Challenges in Trade Practices with India. Export Challenges in India. Export Expansion Problems. Structural changes in trade policies of India.

1. By- Shyam Nair
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2. Challenges For Trade Practices
1. The cost of starting a business in India is astronomical, and
the procedures involved can be daunting without local
knowledge.
2. There are 12 procedures to complete in the initial set up of a
business costing 49.8% of income per capita. It takes almost
a month (27 days) to complete the tasks on average, which is
well above the OECD average of 12 days. (Organisation
for Economic Co-operation and Development)
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3. Dealing with Construction Permits
1. Construction permits are also a costly pursuit, involving 34
procedures and taking 196 days.
2. Obtaining Intimation of Disapproval from the Building
Proposal Office and paying fees takes around a month, and
NOCs must be sought from the Tree Authority, the Storm
Water and Drain Department, the Sewerage Department, the
Electric Department, the Environmental Department, the
Traffic & Coordination Department and the CFO.
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4. Getting Credit
1. India performs the best of all South Asian economies for ease
of getting credit, ranking 23rd in the world according to the
World Bank and International Finance Corporation.
2. The 2013 report this to when a “unified collateral registry,
which is centralised geographically, became operational in
India strengthening access to credit and the secured
transaction regime”.
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5. Resolving Insolvency
1. It takes 4.3 years to resolve insolvency in India, far longer
than the South Asian and OECD average.
2. The laborious court system can often slow business relations.
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6. Question- 1
 Why is India’s Export less vulnerable to the financial
turmoil of developed countries?
 The reason being lower exports of traditional products
like handicrafts, textiles and leather will be compensated
by higher overseas sales of engineering goods and
resource intensive items like metals and petroleum
products in 2008-09 to China, countries in West Asia as
well as economic blocs like the South East Asian
nations.
 Moreover, the 14 per cent depreciation of the rupee
against the US dollar will also lead to an increase in
rupee realisation of export earnings.
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7.  In spite of the financial turmoil in the US and the EU,
international orders for engineering goods produced by India
have not gone down.
 But Indian engineering exporters are asking for more secure
modes of payment for their clients abroad. Engineering goods
account for one-fifth of India’s export basket.
 The US and the EU together account for 40 per cent of the
exports for this sector. Engineering exports are expected to
grow in the range of 20 to 25 per cent in the current financial
year, marginally lower than the 27.3 per cent seen in 2007-08.
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8.  Another factor that will buttress exports from India is the
diversification of its export destinations.
 India presently exports two-thirds of its exports to non-US and
non-EU members like China, West Asia, Africa as well as to
the Asean.
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9. Question- 2
 What are problems of export expansions in India?
 Major challenge before India is the emerging mega multilateral
trade agreements being signed between major nations.
 India is not part of most of these agreements and that can
potentially hurt the country’s exports as nations that are
signatories to these agreements – mostly all of Europe, the
Americas and developed Asia – would seek to trade amongst
themselves.
 India would be able to penetrate these large and advanced
markets only by offering high quality and competitively priced
exports.
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10.  Exporters believe the two new schemes of the foreign trade
policy – Merchandise Exports from India Scheme (MEIS) and
Services Exports from India Scheme (SEIS) — together with
revamping of incentive schemes, reduction of transaction costs,
incentives to special economic zones and easier rules for doing
business will boost exports.
 But exporters also need to reconcile to living with lower
subsidies and incentives as the Indian economy prospers. Once
India’s per capita income tops $1,000, the government will
need to phase out some of the subsidies it gives exporters.
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11. Other challenges include:
 Barriers to trade and investment in some sectors resulting from
regulatory constraints, local sourcing requirements and import
tariffs
 Protecting your Intellectual Property (IP)
 Risk of bureaucratic delays
 Land acquisition can be difficult
 Risk of bribery and corruption
 Access to the right skills in the local workforce
 Poor infrastructure, including distribution and logistics as much
of India remains rural
 Weather extremes with extremely hot weather in summer and
wet weather in the monsoon season can affect business
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12. Question- 3
 What type of structural changes do you notice in
India’s Exports in recent years?
 The year 1991, when economic reforms were introduced, is
seen as the sole turnings point, providing a break from the low
growth to high growth and dividing the post‐Independence
economic history into two clear phases: the pre‐reform ‘dark’
phase and the post reform ‘bright’ phase.
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13.  Phase 1. Independence to Mid‐1960s: This period saw a
significant acceleration in the growth rate over the past decades
marked by a high growth of industry, and a significant
structural change with a large increase in the share of
non‐agricultural sector, especially of the industry in the
national output.
 Phase 2. Mid‐1960’s to 1980: This period was marked by a
slower growth of GDP, accompanied by a deceleration in the
growth of industry, a slower pace of structural shift from
agriculture to non‐agriculture and a very small increase in the
share of industry.
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14.  Phase 3. 1980 to early 1990s: This period saw a sharp
acceleration in growth rate, mainly contributed by services.
Structural changes were also swift, with a large decline in the
share of agriculture, but very little increase in the share of
industry‐services picking up the major share of the shift.
 Phase 4. Easy 1990’s Onwards: Growth continued at similar rate
as 1980’s, but declined during 2000‐2004. Structural changes
continued at an accelerated pace with share of agriculture sharply
declining and services emerging as the major sector and with very
small increase in the share of industry. Within this phase, period
2005‐10 has seen a sharp acceleration in growth rate, despite a
slowdown in 2008‐09. Share of agriculture has declined from
around 20 to 16 per cent, that of services has increased from 54 to
59 per cent and that of industry has stagnated.9/30/2016 14Shyam Nair©

15. The External Sector:
 Exports and Imports together accounted for about 15 per cent
of GDP in 1980‐81. By 2009‐10 the figure has gone up to 35
per cent.
 Significant changes took place in the structure of imports over
the period of a restrictive policy regime, 1950‐51 to 1980‐81:
the share of raw materials and intermediate products increased
sharply from 37 per cent in 1950‐51 to 78 per cent in 1980‐81
(but that of fibres and raw cotton sharply declined).
 Share of fertilizers increased till 1970‐71 but declined during
1971‐81. Petroleum products made up a small part of imports
till 1970‐ 71.
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16.  Since 1980‐81, the share of raw materials and intermediate
manufacturer declined, while petroleum products became the
most important item. Fertilizers, cereals, iron and 9 steel and
machinery which were relatively important items of imports
have declined in importance while pearls and semiprecious
stones have become more important since 1980‐81.
 The import structure has thus changed in favour of energy and
some new export oriented raw materials and intermediate
manufacturers over the past three decades. Capital goods
imports have somewhat declined in importance. What is
particularly intriguing to note is that the share of labour and
resource intensive products has increased while that of medium
skill and technology intensive manufactures has declined.
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17. Thank You!
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