developing countries like India.

2) TRIMS:
The Agreement on TRIMs also favors developed nations as there are no rules in the agreement to formulate
international rules for controlling business practices of foreign investors.
Also, complying with the TRIMs agreement will contradict our objective of self reliant growth based on locally
available technology and resources.

3) GATS:
The Agreement on GATS will also favor the developed nations more.
Thus, the rapidly growing service sector in India will now have to compete with giant foreign firms.
Moreover, since foreign firms are allowed to remit their profits, dividends and royalties to their parent company, it will
cause foreign exchange burden for India.

4) TRADE AND NON TARIFF Barriers:


Reduction of trade and non-tariff barriers has adversely affected the exports of various developing nations.
Various Indian products have been hit by. Non- tariff barriers. These include textiles, marine products, floriculture,
pharmaceuticals, basmati rice, carpets, leather goods etc.

5) LDC exports :
Many member nations have agreed to provide duty free and quota free market access to all products originating
from least developed countries.
India will have to now bear the adverse effect of competing with cheap LDC exports internationally. Moreover, LDC
exports will also come to the Indian market and thus compete with domestically produced goods.

CONCLUSION:
Thus the WTO is a powerful body that will enact international laws on various matters.
It will also globalize many countries and help them to develop their competitive advantages and seek benefits from
advanced technology of other nations.

Though countries like India will face serious problems by complying with the WTO agreements, it can also benefit
from it by taking advantage of the changing international environment.