Indian 

Economy
Dear Aspirants
You are welcome to Economics Section of Free Notes 4 IAS-2010 [Prelims]
Before moving ahead to study Indian Economy. We would like to discuss with you some
basic concepts of Economics like What is Economics-? Why it is important-? and Current
Status of India Economy so that you can harness ur basic concepts in Economics and handle
upcoming study material with confidence. Every exam is all about getting clarity of
Concepts, which we can get only through logical study
What do you mean by Logical Study-?
To understand the concept of logical study. Let me give you an example.
Suppose you are studying a topic on Inflation. Think logically as a layman, and then you
should get the following sequence of questions-

 What is inflation-?
 Why there is inflation, i.e. causes of inflation-?
 So what if there is inflation, i.e. impact of inflation-?
 If its impact is negative, then naturally we should find some solutions to
reduce it
 What can be those possible solutions-?
If the steps to reduce inflation as you think about has already taken by system to cater the
problem but inflation is still there, then think what went wrong and what can be an
alternate solution-?

 Keep in mind the current status of inflation

This is called logical thinking which is an essential trait examiner is looking for in you

So lets move ahead with logical study of Economics, which is an important part of General
Studies

I would like to repeat here that this is a team work and suggestions of every
player [Readers] would be highly appreciated to enhance the performance of
our team. So Feel Free to give any idea/suggestion where you think, there is a
scope 4 improvement
Thanx once again 4 being with us and serving HUMANITY
What is Economics-?
Economics is a branch of social science. In simple words we can say that Economics is the
study of how people choose to use their available resources in most efficient way. Please
note down that Economics is not only about managing money and finance. It is much more
than that in contemporary context. There is no universal definition of Economics because it
is really difficult to cover all aspects of economics into a water tight boundary. Yet some
scholars tried to defined Economics in their words as given below-

“Economics is the study of how individuals and groups make decisions with limited
resources as to best satisfy their wants, needs, and desires”

“Economics is the social science that examines how people choose to use limited or scarce
resources in attempting to satisfy their unlimited wants”

A definition that captures much of modern economics is that of Lionel Robbins in a 1932
essay- “the science which studies human behavior as a relationship between ends and scarce
means which have alternative uses

Economics aims to explain how economies work and how economic agents interact.
Economic analysis is applied throughout society, in business, finance and government, but
also in crime, education, family, health, law, politics, religion, social institutions, war, and
even to science

Moral of the story-

Over all we can say that Economics is the branch of social science that studies the
production, distribution, and consumption of goods and services in a society

On the basis of above definition, we can break down the study of economics into two broad
categories

1. Microeconomics
2. Macroeconomics
What is Microeconomics-?
This is a sub branch of economics that deals with economics decisions made at a low, or
micro, level. How does the change of a price of good influence a family’s purchasing
decisions-? If my wages rise, will I be inclined to work more hours or less hours-?
What is Macroeconomics-?
This is a sub branch of Economics which deals with a larger/broader level of economy. It
relates to issues such as determination of national income, savings, investment,
employment at aggregate levels, tax collection, government expenditure, foreign trade,
money supply and price level etc

Notable Points-
 Adam smith is considered as father of Modern Economics. He wrote “The
nature & causes of wealth of the Nations” in 1776. He stressed upon wealth aspect of
economy
 After that Professor Marshall wrote “Principles of Economics” in 1890. He stressed
upon welfare aspect of economy
Current Status of Indian Economy-
The economy of India is the 12 th largest economy in the world by market exchange rates and
4th largest economy of world by purchasing power parity (PPP) as per the latest report of
World Bank. Despite recent global economic recession, Indian Economy is growing at a
healthy rate of 6% and considered as one of the fast emerging economy in world along with
China, Brazil, South Africa and Mexico. In the 21 st century, India is an emerging economic
power with vast human and natural resources, and a huge knowledge base. Economists
predict that by 2020, India will be among the leading economies of the world. However,
Indian Economy is still lagging behind in many spheres like more than 60% of India’s total
working population is still engaged into agricultural activates, while its contribution into
GDP is only around 18%. India is a labor surplus country and problem of sectional
unemployment still a matter of concern for GOI. V
India was under social democratic-based policies from 1947 to 1991. The economy was
characterized by extensive regulation, protectionism, and public ownership, leading to
pervasive corruption and slow growth. Since 1991, continuing economic liberalization has
moved the economy towards a market-based system. A revival of economic reforms and
better economic policy in 2000s accelerated India’s economic growth rate. By 2008, India
had established itself as the world’s second-fastest growing major economy after China.
India’s large service industry accounts for 54% of the country’s GDP while the industrial and
agricultural sector contribute 29% and 17% respectively. Agriculture is the predominant
occupation in India, accounting for about 60% of employment. The service sector makes up
a further 28% and Industrial sector around 12%.The labor force totals half a billion workers.
India ranked 31st in Financial development index-2009 produced by World Economic
Forum
Some Indicators of Indian Economy-
 GDP growth in 2008-09                               6.7% [due to global recession]
 10th Five year plan GDP-                             8% [targeted] 7.8% [achieved]
 11th Five year plan GDP-                             9% [targeted]
 Per Capita Income-                                        $1070 [Rank 142nd]
 Labor Force-                                                     Huge [Surplus]
 Inflation (CPI)                                                  7.8% [2008] increasing every day
 Population BPL                                                22% [2008]
Current Challenges before Indian Economy -
 Maintaining consistent growth rate of 9%
 Reducing widening gulf between rich and poor
 Control on increasing population
 Producing new employment opportunities
 Harnessing potential of human power
 Optimal usage of Natural Sources along with sustainable development
 Increasing Indian Share into Foreign Trade
What is concept sustainable Development-?
Meeting the needs of the present without compromising the ability of future generations to
meet their needs is called sustainable development. This concept is popular in present
context of development

What is concept of Microcredit-?

In common meaning Micro credit is “Loan of very small amount”. It can be defined as
provision of parsimony, credit and other financial services and products of very small
amount to the poor in rural, semi-urban and urban areas for enabling them to raise their
income levels and improve living standards. The institutions that provide Micro Credit are
called Micro Credit Institutions. Micro Credit is provided to those individuals that lack
collateral, steady employment and a verifiable credit history and therefore cannot meet even
the most minimal qualifications to gain access to traditional credit. This group of
individuals includes artisans, tiny and small industries, grocers, vegetable vendors, rickshaw
pullers, roadside retailers and the like. Other activities include farming, poultry, cattle
rearing, piggery, fishery etc.
The innovative idea of Microcredit originated with the Grameen Bank in Bangladesh. In
1976 Professor Muhammad Yunus launched a research project to examine the possibility of
designing a credit delivery system to provide banking services targeted to the rural poor.
The Grameen Bank is a microfinance organization and community development bank
started in Bangladesh that makes small loans known as microcredit. The organization and
its founder, Muhammad Yunus, were jointly awarded the Nobel Peace Prize in 2006; the
organization’s Low-cost Housing Programme won a World Habitat Award in 1998. The
United Nations declared 2005 the International Year of Microcredit.
Before the nationalization of banks in India in 1969, co-operative banks were the main
dispensers of small loans in the organized sector. Commercial banks were not easily
accessible to small borrowers. Those were the days of security-oriented approach. Nobody
could think of a loan, big or small, without a guarantor or mortgage of immovable property.
Profit was the only motive of the banking. However Nationalization changed the picture and
the nationalized banks opened branches in the remotest corners of the country. They were
to implement various government schemes like the Twenty Point Program, Antyodaya
Program, subsidized Differentiated Rate of Interest loan etc. which aimed at uplifting the
poorest of the poor with the help of micro credit.

Gradually there was establishment of Regional Rural Banks (RRBs), Deposit Insurance and
Credit Guarantee Corporation (DICGC), National Bank for Rural and Agricultural
Development (NABARD), Small Industrial Development Bank of India (SIDBI), Export
Credit Guarantee Corporation (ECGC) and the latest Credit Guarantee Fund Trust for Micro
& Small Enterprises (CGTMSE). The CGTMSE covers collateral-free credit up to Rs. 50
lakhs. These institutions play supportive roles to ensure uninterrupted flow of credit to
small time borrowers. Under the present directive of the RBI, the priority sectors must get a
minimum of 40% share of a commercial banks’ total lending. This includes 16% for the
agriculture sector.

Some Issues-
 In spite of all these measures the performance of micro finance in India has neither
been quite satisfactory quantitatively nor qualitatively.
 The money disbursed has not been adequate, nor has it yielded the desired results.
 Instead of being recycled, the major portions of loans have been lost as bad debt.
Self-Help Groups [SHGs]-
A Self-Help Group (SHG) is a registered or unregistered group of micro entrepreneurs
belonging to homogenous social and economic background voluntarily, who come together
to save small amounts regularly, to mutually agree to contribute to a common fund and to
meet their emergency needs on mutual help basis. The group members use collective
wisdom and peer pressure to ensure proper end-use of credit and timely repayment thereof.
SHG provides strength to an economically poor individual as part of a group. Financing
through SHGs reduces transaction costs for both lenders and borrowers.

SHG-bank linkage Programme-

With a view to facilitating smoother and more meaningful banking with the poor, A pilot
project for purveying micro credit by linking Self-Help Groups (SHGs) with banks was
launched by NABARD in 1991-92. The aim was to make it possible facilitating smoother and
more meaningful banking with the poor. RBI had then advised commercial banks to actively
participate in this linkage programme. The scheme has since been extended to RRBs and co-
operative banks. More than 90 per cent of the groups linked with banks are exclusive
women groups. SHG-bank linkage programme has surely emerged as the dominant micro
finance dispensation model in India; other models too have evolved as significant micro
finance purveying channels.

History of Indian Economy-

There was a time when India considered as “Sparrow of Gold.” It was the wealth of India,
which attracted so many invaders and foreign rulers towards the country at that time.
During ancient time when other countries had limited trade activities, India enjoyed a very
well developed trade and commerce. The famous silk route of India is very well known even
today. After the advent of British East India Company in 1600, the trade activities were in
favor of India till 1757.  But in the beginning of 18th Century when industrial revolution
emerged in England, British used India as producer of raw material for their industries on
one hand and exploited the country as potential mark for various goods produced into
factories of England. Gradually till 1813 handloom and craft business of India totally ruined
by British for their personal advantages. Dada Bhai Narojee exposed the “drain of wealth”
from India in his famous work
After Independence-
Independence came with pain of partition to India. Hence it was not easy to put the country
on path of rapid development. Indian Government opted for planned economy [a type of
economy where economic planning plays very crucial role in the socio-economic
development of country]. To achieve the desired and consistent growth in Indian Economy,
GOI came up with idea of “Five Year Plans.” To implement this idea Planning Commission
was constituted in 1950 and 1st Five year plan was formulated for period from 1951 to 1956.
At present 11th Five year plan is going on and Indian economy is growing with a healthy rate
of 8% since last on decade
New Economic Policy-
The initial idea of planned economy did not work as well as it was expected. It resulted into
heavy burden of external debt on India. Hence GOI came with new economic policy in 1991.
The 3 main objectives of this new economic policy was as follows-

1. Globalization [Unrestricted movement of goods and technology across globe]

2. Liberalization [Government Control on industries has been relaxed. More and
More Sectors gradually opened for commercialization]
3. Privatization [Handover of public sector to private sector, Disinvestment]
What is Policy of Laissez Faire-?
Laissez Faire is a French term and it literally means no interference. It is a doctrine which
states that government generally should not intervene in the economic activities and
economy should be market oriented based upon demand and supply principle

Banking System in India-

The organized banking system of India can be divided into following 3 categories-

1. Central Bank of India [**RBI which is apex banking institution in the country and
control as well regulates the sheer money in India]
**RBI was established in 1935 on recommendations of Young Hitler Commission and
nationalized in 1949. RBI was established in Kolkata initially but later headquarters of RBI
shifted to Mumbai. Its financial year is from 1 stJuly to 30th June. RBI’s main function is to
control flow of money in Indian Market i. e. formulation and implementation of Monetary
Policy for India. RBI formulate such policy every year and came up with its review quarterly
[at an interval of 3 months]. During this quarterly review of monetary policy, RBI announce
current rate of various financial control mechanisms like Bank Rate, SLR, CRR and Repo
Rate.
Latest Review by RBI-
RBI’s 2nd Quarter review of monetary policy released on 28thOctober 2009
1. Commercial Banks [Public Banks like SBI + Private Banks like HDFC as well as
foreign banks]
2. Rural/ Co-operative Banks [Dedicated to Rural Banking and usually sponsored
by Public Banks]
**RBI is the supreme banking authority and all other banks of India works under guidelines
given by it. Notes and Coins of only Rupee 1 are released by Finance Ministry of India and
all other currency notes as well as coins are released by RBI. Even Currency printing press
cannot print notes without permission of RBI

India and Foreign Trade-

The trade activity with other countries on globe is known as Foreign Trade. It is directly
related to export-import of a country with other countries. The foreign trade of India was
very well developed during ancient history. The orientation of foreign trade of India totally
changed with advent of British Empire in India. Immediately after independence GOI
adopted inward looking foreign trade policy to restrict global trade but picture has been
changed with new economic policy of the country which emphasized on globalization. In
1950, the Indian Share in total world trade was just 1.78% which further decreased to 0.6%
in 1995. The foreign trade of India is going upwards and it is expected to be 2% of total
world trade by 2009 [As per figure released by WTO]. These figures clearly shows that India
has failed to increase its share in the total world trade

Foreign Trade of India-

India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947
and its successor, the WTO. While participating actively in its general council meetings,
India has been crucial in voicing the concerns of the developing world. For instance, India
has continued its opposition to the inclusion of such matters as labor and environment
issues and other non-tariff barriers into the WTO policies. Since liberalization India opened
almost all sectors for FDI [Foreign Direct Investment] and continuously signing pact with
international economic organizations like ASEAN and APEC to harness international trade
potential. USA is top trade partner of India followed by China. These days India is
considered as one of the hottest destination for FDI. Recently Ministry of Commerce and
Trade came up with new Foreign Trade Policy to boost its share in total world trade
Indian Foreign Trade Policy 2009-2014
What is Foreign Trade Policy?
The Union Commerce Ministry, Government of India announces the integrated Foreign
Trade Policy FTP in every five year. This is also called EXIM [Export, import] policy. This
policy is updated every year with some modifications and new schemes. New schemes come
into effect on the first day of financial year i.e. April 1, every year. The Foreign trade Policy
which was announced on Thursday August 28, 2009 is an integrated policy for the period
2009-14.

Objectives of Foreign Trade Policy 2009-14

1. To arrest and reverse declining trend of exports due to global recession is the main
aim of the policy. This aim will be reviewed after two years.
2. To double India’s exports of goods and services by 2014.
3. To double India’s share in global merchandise trade by 2020 as a long term aim of
this policy. India’s share in Global merchandise exports was1.45% in 2008.
4. Simplification of the application procedure for availing various benefits
5. To set in motion the strategies and policy measures which catalyze the growth of
exports
6. To encourage exports through a “mix of measures including fiscal incentives,
institutional changes, procedural rationalisation and efforts for enhance market
access across the world and diversification of export markets.
Aim in General: The policy aims at developing export potential, improving export
performance, boosting foreign trade and earning valuable foreign exchange. FTP assumes
great significance this year as India’s exports have been battered by the global recession. A
fall in exports has led to the closure of several small- and medium-scale export-oriented
units, resulting in large-scale unemployment.
Targets:
1. Export Target : $ 200 Billion for 2010-11
2. Export Growth Target: 15 % for next two year and 25 % thereafter.
EPCG [Export Promotion Capital Goods Scheme] Scheme:
1. Obligation under EPCG scheme relaxed.
2. To aid technological Upgrdation of export sector, EPCG Scheme at Zero Duty has
been introduced.
 3. Export obligation on import of spares, moulds etc. under EPCG Scheme has been
reduced by 50%.
Refixation of Annual Average Export Obligation:
Taking into account the decline in exports, the facility of Re-fixation of Annual Average
Export Obligation for a particular financial year in which there is decline in exports from the
country, has been extended for the 5 year Policy period 2009-14. Support for Green
products and products from North East extended.

Announcements for FPS [Focus Product Scheme], FMS [Focus Market Scheme],
MLFPS [Market Linked Focus Product Scheme]-
1. 26 new markets added in this scheme.
2. Incentives under FMS raised from 2.5 % to 3 %
3. Incentive available under Focus Product Scheme (FPS) rose from 1.25% to 2%.
4. Extra products included in the scope of benefits under FPS
5. Market Linked Focus Product Scheme (MLFPS) expanded by inclusion of products
like pharmaceuticals, textile fabrics, rubber products, glass products, auto
components, motor cars, bicycle and its parts.etc. (However, benefits to these
products will be provided, if exports are made to 13 identified markets (Algeria, Egypt,
Kenya, Nigeria, South Africa, Tanzania, Brazil, Mexico, Ukraine, Vietnam, Cambodia,
Australia and New Zealand).
6. Focus Product Scheme benefit extended for export of green products and some
products from the North East.
7. A common simplified application form has been introduced to apply for the benefits
under FPS, FMS, MLFPS and VKGUY.
MDA [Market Development Scheme] & MAI [Market Access Initiative]-
Higher allocation for Market Development Assistance (MDA) and Market Access Initiative
(MAI) has been announced.

Towns of Export Excellence (TEE)

The following cities have been recognized as towns of export excellence (TEE)

1. Handicrafts : Jaipur, Srinagar and Anantnag

2. Leather Products : Kanpur, Dewas and Ambur
3. Horticultural Products: Malihabad
Scheme for Status Holders (Status Holders means star status holders)
1. Additional Duty Credit Scrip’s shall be given to Status Holders @ 1% of the FOB
value of past exports accelerate exports and encourage technological Upgrdation.
2. This facility shall be available for sectors of leather (excluding finished leather),
textiles and jute, handicrafts, engineering (excluding Iron & steel & non-ferrous
metals in primary and intermediate form, automobiles & two wheelers, nuclear
reactors & parts, and ships, boats and floating structures), plastics and basic
chemicals (excluding Pharma products).
3. This facility shall be available up to 31 March, 2011.
4. Transferability for the Duty Credit scrip’s being issued to status holders under
VKGUY [Vishesh Krishi & Gram Upaj Yojana] Scheme permitted only for the
procurement of cold chain equipments.
Extension of Income Tax Exemption to EOU [Export Oriented Units]and STPI
[Software Technology Parks of India]-
Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of
Income Tax Act has been already extended for the financial year 2010-11 in the Budget
2009-10.

Extension of ECGC [Export Credit Guarantee Corporation (of India Ltd)]-

The adjustment assistance scheme initiated in December, 2008 to provide enhanced ECGC
cover at 95%, to the adversely affected sectors, is continued till March, 2010.

Announcements for Marine sector-

1. Fisheries exempted from maintenance of average EO under EPCG Scheme (along
with 7 sectors) however Fishing Trawlers, boats, ships and other similar items shall
not be allowed for this exemption.
2. Additional flexibility under Target plus Scheme (TPS) / Duty Free Certificate of
Entitlement (DFCE) Scheme for the marine sector.
Announcements for Gems & Jewellery Sector:
1. Duty Drawback is allowed on Gold Jewellery exports to neutralize duty incidence.
2. Plan to establish “Diamond Bourse (s) with an aim to make India and International
Trading Hub announced.
3. Introduction of a new facility to allow import on consignment basis of cut & polished
diamonds for the purpose of grading/ certification.
 4. 13 value limits of personal carriage have been increased from $ 2 million to US$ 5
million in case of participation in overseas exhibitions.
5. The limit in case of personal carriage, as samples, for export promotion tours, has
also been increased from US$ 0.1 million to US$ 1 million.
6. Time limit of 60 days for re-import of exported gems and jewellery items, for
participation in exhibitions has been extended to 90 days in case of USA.
Announcements for Agro Exports-
1. Introduction of a single window system to facilitate export of perishable agricultural
produce with an aim to reduce transaction and handling cost.
2. This system will involve creation of multi-functional nodal agencies. These agencies
will be accredited by APEDA [Agricultural & Processed Food Products Export
Development Authority]
Announcements for Leather Exports-
On the payment of 50 % applicable export duty, Leather sector shall be allowed re-
export of unsold imported raw hides and skins and semi finished leather from
public bonded ware houses.
Announcements for Tea Exports-
1. The existing Minimum value addition under advance authorization scheme for
export of tea is 100 %. It has been reduced from the existing 100% to 50%.
2. DTA (Domestic Tariff Area) sale limit of instant tea by EOU units increased from
30% to 50%.
3. Export of tea has been included under VKGUY Scheme benefits.
Announcements for Pharma Exports-
1. Export Obligation Period for advance authorizations issued increased from existing 6
months to 36 months.
2. Pharmacy sector included under MLFPS for countries in Africa and Latin America &
some countries in Oceania and Far East.
Announcements for Handloom Exports-
The claims under Focus Product Scheme, the requirement of “Handloom mark” was
required earlier which has been removed.

Scheme for Export Oriented Units-

1. EOUs have been allowed to sell products manufactured by them in DTA (Domestic
Tariff Area) up to a limit of 90% instead of existing 75%, without changing the criteria
 of ‘similar goods’, within the overall entitlement of 50% for DTA sale. (This means
that instead of 75% these units can sell up to 90 % of their products in the domestic
markets)
2. EOU allowed procuring finished goods for consolidation along with their
manufactured goods, subject to certain safeguards.
3. Extension of block period by one year for calculation of Net Foreign Exchange
earnings of EOUs kept under consideration.
4. EOU allowed CENVAT Credit Facility.
Announcements for Value Added Manufacturing (VAM)
To encourage Value Added Manufactured export, a minimum 15% value addition on
imported inputs under Advance Authorization Scheme.

Announcements for Project Exports-

Project Exports and a large number of manufactured goods covered under FPS and MLFPS.

Fuel included in DEPB Scheme-

Custom duty component on fuel where fuel is allowed as a consumable in Standard Input-
Output Norm included in factoring.

Easy Import of samples-

Number of sample pieces has been increased from the existing 15 to 50. This will facilitate
the duty free import of samples by exporters.

Convertibility of Shipping Bills-

Greater flexibility has been permitted to allow conversion of Shipping Bills from one Export
Promotion scheme to other scheme. Customs shall now permit this conversion within three
months, instead of the present limited period of only one month.

Reduction in Transaction Costs-

1. Dispatch of imported goods directly from the Port to the site has been allowed under
Advance Authorization scheme for deemed supplies. (Presently the duty free imported
goods could be taken only to the manufacturing unit of the authorization holder or its
supporting manufacturer.
2. Maximum applicable fee for 18 Authorizations/ license applications (except those
mentioned in Chapter 3 of FTP) has been reduced to Rs. 100,000 from the existing Rs
 1,50,000 (for manual applications) and Rs. 50,000 from the existing Rs.75,000 (for
EDI applications).
3. No fee shall now be charged for grant of incentives under the Schemes in Chapter 3
of FTP.
Disposal of Manufacturing Wastes-
Disposal of manufacturing wastes / scrap will now be allowed after payment of applicable
excise duty also before fulfillment of export obligation under Advance Authorization and
EPCG Scheme. Earlier it was allowed after fulfillment of export obligation.

Announcements for Sports Weapon-

Licenses for the import of sports weapon will be issued now by Regional Authorities
provided a NOC (No Objection Certificate) is issued by Ministry of Sports & Youth Affairs.
(Earlier DGFT [Directorate General of Foreign Trade] Headquarters had to be approached
for this)

Announcements for Medical Devices-

To solve the problem of medical device industry, the procedure for issue of Free Sale
Certificate has been simplified and the validity of the Certificate has been increased from 1
year to 2 years.

Announcements for Automobile Industry-

Those Automobile industries which have their R&D establishment will be allowed free
import of reference fuels (petrol and diesel), up to a maximum of 5 KL per annum, which
are not manufactured in India.

Announcements for EDI Initiatives-

1. Export Promotion Councils & Commodity Boards have been advised to issue RCMC
through a web based online system.
2. It is expected that issuance of RCMC would become EDI enabled before the end of
2009.
Inter Ministerial Committee
Mr. Anand Sharma announced that an Inter Ministerial Committee will be formed to
redress/ resolve problems/issues of exporters.

Set up of Directorate of Trade Remedy Measures Announced

A Directorate of Trade Remedy Measures shall be set up, which will enable support to
Indian industry and exporters, especially the Micro Small & medium Enterprises MSMEs in
availing their rights through trade remedy instruments,

Duty Credit Scrip’s

Earlier the payment of customs duty for Export Obligation (EO) shortfall under Advance
Authorization, DFIA or EPCG Authorization was allowed in cash only. Now this payment
can be done in the way of debit of Duty Credit scrip’s.

Import of Restricted Items

Restricted Items can be imported now (as replenishment) against transferred DFIAs (Duty
Free Import Authorizations) as the present DFRC (Duty Free Replenishment Card) scheme.

Dollar Credits
There is a provision for state-run banks to provide dollar credits
What is WTO and Concept of Doha round-?

Uruguay Round of Multilateral Trade Negotiations comprised 28 Agreements. It had two

components-

1. WTO Agreement
2. Ministerial decisions and declarations
World Trade Organization (WTO) was founded to supervise and liberalize international
trade. The organization officially commenced on January 1, 1995 under the Marrakesh
Agreement, replacing the General Agreements on Tariffs and Trade (GATT). The WTO has
153 members which represent more than 95% of total world trade and 30 observers, most
seeking membership. The WTO is governed by a ministerial conference, meeting every two
years; a general council, which implements the conference’s policy decisions and is
responsible for day-to-day administration; and a director-general, who is appointed by the
ministerial conference. The WTO’s headquarters is at the Centre William Rappard, Geneva,
Switzerland.
WTO deals with
1. Regulation of trade between participating countries
2. Providing a framework for negotiating and formalizing trade agreements
 3. Dispute resolution process aimed at enforcing participants’ adherence to WTO
agreements which are signed by representatives of member governments and ratified
by their parliaments.
What is Doha Development Agenda?
WTO is currently endeavoring to persist with a trade negotiation called the Doha
Development Agenda (or Doha Round), which was launched in 2001 to enhance equitable
participation of poorer countries which represent a majority of the world’s population.

However, the negotiation has been dogged by “disagreement between exporters of

agricultural bulk commodities and countries with large numbers of subsistence farmers on
the precise terms of a ‘special safeguard measure’ to protect farmers from surges in imports.
At this time, the future of the Doha Round is uncertain.”

Ministerial conferences & bulwark of disagreements

First ministerial conference – Singapore 1996
The inaugural ministerial conference was held in Singapore in 1996. Disagreements
between largely developed and developing economies emerged during this conference over
four issues initiated by this conference, which led to them being collectively referred to as
the “Singapore issues”.

The Singapore issues were:

1. Transparency in government procurement

2. Trade facilitation (customs issues),
3. Trade and investment
4. Trade and competition.
The developing countries opposed these issues as they were not in their favors. The
European Union, Japan and Korea favored these issues and pushed them in successive
conferences. US said that it could accept some or all of them at various times, but preferring
to focus on market access.

Fourth ministerial conference Doha 2001

The Doha Development Round was launched at the conference. The talks are stalled even
today and impetus is on reaching a final agreement. The major impediment is different
interests of developed and developing nations.
Fifth ministerial conference, Cancun Mexico 2003
This ministerial conference was called for to reach an agreement on the Doha round.
However, an alliance of 22 southern states, the G20 developing nations (led by India, China
and Brazil), demanded agreements on Singapore issues and called for an end to agricultural
subsidies within the EU and the US. There was no progress made in this round too.

Sixth ministerial conference: Hong Kong 2005-

The sixth WTO ministerial conference was held in Hong Kong from 13 December – 18
December 2005 with an aim to reach an agreement on Doha Round by 2006. In this
meeting, countries agreed to phase out all their agricultural export subsidies by the end of
2013, and terminate any cotton export subsidies by the end of 2006. Further concessions to
developing countries included an agreement to introduce duty free, tariff free access for
goods from the Least Developed Countries, following the Everything But Arms initiative of
the European Union — but with up to 3% of tariff lines exempted. Other major issues were
left for further negotiation to be completed by the end of 2010

Seventh ministerial conference- Geneva 2009

This will held in Geneva from 30 November–December 2009.

Global competitiveness report 2009-10

What is Global Competitiveness Report?

The Global Competitiveness Report is a report annually published by theWorld Economic
Forum since 1979. This report “assesses the ability of countries to provide high levels of
prosperity to their citizens. This in turn depends on how productively a country uses
available resources. Therefore, the Global Competitiveness Index measures the set of
institutions, policies, and factors that set the sustainable current and medium-term levels of
economic prosperity.
Top 10 Countries with GCI [2009-10]-
1. Switzerland 5.60
2. United States 5.59
3. Singapore 5.55
4. Sweden 5.51
5. Denmark 5.46
6. Finland 5.43
 7. Germany 5.37
8. Japan 5.37
9. Canada 5.33
10. Netherlands 5.32
India has moved up one position to 49 (GCI 4.30) in the Global Competitiveness Report
2009-2010.

Finance Ministers of the world’s 20 most powerful countries are gathering for a two-day
meet starting to discuss reforms to tackle black money and money laundering in London

Doha Round-Issues, Implications & Challenges

Trade ministers from about 35 countries met in Delhi recently to give impetus to the Doha
round of trade talks. This article covers in a condensed form the background of the stalled
Doha round of Trade negotiations, understanding the issues of the developing countries and
challenges ahead.

What was the Objective of Delhi Meeting?

The objective of the Delhi meeting was neither to focus on negotiations on specific topics
nor to reach an agreement .The objective was to concentrate on working on a timetable
for the talks. India’s foreign trade minister, Anand Sharma had invited the leaders to get
some momentum into the negotiations.
The Echo of the Issues-
The core issues were echoed in G20 summits in Washington in November and London in
April as well as the G8+ summit in L’Aquila in July apart from a meeting of farm exporters
in June at Bali and again at the Organisation for Economic Cooperation and Development
(OPEC) in Paris and in July at a meeting of the Asia-Pacific APEC grouping.

Is America taking too much Interest?

United States is key to any deal is expected by many other countries to start engaging in the
negotiations; however the key focus of Obama Administration seems to be upon economic
crisis and health care besides to be able to point to new opportunities for U.S. business.

What is Emphasis of Developed Countries?

Developed countries emphasize the big emerging countries like China, India and Brazil to
open their markets and not make excessive use of special arrangements for developing
countries in a Doha deal to shield their industries from competition.
What are the Issues & Challenges?
There are gaps and unresolved issues on agriculture and non-agriculture market access
(Nama). The center point of talks involves efforts to open up trade in agriculture and
industrial goods.

The involves rich countries to open their protected markets for agriculture produce and
cutting their heavy subsidies they provide to their farmers & agro exporters , as they are able
to wipe out the farmers in poor / developing countries out of the market.

The richer developing countries will also cut industrial tariffs in return so that it opens up
their markets for industrial goods to do business with both rich and poor countries.

Outcome-
There seems to be a more of a split between the developing and the developed nations

 
 
18 Votes