International Marketing

International marketing
Global marketing is marketing on a worldwide scale reconciling

or taking commercial advantage of global operational differences, similarities and opportunities in order to meet global objectives".
International marketing International marketing is the export, franchising, joint venture or full direct entry of a marketing organization into another country. This can be achieved by exporting a company's product into another location, entry through a joint venture with another firm in the target country, or foreign direct invesetment into the target country. The development of the marketing mix for that country is then required - international marketing. It can be as straightforward as using existing marketing strategies, mix and tools for export on the one side, to a highly complex relationship strategy including localization, local product offerings, pricing, production and distribution with customized promotions, offers, website, social media and leadership. Internationalization and international marketing meets the needs of selected foreign countries where a company's value can be exported and there is interfirm and firm learning, optimization and efficiency in economies of scale and scope. the firm does not need to export or enter all world markets to be considered an international marketer.
Global Marketing Global marketing is a firm's ability to market to almost all countries on the planet. With extensive reach, the need for a firm's product or services is established. The global firm retains the capability, reach, knowledge, staff, skills, insights, and expertise to deliver value to customers worldwide. The firm understands the requirement to service customers locally with global standard solutions or products, and localizes that product as required to maintain an optimal balance of cost, efficiency, customization and localization in a controlcustomization continuum to best meet local, national and global requirements to position itself against or with competitors, partners, alliances, substitutes and defend against new global and local market entrants per country, region or city. The firm will price its products appropriately worldwide, nationally and locally,
1
and promote, deliver access and information to its customers im the most costeffective way. The firm also needs to understand, research, measure and develop loyalty for its brand and global brand equity (stay on brand) for the long term. At this level, global marketing and global branding are integrated. Branding involves a structure process of analyzing "soft" assets and "hard" assets of a firm's resources. The strategic analysis and development of a brand includes customer analysis (trends, motivation, unmet needs, segmentation), competitive analysis (brand image/identity, strengths, strategies, vulnerabilities), and selfanalysis (existing brand image, brand heritage, strengths/capabilities, organizational values) Further, Global brand identity development is the process establishing brands of products, the firm, and services locally and worldwide with consideration for scope, product attributes, quality/value, uses, users and country of origin; organizational attributes (local vs. global); personality attributes (genuine, energetic, rugged, elegant) and brand customer relationships (friend, adviser, influencer, trusted source); and importantly symbols, trademarks metaphors, imagery, mood, photography and the company's brand heritage. In establishing a global brand, the brand proposition (functional benefits, emotional benefits and self-expressive benefits are identified, localized and streamlined to be consistent with a local, national, international and global point of view. The brand developed needs to be credible. A global marketing and branding implementation system distributes marketing assets (website, social media, Google PPC, PDFs, sales collateral, press junkets, kits, product samples, news releases, local mini-sites, flyers, posters, alliance and partner materials, affiliate programs and materials, internal communications, newsletters, investor materials, event promotions and trade shows to deliver an integrated, comprehensive and focused communication, access and value to the customers, that can be tracked to build loyalty, case studies and further establish the company's global marketing and brand footprint.
Global marketing specialization Global marketing is a field of study in general business management to provide valuable products, solutions and services to customers locally, nationally, internationally and worldwide
Elements of the global marketing Not only do standard marketing approaches, strategies, tactics and processes apply, global marketing requires an understanding of global finance, global operations and distribution, government relations, global human capital management and resource allocation, distributed technology development and management, global business logic, interfirm and global competitiveness, exporting, joint ventures, foreign direct investments and global risk management. The standard Four Ps of marketing: product, price, placement, and promotion are all affected as a company moves through the five evolutionary phases to become a global company. Ultimately, at the global marketing level, a company trying to speak with one voice is faced with many challenges when creating a worldwide marketing plan. Unless a company holds the same position against its competition in all markets (market leader, low cost, etc.) it is impossible to launch identical marketing plans worldwide. Nisant Chakram(Marketing Management)
Worldwide competition One of the product categories in which global competition has been easy to track in U.S.is automotive sales. The increasing intensity of competition in global markets is a challenge facing companies at all stages of involvement in international markets. As markets open up, and become more integrated, the pace of change accelerates, technology shrinks distances between markets and reduces the scale advantages of large firms, new sources of competition emerge, and competitive pressures mount at all levels of the organization. Also, the threat of competition from companies in countries such as India, China, Malaysia, and Brazil is on the rise, as their own domestic markets are opening up to foreign competition, stimulating greater awareness of international market opportunities and of the need to be internationally competitive. Companies which previously focused on protected domestic markets are entering into markets in other countries, creating new sources of competition, often targeted to price-sensitive market segments. Not only is competition intensifying for all firms regardless of their degree of global market involvement, but the basis for competition is changing. Competition continues to be market-based and ultimately relies on delivering superior value to consumers. However, success in global markets depends on knowledge accumulation and deployment.
Evolution to global marketing Global marketing is not a revolutionary shift, it is an evolutionary process. While the following does not apply to all companies, it does apply to most companies that begin as domestic-only companies.
Domestic marketing A marketing restricted to the political boundaries of a country, is called "Domestic Marketing". A company marketing only within its national boundaries only has to consider domestic competition. Even if that competition includes companies from foreign markets, it still only has to focus on the competition that exists in its home market. Products and services are developed for customers in the home market without thought of how the product or service could be used in other markets. All marketing decisions are made at headquarters.
4
The biggest obstacle these marketers face is being blindsided by emerging global marketers. Because domestic marketers do not generally focus on the changes in the global marketplace, they may not be aware of a potential competitor who is a market leader on three continents until they simultaneously open 20 stores in the Northeastern U.S. These marketers can be considered ethnocentric as they are most concerned with how they are perceived in their home country. Domestic market is a large market that every nation needs. These markets are all restricted to be under control of certain boundaries in that company or country. This type of marketing is the type of marketing that takes place in the headquarters. In domestic markets it helps reduce the cost of competition. By reducing competition the company has a better shot of being more successful in the long run. Also if the companys competition is not a big factor that will affect their business, they have a good shot at making prices higher and people will still purchase that product. A domestic market also gets the opportunity to operate in different areas and this gives the company an opportunity to have bigger markets to advertise to. Even in Domestic markets businesses are still trying to trade with each other to promote their business to other businesses in the area. A good thing that helps out Domestic market is that they might be able to receive tax benefits, because they offer jobs to the nation and give people opportunities for work. Domestic market helps countrys out by offering more jobs bring in good business to the market and also helps with the trading around the market. Product A global company is one that can create a single product and only have to tweak elements for different markets. For example, Coca-Cola uses two formulas (one with sugar, one with corn syrup) for all markets. The product packaging in every country incorporates the contour bottle design and the dynamic ribbon in some way, shape, or form. However, the bottle can also include the countrys native language and is the same size as other beverage bottles or cans in that same country. Price Price will always vary from market to market. Price is affected by many variables: cost of product development (produced locally or imported), cost of ingredients, cost of delivery (transportation, tariffs, etc.), and much more. Additionally, the products position in relation to the competition influences the ultimate profit margin. Whether this product is considered the high-end,
5
expensive choice, the economical, low-cost choice, or something in-between helps determine the price point. Placement How the product is distributed is also a country-by-country decision influenced by how the competition is being offered to the target market. Using Coca-Cola as an example again, not all cultures use vending machines. In the United States, beverages are sold by the pallet via warehouse stores. In India, this is not an option. Placement decisions must also consider the products position in the market place. For example, a high-end product would not want to be distributed via a dollar store in the United States. Conversely, a product promoted as the low-cost option in France would find limited success in a pricey boutique. Promotion After product research, development and creation, promotion (specifically advertising) is generally the largest line item in a global companys marketing budget. At this stage of a companys development, integrated marketing is the goal. The global corporation seeks to reduce costs, minimize redundancies in personnel and work, maximize speed of implementation, and to speak with one voice. If the goal of a global company is to send the same message worldwide, then delivering that message in a relevant, engaging, and cost-effective way is the challenge. Effective global advertising techniques do exist. The key is testing advertising ideas using a marketing research system proven to provide results that can be compared across countries. The ability to identify which elements or moments of an ad are contributing to that success is how economies of scale are maximized. Market research measures such as Flow of Attention, Flow of Emotion and branding moments provide insights into what is working in an ad in any country because the measures are based on visual, not verbal, elements of the ad.
Advantages and Disadvantages Advantages The advantages of global market we can introduce our product by using advertising:

Economies of scale in production and distribution Lower marketing costs Power and scope Consistency in brand image Ability to leverage good ideas quickly and efficiently Uniformity of marketing practices Helps to establish relationships outside of the "political arena" Helps to encourage ancillary industries to be set up to cater for the needs of the global player Benefits of eMarketing over traditional marketing
Reach The nature of the internet means businesses now have a truly global reach. While traditional media costs limit this kind of reach to huge multinationals, eMarketing opens up new avenues for smaller businesses, on a much smaller budget, to access potential consumers from all over the world.
Scope Internet marketing allows the marketer to reach consumers in a wide range of ways and enables them to offer a wide range of products and services. eMarketing includes, among other things, information management, public relations, customer service and sales. With the range of new technologies becoming available all the time, this scope can only grow.
Interactivity Whereas traditional marketing is largely about getting a brands message out there, eMarketing facilitates conversations between companies and consumers.
With a two way communication channel, companies can feed off of the responses of their consumers, making them more dynamic and adaptive. Immediacy Internet marketing is able to, in ways never before imagined, provide an immediate impact. Imagine youre reading your favorite magazine. You see a double-page advert for some new product or service, maybe BMWs latest luxury sedan or Apples latest iPod offering. With this kind of traditional media, its not that easy for you, the consumer, to take the step from hearing about a product to actual acquisition. With eMarketing, its easy to make that step as simple as possible, meaning that within a few short clicks you could have booked a test drive or ordered the iPod. And all of this can happen regardless of normal office hours. Effectively, Internet marketing makes business hours 24 hours per day, 7 days per week for every week of the year. By closing the gap between providing information and eliciting a consumer reaction, the consumers buying cycle is speeded up.
Demographics and targeting Generally speaking, the demographics of the Internet are a marketers dream. Internet users, considered as a group, have greater buying power and could perhaps be considered as a population group skewed towards the middleclasses. Buying power is not all though. The nature of the Internet is such that its users will tend to organize themselves into far more focused groupings. Savvy marketers who know where to look can quite easily find access to the niche markets they wish to target. Marketing messages are most effective when they are presented directly to the audience most likely to be interested. The Internet creates the perfect environment for niche marketing to targeted groups.
Adaptivity and closed loop marketing Closed Loop Marketing requires the constant measurement and analysis of the results of marketing initiatives. By continuously tracking the response and effectiveness of a campaign, the marketer can be far more dynamic in adapting to consumers wants and needs. With eMarketing, responses can be analyzed in real-time and campaigns can be tweaked continuously. Combined with the immediacy of the Internet as a medium, this means that theres minimal advertising spend wasted on less than effective campaigns. Maximum marketing efficiency from eMarketing creates new opportunities to seize
8
strategic competitive advantages. The combination of all these factors results in an improved ROI and ultimately, more customers, happier customers and an improved bottom line.
Disadvantages

Differences in consumer needs, wants, and usage patterns for products Differences in consumer response to marketing mix elements Differences in brand and product development and the competitive environment Differences in the legal environment, some of which may conflict with those of the home market Differences in the institutions available, some of which may call for the creation of entirely new ones (e.g. infrastructure) Differences in administrative procedures Differences in product placement. Differences in the administrative procedures and product placement can occur
Fundamentals of International marketing by Sree Rama Rao When a business crosses the borders of a nation, it becomes complex. International marketing involves all the activities that form part of domestic marketing. An enterprise engaged in international marketing has to correctly identify, assess and interpret the needs of the overseas customers and carry out integrated marketing operations to satisfy those needs. In other words, the basic functions are the same in international marketing as well as in domestic marketing. At the same time, there are several characteristics that are unique to international marketing. When the business crosses the national borders of a given country, it becomes enormously more complex. The resulting problems and management situations transcend those of marketing, finance and production. A wide range of legal, political, cultural and sociological dimensions enter the picture, adding a lot of complexity to the task. And, the one factor that contributes maximum to the complexity is the environmental and cultural dynamics of the global markets. Environmental and Cultural Dynamics of Global Markets: The environmental and cultural dynamics of the markets of different countries can be understood only by studying the respective people, their patterns of life, their tradition, their social interactions, their sensibilities, their faiths and fancies. In other words, the international marketer has to become a native in the foreign land. He has to communicate with the people of those lands in their lingo and idiom. Multinational enterprise must function in a world of contrasts: old and new, primitive and modern, pious, and agnostic, unutterably beautiful and sickeningly squalid, educated and ignorant, progressive and stagnant, sophisticated and naive all in constant agitation. To interpret this volatile diversity, to make sense of this apparent chaos, we must try to identify the underlying forces the prime movers which produce the global dynamics. It is obvious that the difference between domestic and international marketing is essentially environmental and cultural in character. And cultural diversity continues despite the world getting closer. Modern communication and transport systems have no doubt brought the nations of the world closer, but the cultural differences continue. So, understanding the cultural variances and nuances, and responding to them in a manner and style that is appealing to the
10
foreign buyer becomes the crucial task. It is not enough if the international marketer communicates in the buyers language. Language is only one aspect of culture. A nations history, its social and religious heritage, the value system of its people, the code of conduct handed down through generations all these are components of a nations culture. Moreover culture is not a static entity. It undergoes a continuous evolution. So, sizing up the cultural dynamics of the different markets of the world is quite a difficult exercise. And that explains the difficulty of international marketing. Main Functions in International Marketing: Let us briefly touch upon the main functions involved in International marketing. They are: * Choosing the basic route for global marketing * Market selection and product selection * Selection of distribution channels * Developing pricing strategy * International marketing communication * Mastering the procedural complexities * Organizational adaptations * Handling business ethics Choosing the basic route: A properly conceived entry strategy is the starting point. There are five basic routes to enter a foreign market: * Exports * Licensing of technology and know how * Multinational trading * Joint venture * Full-fledged global operation We shall mention the salient features of each of these routes. Export is the primary route for entry into the global markets. Many firms stop with this step in their international marketing endeavor. Some firms, however, go beyond; they license their technology and know how to foreign firms who may be interested in importing it into their land. In multinational trading, the companies source products from any part of the world and cart it to any place where demand for the product exists. Setting up joint ventures in foreign countries is another effective strategy for gaining entry into world markets. Through the joint ventures, the firm literally gets close to the foreign markets.
11
Through joint ventures, a firm becomes a native in foreign lands and that is the surest way to the birth of a full-fledged MNC. In modern days, the joint venture strategy is taking firmer roots among companies planning massive global marketing. Becoming full-fledged global operators or MNCs with manufacturing and marketing set up across countries is the most difficult but also rewarding of all strategies of International Marketing.
The International Marketing Process

Exporting is an ongoing process requiring financial and human resources Exporting is not a "hit and run" action The exporting process is a voluntary act of your business. No one is forcing you to export. Make decisions after giving them full consideration, not impulsively. Don't expect anyone to give you a medal for exporting; likewise, no one will hold it against you if you don't export. Rely only on yourself and don't count on receiving grants and gifts. If you do receive them - that's great. If you don't, continue without them, at your own pace. Make an assessment of yourself, your organization, operation, business, products and employees. Then decide whether to enter into the field of exporting in a serious and systematic way, not as an adventure. There is an element of uncertainty in export activities, an element of "trial and error." Try to minimize this by consulting with an export in this area. Define your expectations, goals, costs and tasks that you and your business are capable of meeting. The global market environment is dynamic, competitive and changing. Manufacturers and countries enter and exit the process; government and organizational standards, and international currency fluctuations influence and are affected by the process and the changes are sometimes immediate. You always have to be attuned to the latest developments. In current global market conditions, nearly every Israeli product or service can be exported to some destination, but the target market is not usually ready and waiting. You have to make an effort to market abroad. Israel has international agreements and trading relations with almost the entire world.
12
The exporting establishment and exporting infrastructure is ready to assist you, but you need to do the work. The planning of international marketing is of the utmost importance; do this thoroughly. Take this matter seriously and not just as a formality. You won't get very far by just saying: "Take a catalogue and sample, and if you bring an order, you'll receive a commission." At most, this type of approach can bring a few scattered orders. This is not the way to develop a marketing network and agents abroad. Many organizations are involved in the exporting process. Get to know them and work with them. Exporting is an ongoing process, with its ups and downs. Don't give up in midcourse. You started, then continue! Draw conclusions from every success and/or failure. Client and market reactions sometimes come immediately and sometimes over the course of time. Exports not only improve the State of Israel's balance of trade, but also give a boost to you and your business, and put it in sync with the global market and the trade conditions in which Israel competes. Many Israeli exporters have already done this, and the scope of exports and number of exporters is steadily growing each year. Israeli exports comprise about 0.5 percent of world trade, so there unlimited markets for god products and services, and at competitive prices. The local market is small and sometimes stable - diversify the spread of your sales targets.
13
Importance of international market
International Marketing is the multinational process of planning and executing the conception,pricing, promotion,and distribution of ideas,goods and services to create exchanges that satisfy individual and organizational objectives.Now follows the importance of international marketing:
A)Importance from the consumer's point of view:

Consumption of unpronounced goods Consumption of goods at a low price Enjoying benefits of competition Consumption of new products Increase in consumption
B)Importance from the producer's point of view:

Export of surplus production Expansion of market in foreign countries Production of goods at a low cost
14

Increase in production More profitable Reduce business risk Reduce cost
C)Importance from economic point of view:

Increases total production Increases export earnings Challenging natural calamities knowledge and cultural progress Increases international peace and assistantship Extension of industry Export of unusual goods Optimum utilization of natural resources Progress in technological knowledge Image development.
15
EXPORT PROMOTION MEASURES

Measures taken by the government of india to promote import and export With a view to making exports an effective instrument for promoting greater economic activity and employment, a number of schemes which have been in existence for some time now have been strengthened and improved upon while some new ones have been introduced. A brief description of some of these schemes is given below: Assistance to States for Developing Export Infrastructure and Allied activities (ASIDE) Scheme The ASIDE Scheme aims at encouraging the active involvement of State Governments for development of export infrastructure through assistance linked to export performance. The scheme provides an outlay for development of export infrastructure which is distributed among the States, inter-alia, on the basis of the States' export performance in the previous year. The Scheme subsumed the three ongoing Central Schemes viz. the Export Promotion Industrial Park (EPIP), Critical Infrastructure Balance Scheme (CIB) and the Export Development Fund (EDF) Scheme for the North East. The specific purposes for which the funds allocated under the Scheme that can be sanctioned and utilized are as follows:
Creation of new Export Promotion Industrial Parks/Zones (including Special Economic Zones (SEZs)/Agri-Business Zones) and augmenting facilities in the existing Zones. Setting up of electronic and other related infrastructure in export conclaves. Equity participation in infrastructure projects, including the setting up of SEZs. Meeting the requirements of capital outlay of EPIPs/ SEZs. Development of complementary infrastructure such as roads connecting the production centres with ports, setting up of Inland Container Depots and Container Freight Stations. Stabilizing power supply through additional transformers and islanding of export production centres, etc. Development of minor ports and jetties of a particular specification to serve exports. Assistance for setting up Common Effluent Treatment Plants. Projects of national and regional importance.
16
Activities permitted as per the Export Development Fund in relation to the North East and Sikkim.
The outlay of the scheme has two components - the State Component and the Central Component. Eighty percent of the funds (state component) are earmarked for allocation to the States/Union Territories on the basis of the approved criteria and the remaining 20 per cent (central component), and an amount equivalent to the unutilized portion of the funds allocated to the States in the past year(s), if any, is retained at the central level for meeting the requirements of inter-state projects, capital outlays of EPZs, activities relating to promotion of exports from the North Eastern Region as per the existing guidelines of the Export Development Fund and any other activity considered important by the Central Government from the regional or national perspective. The export performance and growth of exports from the States is assessed on the basis of the shipping bills submitted by the exporters. At the State Level, a State Level Export Promotion Committee (SLEPC) headed by the Chief Secretary of the State scrutinizes and approves specific projects and oversees the implementation of the scheme. At the Central Level, an Empowered Committee under the chairmanship of the Commerce Secretary approves and monitors the projects under the Central Sector. The Committee also periodically reviews the progress of the scheme and takes steps to ensure achievement of the objectives of the scheme.
Cold Room at the Benfish Food Park), Kolkata(funded under ASIDE Scheme) Funds are disbursed directly to the Nodal Agency nominated by the State Government. To minimise delays in the submission of reports, utilisation certificates, and for posting/updating of project related information, a webenabled monitoring system has been developed. Thus, monitoring of the utilisation of funds released under ASIDE has been considerably streamlined.
17
Water Treatment Plant at Kolkata (funded under ASIDE Scheme) An outlay of Rs. 1725 crore has been made for the ASIDE scheme during the 10th Five-Year Plan (2002-2007). For the year 2006-07, Rs. 550 crore has been allocated for the Scheme. The details of the funds released under the ASIDE for the years 2002-03, 2003-04, 2004-05, 2005-06 and 2006-07 to various States including N.E Region under the State Component and the Central Sector are given below:Infrastructure Related Issues As a part of border initiative to improve infrastructure of our land borders, namely, on India-Nepal, India-Bangladesh and India-Pakistan, a number of steps have been taken:
Setting up of Land Ports Authority of India (LPAI) as an autonomous agency under Department of Border Management, Ministry of Home Affairs. A total of 13 Integrated Check Posts (ICPs) are proposed to be constructed on our borders with Nepal, Bangladesh, Pakistan and Myanmar at a total estimated cost of Rs. 734 crore. During the first phase, four ICPs will
18
Year-wise allocations/releases of funds to the States/UTs under State Component of ASIDE Scheme (Rs.crore) (Rs. in Crore) 2002-03 State 2003-04 2004-05 2005-06 2006-07
Outa Relea Outa Relea Outa Relea Outa Relea Outa Relea ly se ly se ly se ly se ly se 12.00 12.00 13.00 13.00 13.85 13.85 15.45 15.45 17.00 8.50
Andhra Pardesh
Andaman & Nicobar 2.00 2.00 Islands Bihar 3.00 3.00
2.00 1.00
2.00 0
2.00 0
2.20 0
6.50 0 2.00 0
2.00 0 2.00 0
2.00 0 3.20 3.20
2.00 0 3.50 1.75
Chandigar 1.00 1.00 h Chhattisga 4.00 4.00 rh Dadra & Nagar Haveli
4.00 4.00
5.00 5.00
5.00 5.00
5.00 5.00
1.50 1.50
3.00 0
2.00 0
2.00 0
2.00 0
Daman & 1.50 1.50 Diu Delhi Goa Gujarat 1.00 1.00 6.00 6.00
3.00 0 2.00 0 6.00 6.00
2.00 0 2.65 0 3.73 3.73
2.00 0 2.65 2.65 6.09 6.09
2.00 0 2.90 1.45 6.70 0
14.00 14.00 15.00 15.00 35.78 35.78 43.38 43.38 47.70 47.70 6.00 6.00 8.49 8.49 14.05 14.05 15.45 7.725
Harayana 6.00 6.00
19
Himachal 7.00 7.00 Pardesh Jammu & 6.00 6.00 Kashmir Jharkhand 4.00 4.00
7.50 7.50
5.00 5.00
5.53 5.53
6.00 3.00
6.00 6.00 4.00 4.00
5.00 5.00 5.00 0
5.25 5.25 5.00 0
5.80 2.90 5.50 2.75
Karnataka 18.00 18.00 19.00 19.00 24.14 24.14 33.99 33.99 37.40 18.70 Kerla 11.00 11.00 12.00 12.00 9.30 9.30 2.00 2.00 2.00 0 10.69 10.69 11.75 5.875 2.00 0 2.20 0
Lakshadw 2.00 2.00 eep Madhya Pardesh
20.00 20.00 11.00 11.00 14.35 14.35 14.35 14.35 15.80 7.90
Maharasht 16.00 16.00 34.00 34.00 57.09 57.09 65.52 65.52 72.10 72.10 ra Orissa 4.50 4.50 10.00 10.00 6.05 6.05 3.00 1.50 2.00 0 6.93 6.93 2.00 0 7.65 7.65 2.20 0
Pondicher 3.00 3.00 y Punjab 9.00 9.00
10.00 10.00 9.68 9.68
12.17 12.17 13.4 6.70
Rajasthan 12.00 12.00 13.00 13.00 13.20 13.20 13.20 13.20 14.53 7.265 Tamil Nadu Uttar Pardesh 28.00 28.00 30.00 30.00 39.19 39.19 39.19 39.19 43.12 43.12
20.00 20.00 21.00 21.00 12.59 12.59 21.00 21.00 23.10 11.55 4.00 2.00 5.00 5.00 5.27 5.27 5.80 0
Uttaranch 4.00 4.00 al West
10.00 10.00 11.00 11.00 14.91 14.91 20.09 20.09 22.10 22.10
20
Bengal Total 226.5 226.5 260.0 239.0 304.0 282.3 360.0 343.0 396.0 284.2 0 0 0 0 0 5 0 0 0 35
North Eastern Region Arunachal 1.00 1.00 Pardesh Assam Manipur 4.00 4.00 2.00 2.00 1.25 1.25 5.00 5.00 2.50 0 2.50 0 2.50 2.50 1.25 0.50 1.25 0 3.75 3.75 2.51 0 2.51 2.51 2.76 0
11.49 11.49 12.57 12.57 13.83 0 2.00 2.00 2.00 2.00 5.72 5.72 2.00 2.00 2.00 0 8.28 8.28 2.06 2.06 3.24 3.24 8.34 8.34 2.00 2.00 2.00 2.00 7.28 7.28 2.07 2.27 3.56 1.78 9.17 9.17 2.20 1.10 2.20 1.10 8.10 4.005 19.42 5
Mizoram 1.00 1.00 Meghalya 2.00 2.00 Nagaland 1.00 1.00 Sikkim Tripura Total Grand Total 0.50 0.50 3.00 3.00
14.50 14.50 20.00 13.00 36.00 31.49 40.00 40.00 44.00
241.0 241.0 280.0 252.0 340.0 313.0 400.0 383.0 440.0 303.6 0 0 0 0 0 0 0 0 0 6 (Rs. in Crore)
Year
Total Outaly
Releases to state (including N.E Region) 241.00 252.00
Releases in the Total Releases Central Sector under ASIDE 84.46 98.00 325.46 350.00
2002325.46 03 2003- 350.00
21
04 2004424.88 05 2005500.99 06 2006550.00 07 (as on 450.00(RE) 8.1.07) be taken up for upgradation and setting up of necessary infrastructure. These ICPs are Petrapole at India-Bangladesh border, Moreh at India-Myanmar border, Raxaul at India-Nepal border and Wagah at India-Pakistan border. Upgradation of road and rail stretches constituting back linkages to the ICPs are being taken up on top priority. Infrastructure Support The Government facilitates transport/logistic support and resolves problems experienced by the trading community in the carriage of goods by courier, sea, air, rail and road in coordination with the concerned Ministries and Departments. It seeks to encourage greater containerisation, computerisation of cargo clearance and electronic data interchange, warehousing, setting up of air cargo complexes, inland container depots, container freight stations, etc. As a result of these efforts, export and import have been facilitated through various orders of the Government. The airlines/other carriers having annual transshipment volume above 2500 MT to/from any airport, the same would be exempt from Bank Guarantee for carriage of goods on transshipment. Further, the jurisdictional Commissioners of Customs in deserving cases may also consider giving waiver of bank guarantee. There has been a constant endeavor to solve the problem of congestion in handling and clearance of containers at the Jawaharlal Nehru Port and the Inland Container Depot, Tughlakabad. An Action Group on Trade Facilitation has been formed to recommend simplification of customs procedures leading to reduction of dwell time in cargo clearance. Single window clearance for proposals for setting up of Inland Container Depots/Container Freight Stations/Air Cargo Complexes (ICDs/CFSs/ACCs) is
22
313.84
111.04
424.88
383.00
117.99
500.99
303.66
70.03
373.69
implemented through an Inter-Ministerial Committee (IMC) since 1992. So far, 28 proposals for setting up Inland Container Depots/Container Freight Stations (ICDs/ CFSs) and Air Cargo Complexes (ACCs) have been approved by the IMC. Two high level committees viz. the Standing Committee on Promotion of Exports by Sea (SCOPE-SHIPPING) and the Standing Committee on Promotion of Exports by Air (SCOPE-AIR) have been set up to address the constraints in smooth movement of international cargo and resolve problems of exporters concerning Customs, Containerisation, Air, Shipping, and Railways related issues. The meetings of these two committees were held in Chennai in January, 2006. Electronic Data Interchange (EDI) is also being implemented in a phased manner at Ports and Airports so as to facilitate electronic clearance of export and import containers.
Entry point to Air Cargo Complex at Hyderabad Market Access Initiative (MAI) Scheme The Market Access Initiative (MAI) Scheme is a plan scheme to act as a catalyst to promote India's exports on a sustained basis. The Scheme is based upon 'focus product' and 'focus market' concept. Under the Scheme, assistance is extended to the Departments of Central Government and organisations of Central/State Governments, Export Promotion Councils, Registered Trade Promotion organisations, Commodity Boards, Recognized Apex Trade Bodies, Recognized Industrial Clusters and individual Exporters (only for product registration and testing charges for engineering products abroad). Assistance is given for the following components:
23
Market studies
Marketing projects which may include: Opening of showrooms Warehousing facility Display in international departmental stores Publicity campaign Participation in trade fairs, BSMs etc., abroad Research and product development Reverse visits of the prominent foreign buyers etc. from the project focus counties Export potential survey of the States Registration charges for product registration abroad for Pharmaceuticals, Biotechnology and Agro-Chemicals. Testing charges for Engineering products abroad Cottage and Handicrafts units for similar activities and for developing the web site for virtual exhibition. Studies on WTO related matters Industrial clusters for marketing studies, participation in trade fairs etc. abroad Box 4.1 : Additional Activities included in the MAI Scheme
1. 2. 3. 4. 5. 6. 7.

National Level Participation & Organising Trade Festival of India, BSMs abroad. Publication of World Class Catalogues Publicity Campaign and Brand Promotion Research and Product Development Assistance for up-gradation of Laboratories, in Universities, Research Institutions, National Level Institutions for fulfilling Sanitary and Phyto Sanitary (SPS) measures related testing Capacity building of exporters for export related matters and product upgradation Developing Common facility Centres, Design Centres etc. Hiring consultant/designers in the prospective/buyer country Anti Dumping, Anti Money Laundering and other investigations/compliances. Studies on WTO related matters and JSG/FTA/RTA Studies Project Development
24
Box 4.2 - New Agencies eligible under MAI Scheme

Indian Missions National Level institutions like IITs, IIM, NIDs, NIFT etc Research Institutions, universities and recognized laboratories
Any project/study which the Empowered Committee feels would further the objectives of the Scheme. The Scheme has been revised during the current year by adding of more activities relating to marketing projects, capacity building, support for statutory compliance, studies and project development etc. and more agencies have been made eligible for assistance under the scheme. Details about outlays during 2002-2007 and actual expenditure are given below: (Rs. Lakh) Year 2002-03 2003-04 2004-05 2005-06 2006-07 4200 4400 10244 4000 4000 Budget 1086 900 484 1991 2669 (up to December) Actual
Marketing Development Assistance (MDA) To facilitate various measures being undertaken to stimulate and diversify the country's export trade, Marketing Development Assistance (MDA) Scheme is under operation in the Department of Commerce. The Scheme supports the under mentioned activities:

Assist individual exporters for export promotion activities abroad. Assist Export Promotion Councils (EPCs) to undertake export promotion
25
activities for their product(s) and commodities Assist approved organisations/trade bodies in undertaking limited exclusive non-recurring innovative activities connected with export promotion efforts for their members. Assist Focus Area export promotion programmes in specific regions abroad like Focus LAC, Focus Africa, Focus CIS and ASEAN+2 programmes. Promote residual essential activities connected with marketing promotion efforts abroad.
Eligible Agencies

Recognised Export Promotion Councils (EPCs). Exporting companies with an f.o.b. value of exports of upto Rs.15.00 crore in the preceding year Export Promotion Agencies like ITPO, FIEO, KVIC
Details about outlays during 2002-2007 and actual expenditure are given below: (Rs. Lakh) Year 2002-03 2003-04 2004-05 2005-06 2006-07 Budget 4500.00 5200.00 5500.00 5500.00 5225.00(RE) 4484.91 5200.00 5500.00 3847.00 3113.00 (up to December 2006) During the year 2006-07, the Indian Oilseeds and Produce Exporters Association (IOPEA) was approved as an Export Promotion Council for the Deoiled Cake and meals, Oilseeds and Edible Oils other than those dealt by Shellac EPC. Khadi and Village Industries Commission (KVIC) has been accorded a deemed EPC status and will be extended assistance on the pattern of an umbrella EPC like FIEO. KVIC's proposals for participation in International Fairs, organizing BSMs etc. would be approved, as per admissibility under
26
Actual
MDA/MAI guidelines. J&K Chamber of Commerce was also assisted for the first time to participate in International Fairs/exhibitions under MAI scheme. Export Credit Guarantee Corporation of India Limited (ECGC) The Corporation was established in 1957 as the Export Risk Insurance Corporation Limited. Keeping in view the wider role played by the Corporation, the name was changed to Export Credit Guarantee Corporation of India Limited (ECGC). The ECGC is the premier organisation in the country, which offers credit risk insurance cover to exporters, banks, etc. The primary objective of the Corporation is to promote the country's exports by covering the risk of export on credit. It provides (a) a range of insurance covers to Indian exporters against the risk of non realisation of export proceeds due to commercial or political causes and (b) different types of guarantees to banks and other financial institutions to enable them to extend credit facilities to exporters on liberal basis. Achievements of ECGC during 2005-06 Transfer guarantees are issued to banks in India which add confirmation to letters of credit and such guarantees protect banks against loss that may be sustained due to default of banks are certain political risks. The total value of shipment declared under the scheme amounted to Rs. 37590.19 crore as compared to Rs. 35,987.01 crore in 2004-05 recording a growth of 4.45 per cent, The total premium income during the year amounted to Rs. 577.33 crore as compared to 515.54 crore in 2004-05 registering a growth 11.99 per cent. The amount contributed to growth came from short term guarantee business which amounted for 67.25 per cent of the total premium income followed by short term policy sector including factoring which contribute to 28.28 per cent. Income from medium and long term sector amounts to Rs. 25.79 crore which is 4.47 per cent of the total premium income. The total gross income of the Corporation amounted to Rs. 705.48 crore compared to Rs. 591.07 crore for the previous year. The premium income was Rs. 543.05 crore against Rs. 476.13 crore for the previous year. Other income for the year was Rs. 162.44 crore as against Rs. 114.05 crore for the previous year. The total expenditure came to Rs. 362.91 crore comprising of Rs. 249.63 crore
27
by way of net claims paid and provisions for liability, Rs. 113.28 crore being administrative expenditure and write offs including depreciation. The year ended with a profit of Rs. 343.57 crore before tax as compared to Rs. 119.51 crore for the previous year. The Corporation declared and paid a dividend of Rs. 45.35 crore for the year 2005-06 as compared to Rs. 15.23 crore for the previous year. National Export Insurance Account (NEIA) A separate Fund with a corpus of Rs. 2,000.00 crore called the National Export Insurance Account (NEIA) was set up with the approval of the Cabinet Committee on Economic Affairs (CCEA) in its meeting held on 24.01.2006. The objective of NEIA is to promote project exports from India, which may not take place but for the support of a credit risk insurance cover in the following cases:

High risk on a single country High value of a single transaction Large valued projects involving unusual or unconventional credit terms, which are beyond the normal, risk bearing capacity of ECGC. The progress achieved during the current year is given below: The NEIA Trust was registered with an initial corpus of Rs. 66 crore under Bombay Public Trust Act, 1950 on 8th May, 2006. The second installment of Rs. 180 crore was received on 10th October, 2006 taking the total amount of funds to Rs. 246 crore. The Corpus is expected to be enhanced to Rs. 2000 crore by the end of the 11th Plan period. Projects fulfilling following criteria will receive NEIA support:
1. The project by itself should be commercially viable. 2. The project should be strategically important for India, with regard to the economic and political relationship of India with the project country. 3. The exporter should be capable of executing the contract, as evident from his previous track record. 4. ECGC is not able to cover the project on its own, due to its underwriting constraints.
TCIL's Angola Project has been approved in principle provided Government of India backed Line of Credit to Angola does not materialize. The value of the Angola project is US$ 10 million. Other projects are under consideration.
28
India Brand Equity Foundation (IBEF) The India Brand Equity Foundation is working as a public-private partnership with the Confederation of Indian Industry. The activities undertaken by the IBEF during the year are given below:
"India Everywhere" campaign was successfully launched at the Annual Meeting of the World Economic Forum in Davos, Singapore at the "Celebrating India in Singapore Week" and "Hannover Fair". The IBEF's partnership with the World Economic Forum was carried forward and extended to initiatives in the markets of China and Japan. Organised an Indo-German Business Summit at Hannover. Over the following months, business audiences across markets to Japan, UK, Belgium, China, Brazil and Italy were engaged. Show cased a business exhibition at the European Parliament in Brussels on contemporary India. Business seminars were organised in collaboration with Ministry of Finance during the 39th Annual Meeting of the Board of Governors of ADB held in May, 2006 in Hyderabad and India Economic Summit held in November, 2006 in New Delhi.
The film titled "Young and Resurgent India" was screened on a gratis basis by BBC World, Doordarshan, Aaj Tak, Zee and CNN IBN channels.

Indian economic studies on States of India were prepared highlighting the business trends and key opportunities. Engaged with academic delegations as well as international journalists from across markets USA, Sweden, Brazil, Brussels, Germany, Italy and South Africa. Prominent among the former were inter-actions with the Kellog School of Management, Dakin University, Stockholm University School of Business, Babcock School of Business. Developed a website for the Ministry of Finance to promote investment in infrastructure projects in India. The website was launched on December 21, 2006.
Trade Finance Trade Finance coordinates the pre-budget proposals received from Apex Industry Associations/Chambers of Commerce, Export Promotion Councils, Commodity Boards, Federation of Exporters' Organizations, individuals companies, etc. The Department through the Export-Import Bank of India and in line with the trading opportunities proactively endeavored to enhance the competitiveness of Indian exporters while also striving to ensure that Banks' activities and financing initiatives keep pace with the discerning requirements of
29
industry and trade. Taking into consideration our trading requirements, the Department has taken up the matter with the Ministry of Finance for opening new branches or upgrading the status of the existing branches of Indian Banks abroad and of Foreign Banks in India. At the initiative of the Department, the RBI has taken the decision to continue the existing Rupee Export Credit Interest Rates up to 30 April, 2007 with a view to assist the exporters. With a view to help the exporters, representations/complaints involving export credit/exchange control matters were also taken up with the Ministry of Finance and the Reserve Bank of India. A Working Group consisting of the RBI, select banks and export organizations was set up in April, 2005 on export credit. The function of this group is to review (i) action taken on exporters' satisfaction survey, (ii) existing procedures for export credit, (iii) Gold Card Scheme, (iv) export credit for non-star exporters, and (v) the current interest rate regulations in export credit. The Working Group had recommended several measures to improve customer service. In the light of the recommendations, RBI has issued instructions to banks, the important ones are given below: Review of the existing procedure for export credit 1. There is a need for attitudinal change in the approach of banks' officials in small and medium exporters. Banks may take suitable steps in this regard. 2. Banks should put in place a control and reporting mechanism to ensure that the applications for export credit especially from Small and Medium Exporters are disposed of within the prescribed time frame. 3. Small and Medium Exporters especially in the upcountry centers should be properly trained by SSI/export organizations with technical assistance from banks regarding correct filling up of forms. State Level Export Promotion Committees (SLEPCs) which have been reconstituted as sub-committees of the SLBCs should play a greater role in promoting coordination between banks and exporters. Review of the Gold Card Scheme 1. Since the number of Gold cards issued by banks is low, banks were advised to speed up the process of issue of the Cards to all the eligible exporters especially the SME exporters. 2. Simplified procedure for issue of Gold Cards as envisaged under the scheme should be implemented by all banks.
30
Review of export credit for non-star exporters
Banks should post nodal officers at Regional / Zonal Offices major branches for attending to credit related problems of SME exporters.
Review of other issues 1. The interest rates prescribed by RBI are ceiling rates. Since the banks are at liberty to charge lesser rates of interest, banks may consider extending export credit at rates lesser than the ceiling rates prescribed by RBI. 2. Banks should give priority for the foreign currency export credit requirements of exporters over foreign currency loans to non-exporter borrowers. Interest on export credit in Foreign Currency 1. As recommended by the Working Group the ceiling rate of interest on export credit in foreign currency by banks was revised to LIBOR plus 100 basis points w.e.f. April 18, 2006 from the existing ceiling rate of LIBOR plus 75 basis points. eTrade Project The community project `eTrade' is being pursued in various trade regulatory and facilitating agencies like Customs, DGFT, Ports, Airports, RBI, Export Promotion Organisations (EPO), Exporters, Importers, Agents, CONCOR and Banks. The objectives of this project are to facilitate electronic delivery of services; to simplify procedures; to provide 24 hour access to users with their partners; to make procedure transparent; to reduce the transaction cost and time and to introduce international standards and best practices. The project has witnessed good progress over the year and one of the major achievements was operationalisation of web based system for electronic interface between Airports Authority of India and importers, exporters, airlines, agents etc. All export transactions are done through this system at the airports of Delhi, Chennai, Mumbai and Kolkata. The import cycle is also being streamlined. Similarly CONCOR has operationalised the web based system for e-filing of documents by its community partners at Tuglakabad. The electronic data interchange (EDI) system for express courier is under development. The Department organized the 9th United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) Forum meeting from 2-6 October, 2006 along with the United Nations Electronic Trade Document (UNeDocs) workshop from 3-4 October, 2006 at New Delhi. This was attended by around
31
275 participants from twenty eight countries around the world. The focus of the five day event was the development and simplification of electronic data interchange, e-business and administrative processes in most of public and private sectors such as finance, health, business, environment, and so on. Important Initiatives taken by EPCs With a view to boost exports, the government provides various incentives and promotional schemes through its Commodity Boards/Councils for infrastructure development, quality and quality control, market development and promotion, packaging, publicity, information dissemination etc. Some of the initiatives undertaken are given as under: Shellac & Minor Forest Produce With a view to strengthen the backward linkages for exports, the Shellac EPC is undertaking projects on expansion of cultivation of several Minor Forest Produce (MFP) including Lac, Guar, Cheronjee, in existing areas and extension of their cultivation to new areas as well. To generate employment and income from these activities at grass root level, the Council aims at forming 5,300 SHGs in 8 MFP producing States, in association with respective State governments, and with fund support from various centrally sponsored schemes like Swarnajayanti Gram Swarojgar Yojana (SGSY). The Department of Rural Development has given in-principle approval to the following 4 special projects:
Proposal for Guar Swarojgar Programe in Haryana, Rajasthan, and Gujarat. The project aims at increasing 50 per cent guar seed production and guar gum export in 5 years, providing income of Rs. 15,000 per Beneficiary per year. Proposal for Lac Swarojgar Programe in West Bengal, Orissa, Andhra Pradesh and Chattisgarh. The project aims at increasing lac production and Shellac exports by 2011, providing income of Rs. 15,000 per Beneficiary per year. Proposal for Lac Swarojgar Programme in Patalkot and Chhindwara areas of Madhya Pradesh. The project aims at increasing the lac production by 4.75 lakh kgs in India by 2011, providing income of Rs. 14,500 per Beneficiary per year. Proposal for Cheronjee Swarojgar Programe in Amarwara region of Chhindwara district of Madhya Pradesh. The project aims at increasing Cheronjee production by 1000 MT in India by 2011, providing income of Rs. 11,000 per Beneficiary per year.
As part of its mission of enhancing Industry competency and spinoff benefits of employment generation amongst weaker sections of society attached with MFP,
32
SHEFEXIL has also undertaken the second step by initiating a pilot project successfully in Lac cultivation in Purulia, which is the Lac growing district in West Bengal. It is targeted to benefit 600 SHGs in Purulia, in association with Department of Panchayats and Rural development, Government of West Bengal. Out of this, the Council has already helped set up 300 SHGs in the area, most of which are run by women. It has already set up a Broodlac Farm, in that area. Engineering Exports The Engineering Export Promotion Council (EEPC) had released funds for various export promotion activities such as holding buyer-seller meets, organizing and participating in exhibitions abroad, conducting market surveys and for providing services to exporters of engineering products through its offices abroad, etc. under the General and Focus Area Programme. During 2006-07, the EEPC organized the following important events:

Hannover Fair, Hannover, Germany April 24-28 India Pavillion at INTERPHEX, Singapore June 27-29 Automechanika Frankfurt September 2-17 India Pavillion at SAITEX, Johannesburg October 10-13 INDEE Cairo November 23-26
The India Pavillion at the Hannover Fair 2006 was jointly inaugurated by Dr. Manmohan Singh, Hon'ble Prime Minister of India and Dr. Angela Merkel, Hon'ble Chancellor of Federal Republic of Germany on 23rd April, 2006. 315 Indian entrepreneurs, both from PSUs and Public Sector, showcased the advancement of Indian technology. Besides, there was state level participation from Governments of West Bangal, Orissa, Jharkhand, Gujarat and Karnataka. A series of Business Summits, Conferences and Seminars were organized during the exhibition. A Memorandum of Understanding (MoU) was also signed between EEPC and German Engineering Federation (VDMA) on 27th April to promote business trade between India and Germany. The Indian Engineering Exhibition (INDEE) was held in Cairo, Egypt from 23rd to 26th November 2006. INDEE-Cairo opened a new vista in trade relations between the two countries and has provided an ideal platform for exporters of engineering products and services to address the highly potential and ever-growing market of Egypt, Middle East and other North African (MENA) region. Major exhibits on display in INDEE included automotive components, hand tools, cutting tools, pharmaceutical machinery, electrical appliances, fasteners, pumps, diesel engines, gears & gear boxes, castings & forgings, stainless steel utensils, railway track fitting etc.
33
Gems and Jewellery Gems & Jewellery has been identified as a thrust sector in the Foreign Trade Policy. The Annual Supplement to the Foreign Trade Policy issued on 7th April, 2006 has extended the following facilities to this sector: (i) Import of gold of 8 carat and above has been allowed under the replenishment scheme subject to the import being accompanied by an Assay Certificate specifying the purity, weight and alloy content. (ii) Duty Free import entitlement of consumables for metals other than Gold, Platinum to be 2 per cent of FOB value of exports during the previous financial year. (iii) Duty free import entitlement of commercial samples to be Rs. 300,000. (iv) Duty free re-import entitlement for rejected jewellery to be 2 per cent of the FOB value of exports. (v) Cutting and polishing of gems and jewellery, to be treated as manufacturing for the purposes of exemption under Section 10A of the Income Tax Act. (vi) Import of precious metal scrap / used jewellery has been allowed for melting, refining and re-export of jewellery. However, such import will not be allowed through hand baggage. (vii) Gem & Jewellery exporters have been allowed to export jewellery on consignment basis. Box No.4.2-Kimberley Process Certification Scheme The Kimberley Process Certification Scheme (KPCS) is an international certification scheme aimed at preventing conflict diamonds from entering the legitimate trade, from funding conflicts and from fueling human rights abuses, in terms of UN resolution No.55/56 (2000). At present KPCS has 71 MemberStates (including EU). India is one of the founding members of the KPCS. India has been unanimously selected as Vice-Chair for the year 2007 in the Plenary of KPCS held in Botswana in November 2006. India will automatically assume Chair of the JPCS in January, 2008 for a period of one year. (viii) Gem & Jewellery exporters have been allowed to export cut and polished precious and semi-precious stones for treatment and re-import. (ix) Value addition norms for different categories of gems and jewellery
34
products have been reduced. During the year 2006-07, the Gem and Jewellery Export Promotion Council (GJEPC) participated in various exhibitions in India and abroad given as below:

International Jewellery Tokyo (IJT) 2006, Tokyo, Japan Vicenza Oro 1 at Vicenza, Italy Bangkok Gems and Jewellery Fair, Bangkok, Thailand Hong Kong International Jewellery Show 2006, Hong Kong OROGEMMA 2005, Vicenza, Italy Jewellery Arabia 2005, Bahrain The Council promoted the image of Indian gem and jewellery products abroad in print media through release of advertisements and organized India International Jewellery Show (IIJS) 2006 in Mumbai During 2006, India participated in Inter-Sessional and Plenary Meetings of Kimberley Process Certification Scheme (KPCS) 2006 in Gaborone, Botswana.
Services Exports In order to give proper direction, guidance and encouragement to the Services Sector, the Government on the recommendations of a Task Force constituted in this regard has announced setting up of an exclusive Export Promotion Council for Services (SEPC). The Government has initially identified the following 11 services sectors being supported through the SEPC:

Health Care Services, Educational Services; Entertainment Services; Consultancy Services; Architectural Services/Interior Decoration; Distribution Services; Accounting/Auditing and Book Keeping Maritime Transport Services; Marketing Research & Management Services; Printing and Publishing Legal Services
35
Current measures taken by the government of india to control the loosing depreciation of money. Why has govt failed to arrest rupee's free fall? Tuesday, Aug 20, 2013, 12:11 IST | Place: New Delhi | Agency: Zee Media Bureau Ajeet Kumar & Reema Sharma RBI's recent intervention did precious little to save rupee from depreciating further. India's currency has lost 13 percent against the dollar this year.
The government has taken many steps to contain the free fall of rupee in the past few days but has failed to check the slide. Slumping further, the rupee tested new record low of 64 versus the US dollar. Reserve Bank of Indias (RBIs) recent intervention did precious little to save rupee from depreciating further. India's currency has lost 13 percent against the dollar this year.
36
In order to arrest the rupee slide, RBI last week had announced measures such as restriction on Indian firms investing abroad and on outward remittances by resident Indians, triggering talks of return of capital control regime. At the Interbank Foreign Exchange (Forex) market, the rupee on Tuesday fell past 64 mark to trade at fresh low of 64.11, down by 98 paise, or over 1.5 percent. What are the reasons that have impeded the efforts of the government in tackling rupee fall? Why cant the government check the depreciation of rupee? Why have even RBI measures aimed at tightening liquidity failed to give a boost to the staggering rupee? These are a few questions that continue to crop up every time rupee crashes to newer lows. Worsening current account deficit High Current Account Deficit (CAD) is the main reason that has continuously impeded all efforts of government in arrest the fall of rupee. India posted a record current account deficit of 4.8 percent of gross domestic product (GDP) in the year ending March. Governments failure to explore new destinations has led to poor growth of exports. In the absence of a single window clearance system and process delays, exports have failed to register good growth. Even traditional export areas have failed to show resilience making Indian produce globally less competitive. Insufficient FDI inflows Despite all the decisions to allow major reforms in India, the government has failed to tap major FDI inflow in the country. Instead, India has witnessed withdrawal of major projects by global giants like ArcelorMittal and Posco. Posco pulled out of its Rs 30,000 crore steel plant project in Karnataka followed by ArcelorMittal that scrapped its USD 12 billion (Rs 50,000 crore) steel plant
37
project which it was planning to set up in Odisha. Inordinate delays, land acquisition problems, government clearance delays, lack of promptness have all contributed to the withdrawal of major companies. Last year Indian companies spent more overseas than Foreign Investors in India. FII outflows Overseas investors have pulled out nearly Rs 18,500 crore (about USD 3 billion) from the Indian capital markets in July. In their highest monthly outflow, overseas investors pulled out a record Rs 44,162 crore (over USD 7.5 billion) in the month of June. Outflows of FIIs have put a continuous pressure on rupee not allowing it to come out of the slump. Meanwhile, leading global bank Goldman Sachs has downgraded Indian stocks to underweight and recommended investors to stay selective on concerns of economic growth recovery. Rising Import bill Rising import bill (arising out of gold) is also a major factor that has curtailed governments effort to tackle the fall of rupee. Gold contributes to over 10 percent of the total import bill. Gold imports were 141 tonnes in April and rose to 162 tonnes in May. Due to certain government measures gold imports declined significantly to 31 tonnes in June but could not be held for the month of July. For the first 25 days of July, the imports stood at 45 tonnes. Overall economic contraction Poor economic growth in the manufacturing, agricultural and mining sector has dented investor sentiment and they have become wary of investing in India. Reflecting a persistent slowdown, industrial production in June contracted by 2.2 percent. Last month RBI cut its growth forecast to 5.5 percent for the fiscal year, from 5.7 percent. Unless a better sentiment prevails, confidence in the rupee will stay shattered.
38
Strengthening of dollar overseas In the year to date US dollar index strengthened by 1.91 percent. The strengthening of dollar is beyond governments control which is ultimately hammering the Indian currency. Gradual recovery in US economy coupled with rising expectations that Federal Reserve will withdraw its stimulus package soon is underpinning the US dollar index. However one must not be completely cynical about bouncing back of rupee. A medium to short-term approach towards growth has to be adopted by the government. Constant efforts of the government might bring a very marginal respite for the rupee, but to bring it back to 55-level will be an uphill struggle.
39
Composition of Exports of Indian Foreign Trade NIRAV S The principal exports of India may be grouped into: (i) Agriculture and allied products, (ii) Ores and minerals (excluding coal), (iii) Manufactured goods, (iv) Mineral fuels and lubricants (including coal), and (v) Others. The following observations are made regarding the changing structure of imports of India over the years. 1. Agriculture and Allied Products: The importance of agriculture and allied products in India's exports has been declining. The share of agriculture and allied products in total exports has declined substantially from 44 per cent in 1960-61 to 30.7 per cent in 1980-81 and further to 17.6 per cent in 1992-93. This implies that gradually India is becoming less and less a primary goods exporting country. 2. Manufactured Goods: The importance of manufactured goods in India's exports is increasing day-byday. The share of manufactured goods in India's total exports has increased from 45 percent in 1960-61 to nearly 56 per cent in 1980-81 and further to 76.1 per cent in 1992-93. This reflects the changing production structure of Indian economy. It suggests that India is on the march towards becoming a more vibrant industrial economy. In the beginning of the planning era, India's exports mainly consisted of jute, tea and cotton textiles. Their combined share was more than 50 per cent in the country's total exports. This has come down to 10 per cent in 1992-93. On the other hand, the share of engineering products went up from 3.4 per cent in 1960-61 to 13.2 per cent in 1992-93. This reflects upon the industrial progress made by India. 3. Non-Traditional Items: In recent years, export of readymade garments has emerged as an important foreign exchange earner. The export value of ready-made garments has increased from a meagre Rs. 29 crores in 1970-71 to Rs. 6,931 crores in 199293. Similarly, export of chemicals and allied products has also increased from Rs. 29 crores in 1970-71 to Rs. 3,991 crores in 1992-93. Likewise, export value of leather and leather goods amounted to Rs. 3,700 crores in 1992-93. Besides, exports of Indian handicrafts and jewelleries have substantially expanded during the last two decades. The export value of Indian handicrafts has increased from Rs. 70 crores in 1970- 71 to Rs. 8,346 crores in 1991-92. So
40
also the value of exports of gems and jewelleries has increased to Rs. 6,750 crores in 1991-92. In short, India's exports have considerably become diverse in recent years. Many new and non-traditional items have appeared on the scene. Today, India is exporting nearly 3,000 items as against just 50 items at the inception of planning era in 1951. Nonetheless, the star performers of Indian export scene have traditionally been fabrics, garments, gems and jewellery, leather goods, chemicals and engineering products. 4. Direction of India 's Foreign Trade : Direction of India's foreign trade is studied in relation to the country's proportion of exports to different countries and her proportionate imports from different countries. To study India's direction of foreign trade, her trading partners have been grouped into five major categories: (i) Organisation for Economic Co-operation and Development (OECD) countries; (ii) Organisation of Petroleum Export Countries (OPEC); (iii) Eastern Europe (EE); (iv) Less Developed Countries (LDCs)-(excluding OPEC); and (v) Others. 1. The OECD is the largest trading partner of India. 2. The share of this group in India's total exports accounted for over 60 per cent in 1960-61. This had, however, declined to 46 per cent in 1980-81. Thereafter, it again rose to 53.5 per cent in 1990-91 and further to over 60 per cent in 199293. 3. The U.S.A. is a major trading partner of India. The share of the U.S.A. in India's total exports was 13.5 per cent in 1960-61 which has increased to 18.1 per cent in 1980-81 and further to 18.8 per cent in 1992-93. 4. The share of OECD in India's imports was 78 per cent in 1960-61. This, however, declined to 45.7 per cent in 1980-81. It again picked up to 55.5 per cent in 1992-93. 5. The share of the U.S.A. in India's imports was over 29 per cent in 1960-61. This, however, declined to 12.9 per cent in 1980-81 and remained steady at this level thereafter. 6. Since independence till the sixties, the UK was a major trading partner of India. The share of U.K. in India's total exports was nearly 27 per cent in 196061 which sharply declined to about 6 percent in 1980-81. It marginally improved to 6.5 percent in 1990-91. Likewise, the share of the U.K. in India's imports also declined to 6.7 per cent in 1990-91 as against that of 19.4 per cent in 1960-61.
41
7. India's trade relations with Japan have improved over the years. The share of Japan in India's exports has increased about two-fold from 5.5 per cent in 196061 to 9.3 per cent in 1990-91. Likewise, the share of Japan in India's imports increased from 5.4 per cent in 1960-61 to 7.5 per cent in 1992-93 and further to 8.5 per cent in 1992-93. 8. Over the years, India's trade relations with OPEC have improved considerably. The share of OPEC in India's exports has more than doubled between 1960-61 and 1980-81. But, due to a rise in oil prices and India's growing imports of oil, the share of OPEC in India's imports has increased almost seven-fold. In 1992-93, the share of OPEC in India's exports was 9.6 per cent and its share in India's imports was 21.7 per cent. 9. India's trade with Eastern Europe sharply increased between 1960-61 and 1980-81, but it declined sharply by 1992-93. The share of Eastern Europe in India's exports came down to 4.2 per cent in 1992-93 from the high of 22.1 per cent in 1980-81. Similarly, its share in India's import declined from 10.3 per cent in 1980-81 to 2.5 per cent in 1992-93. This has been largely due to the disintegration of the Soviet blocs and the collapse of the socialist economic system, especially in Russia in the early nineties. India's trade relations with the erstwhile U.S.S.R., Yugoslavia, Bulgaria, Romania, etc. now Commonwealth of Independent Slates are undergoing a severe change in recent years. Exports to Russia came down to 3 per cent in 1992-93 from 16 per cent of India's total exports in 1990-93. 10. Over the years, India's trade relations with the less developed countries of Asia and Africa have improved. Especially, the share of Asian countries in India's exports has increased from about 7 per cent in 1960-61 to 17 per cent in 1992-93. 11. India's exports to the Rupee Payment Area (mainly markets of erstwhile Soviet Union) declined to 42 per cent in 1991-92 and further to 62 per cent in 1992-93. On the other hand, India's exports to General Currency Area (GCA) increased by 10.8 per cent in dollar terms during 1992-93 which was a distinct improvement over about 6 per cent growth in 1991-92. 12. In recent years, India's exports to selected East Asian countries such as Malaysia, Hong Kong, South Korea, Singapore, Thailand and Taiwan have
42
boomed. As mentioned in the Economic Survey 1993-94, the percentage export growth in these countries is about three times of their overall export growth. Concluding Remarks : Export-led growth is the current strategy of India's economic policy towards globalisation of the economy. Indian exports should acquire a high degree of competitiveness in the world markets. For this, adequate supplies of exportable need to be assured, besides the pursurance of sound fiscal and monetary policies. To push up exports India needs a further diversification of foreign trade. Over 40 per cent of India's exports have been concentrated among a few countries such as USA, Japan, UK and West Germany, while, over 60 per cent of our imports are from 10 countries, including France, Hong Kong, Singapore, Iraq, Iran and Saudi Arabia. Asia and Oceanic, which continue to be the largest market for our exports accounting for over 30 per cent. Trade statistics reveal that India depends more on the developed countries for its major proportion of exports as well as imports. India's exports and imports from developing countries do not grow at a significant rate. Further, while trading with developed countries, India's terms of trade are mostly unfavourable. Hence, India is rather a losing partner in its trade with developed countries. As such, larger trade with developed countries would mean more exploitation or resource drain and this cannot be an engine of growth. What is wanted is that India should concentrate more on improving trade relations with the developing countries. In fact, developing countries do possess problems like non-tariff barriers, inadequate tariff-concessions and with a strong political will for economic integration. India can succeed in developing good trade relations with developing countries of the south and neighbouring areas
43
The Direction of Indias Foreign Trade | Export Management By Smriti Chand Export Management This article provides information about the direction of Indias Foreign Trade! Direction of foreign trade means the countries to which India exports its goods and the countries from which it imports. Thus direction consists of destination of exports and sources of our imports. Prior to our Independence when India was under British rule, much of our trade was done with Britain. Therefore, UK used to hold the first position in Indias foreign trade. However, after Independence, new trade relationships were established. Now USA has emerged as the most important trading partner followed by Germany, Japan and UK. India is also making efforts to increase the exports to other countries also the direction of Indias exports and imports. Share of major destinations of Indias exports and sources of imports during 2009-10 (April-September) are given in figure 3.6 and 3.7 respectively:
During the period 2009-10 (April-September), the share of Asia and ASEAN region comprising South Asia, East Asia, Mid-Eastern and Gulf countries accounted for 55.0 per cent of Indias total exports. The share of Europe and America in Indias exports stood at 21.4 per cent and 15.3 per cent respectively of which EU countries (27) comprises 20.0 per cent. During the period United Arab Emirates (14.4 per cent) has been the most important country of export destination followed by U.S.A. (11.5 per cent), China (5.1 per cent), Hong Kong (4.5 per cent), Singapore (4.3 per cent), Netherlands (3.7 per cent), U.K.
44
(3.7 per cent), Germany (3.1 per cent), Saudi Arabia (2.7 per cent) and Belgium (2.1 per cent).
Asia and ASEAN accounted for 61.3 per cent of Indias total imports during the period followed by Europe (19.1 per cent) and America (9.4 per cent). Among individual countries the share of China stood highest at (12.0 per cent) followed by U.S.A. (6.0 per cent), U.A.E. (6.0 per cent), Saudi Arabia (5.5 per cent), Iran (4.5 per cent), Switzerland (4.4 per cent), Germany (3.8 per cent), Kuwait (2.9 per cent), Nigeria (2.5 per cent), and Iraq (2.3 per cent). Import of Sensitive Items during April 09-September 09: The total import of sensitive items for the period April-September 2009- 10 has been Rs 29,256.29 crore as compared to Rs 21,186.61 crore during the corresponding period of last year thereby showing an increase of 38.1%. The gross import of all commodities during same period of current year was Rs 7, 90,644 crore as compared to Rs 6, 05,075 crore during the same period of last year. Thus import of sensitive items constitutes 2.7% and 4.8% of the gross imports during last year and current year respectively. Imports of automobiles, cotton and silk, products of SSI alcoholic beverages and food grains have shown a decline at broad group level during the period. Imports of all other items, viz., edible oil, pulses, fruits and vegetables (including nuts), rubber, spices, marble and granite, tea and coffee, and milk and milk products have shown increase during the period under reference. In the edible oil segment, the import has increased from Rs 6,265.69 crore last year to 1,831.43 crore for the corresponding period of this year. The imports of both crude edible oil as well as refined oil have gone up by 97% and 55%
45
respectively. The increase in edible oil import is mainly due to substantial increase in import of crude palm oil and its fractions. Imports of sensitive items from Indonesia, Myanmar, Brazil, Malaysia, United States of America, Japan, Canada, Ukraine, Argentina, Australia, Benin, Guinea Bissau, etc., have gone-up while those from China PRP, Korea RP, Germany, Thailand, Cote D Ivoire, Czech Republic, etc., have shown a decrease.
46
11 Main Features of Volume, Composition and Direction of Indias Foreign Trade By Smriti Chand Foreign Trade The features of Volume, Composition and Direction of Indias Foreign Trade are as follows: 1) Increasing Share of Gross National Income: Indias foreign trade plays an important role in the Gross National Income. In 1990-91, share of Indias foreign trade (import export) in net national income was 17 per cent which in 2006-07 rose to 25 per cent. In 2006-07 exports and imports as percentage of GDP were 14.0 per cent and 21 per cent respectively. 2) Less Percentage of World Trade: Share of Indias foreign trade in world trade has been declining. In 1950 -51, Indias share in total import trade of the world was 1.8 per cent and in export trade it was 2 per cent. According to World Trade Statistics, Indias share in world trade has gone-up from 1.4 per cent in 2004 to 1.5 per cent in 2006 and estimated to be 2 per cent in 2009. 3) Oceanic Trade: Most of Indias trade is by sea, India has very little trade relations with its neighing countries like Nepal, Afghanistan, Myanmar, Sri Lanka, etc. Thus, 68 per cent of Indias trade is oceanic trade: Share of these neighing countries in our export trade was 21.8 per cent and in import trade 19.1 per cent. 4) Dependence on a Few Ports: For its foreign trade, India depends mostly on Mumbai, Kolkata, and Chennai ports. These ports are therefore, over-crowded. Recently, India has developed Kandla, Cochin, and Visakhapatnam ports to lessen the burden on former ports. 5) Increase in Volume and Value of Trade: Since 1990-91, volume and value of Indias foreign trade has gone up. India now exports and imports goods which are several times more in value and volume. In 1990-91, total value of Indias foreign trade was Rs 75,751 and in 2008-09, it rose to Rs 22, 15,191 crore. Of it, value of exports was Rs 8, 40,755 crore and that of imports was Rs 13, 74,436 crore.
47
6) Change in the Composition of Exports: Since independence, composition of export trade of India has undergone a change. Prior to independence, India used to export agricultural products and raw materials, like jute, cotton, tea, oil seeds, leather, food grains, cashew nuts, and mineral products. It also exported manufactured goods. But now in its export kitty are included mostly manufactured items like, machines, ready-made garments, gems and jewellery, tea, jute manufactures, Cashew Kernels, electronic goods, especially hardwares and softwares which occupy prime place in exports. 7) Change in the Composition of Imports: Since Independence, composition of Indias import trade has also witnessed a sea change. Prior to Independence, India used to import mostly consumption goods like medicines, cloth, motor vehicles, electrical goods, iron, steel, etc. Now it has been importing mostly petrol and petroleum products, machines, chemicals-, fertilizers, oil seeds, raw materials, steel, edible oils, etc. 8) Direction of Foreign Trade: It refers to the countries with whom a country trades. Main changes in the direction of foreign trade are as under: In the year 1990, in exports the maximum share, i.e., 17.9 per cent was that of Eastern Europe, i.e., Romania, East Germany, and U.S.S.R., etc. In import trade, maximum share, i.e., 16.5 per cent was that of OPEC, i.e., Iran, Iraq, Saudi Arabia, Kuwait, etc. In 2008-09, the largest share in Indias foreign trade (both imports and exports) was that of European Union (EU), i.e., Germany, Belgium, France, U.K., etc., and developing countries. Now, U.A.E., China and U.S.A. have occupied important place in Indias foreign trade. The importance of England, Russia, etc., has declined. 9) Mounting Deficit in Balance of Trade: Since 1950-51, Indias balance of trade has been continuously adverse except for two years, viz., 1972-73 and 1976-77, besides it has been mounting year after year. In 1950-51 balance of trade was adverse to the tune of Rs 2 crore and by 1990-1991 it rose to Rs 16,933 crore. After the policy of liberalization, the country has witnessed a rapid increase in it. In 1999- 2000 it rose to Rs 77,359crorc and in 2008-09 it amounted to 5, 33,680 crore. Fast rise in the value
48
of imports and slow rise in the value of exports accounted for this tremendous rise in balance of trade deficit. 10) Trend towards Globalization: Globalization and diversification mark the latest trend of Indias foreign trade. Indias foreign trade is no longer confined or a few goods or a few countries. Presently, India exports 7,500 items to about 190 countries and in its importkitty there are 6,000 items from 140 countries. It unveiled the changing pattern of Indias foreign trade. 11) Changing Role of Public Sector: Since 1991 the role of public sector in Indias foreign trade has undergone a change. Prior to it, State Trading Corporation (STC), Minerals and Metals Trading Corporation (MMTC), Handicraft and Handloom Corporation, Steel Authority of India Ltd. (SAIL), Hindustan Machine Tools (HMT), Bharat Heavy Electrical Limited (BHEL), etc., used to play significant role in Indias foreign trade. As a result of implementation of the policy of liberalization, the importance of all these public sector enterprises has diminished.
49
Causes and cures for Indias current account deficit Ashima Goyal
50
Indias CAD rises when output falls and not when demand rises. August 8, 2012: Indias current account deficit (CAD) has been a source of worry and merits deeper discussion. The CAD reached 4.2 per cent of gross domestic product (GDP) in 2011-12. As global risks rose, capital inflows were lower at 3.7 per cent, requiring the Reserve Bank of Indias (RBI) draw-down of reserves, amounting to $ 12.8 billion, to make up the difference.
EXCESS DEMAND OR SUPPLY SHOCKS? Does such a large CAD imply that the countrys aggregate demand (consumption plus investment) hugely exceeded its aggregate domestic output or income? The problem in this formulation is that 2011-12 also happened be a year when Indias GDP growth rate fell to 6.5 per cent, compared to 8.4 per cent in the previous year. Moreover, growth in aggregate demand categories like consumption and fixed investment fell from about eight to five per cent. Research at the Indira Gandhi Institute of Development Research shows the Indian CAD is countercyclical. That is, it rises when output falls and not when demand rises. This is exactly what happened last year as well. In this, India or the South Asian region is unusual. In all other emerging markets, the CAD tends to be pro-cyclical, linked to overconsumption in good times. Overconsumption, which can also be due to low policy credibility and the associated belief that good times may not last, leads to widening CADs in such times. In developed countries, the CAD exhibits no such firm relationship with income fluctuations. A countercyclical CAD in Indias case suggests dominance of external supply shocks rather than excess demand factors.
51
For example, if oil shocks raise costs, and as a result growth falls, the CAD would rise along with falling growth. It can also be due to export-led growth: As exports rise, they raise income and reduce the CAD. On the other hand, a sudden collapse of export markets, due to a global shock, reduces income and increases the CAD. In line with this analysis, 2011-12, the year of the peak CAD of 4.2 per cent of GDP, saw both a sharp rise in oil prices and fall in growth. As against this, the CAD was only 1.3 per cent in 2007-08, a year of high consumption, investment and output growth. In the first quarter of this fiscal, however, softening international oil prices have reduced the rupee value growth of oil imports, thereby implying the CAD may improve. The table shows the sharp fall in import growth in Q1 this year, compared to what it was in 2011-12.
THE ROLE OF PRICES If a CAD is not due to excess demand, can it be due to prices that encourage excess imports? A depreciation of the rupee increases the price of the countrys imports, and also makes its exports cheaper for foreigners. But this may be a blunt instrument in the Indian context, where oil and gold account for a major share of imports, while imported machinery and other intermediate goods are inputs, whose higher costs would raise production costs here. The effect of depreciation on exports is normally delayed and uncertain. Exports actually grew at double digits in 2010-11, when the rupee appreciated on the whole. The table shows export growth has been negative this year, when the currency has depreciated sharply. Diversification of the export basket and the destinations they go it, improvements in domestic supply conditions, and overall global demand conditions are more reliable export boosters than depreciation. Excess volatility in exchange rates, in fact, does not help exports. Since sharp depreciation today could be reversed tomorrow, exporters are wary. As regards reduction in imports, it is possible to achieve that by just raising the relative prices of the major imported commodities. Part of the reason why demand is inelastic is only because prices do not, or are not allowed to, adjust. The recent higher gold taxes have proved helpful. Greater pass-through of oil
52
prices can do the same, besides also serving the important goal of improving the energy efficiency of the economy. Some nominal depreciation is required to correct for Indias higher inflation rates, softening global oil prices now make it possible to absorb it without adding to inflation. But overcorrection, leading to real depreciation beyond competitive rates, will only sustain inflation.
MONETARY POLICY Specific relative prices and overall structural changes, which can improve the CAD, are in the domain of fiscal policies. What monetary policy can do is prevent excess movement of exchange rates. Excess demand, we have seen, is not driving the CAD, since growth has fallen below potential and the latter itself is falling as investment slows. Even so, the RBI cannot afford cuts in its repo rates now. Credit growth has fallen, but deposit growth has fallen even more. If banks cannot, then, reduce deposit rates post-tax real returns to them are still negative it limits the transmission of lower policy rates. Loan rates can come down only if spreads for banks reduce. Easier money market conditions can contribute to that. High food prices impact inflation expectations. It is, hence, necessary to anchor these since the monsoon is poor. Policy rates are a good instrument for this, as interest rates give a clear signal. Liquidity can, however, move in the opposite direction, to support stable credit targets and also the supply response that lowers inflation expectations. Easier liquidity is also required to compensate for the drying up of international credit sources. (The author is Professor, Indira Gandhi Institute of Development Research.) (This article was published on August 8, 2012) Keywords: current account deficit, capital inflows, GDP, Demand & Supply, money market conditions, Food prices, inflation, fixed investment
53
India's Rupee Keeps Falling and the Trade Deficit Keeps Widening By Bruce Einhorn and Kartik Goyal August 27, 2013
Drop in Indias rupee since the start of the latest quarter: -13.7 percent Its standard macroeconomics: When a countrys currency declines, its exporters should soon get a boost as the lower currency makes their goods more competitive. By that rule, India should be enjoying an export boom. Since the start of May, the currency has dropped 23 percent, making it one of the worlds worst performers. Sure enough, exports did go up in July, rising 11.6 percent year-on-year, the best increase in more than 12 months. Consumers worldwide shouldnt expect to see a surge in Made-in-India products in the coming months, however. The July increase comes after a period of weakness: Indias exports dropped 1.8 percent in the 2012-13 fiscal year. And while the currency has been steadily weakening for two years, the decline of the rupee hasnt helped narrow Indias current-account deficit. Instead, the trade gap has just gotten bigger, hitting 9 percent of gross domestic product in the first quarter. The sustained and large depreciation of the [rupee] since mid54
2011 does not appear to have had any near-term impact on the current-account deficit, Mumbai-based Goldman Sachs economist Tushar Poddar wrote in a report published on Aug. 26. Chances of a short-term rebound driven by a weaker currency are doubtful, he added. One culprit is rising prices inside India, with the consumer price index jumping 9.6 percent in July. Indias high inflation undercuts the competitiveness gains from depreciation, says Indranil Pan, chief economist at Kotak Mahindra Bank in Mumbai. Exports are unlikely to get any significant boost, he says. Any benefit [from the weak rupee] will be offset by the fact that there is a huge inflation problem in India, and the cost of manufacturing is very high for local companies. Rising costs of raw materials are making business challeng ing for Rajesh Mehta, chairman of Rajesh Exports, a Bangalore-based producer of gold and diamond jewelry. There is no big benefit for exporters, he says. A stronger and a stable currency is always better for businesses.
Fall of rupee causes impact and the role of RBI The fall of rupee vs. Dollar has created the same conundrum what the rupee appreciation caused in year 2007. However, the impact has reversed this time with exporters making appreciated revenues and the importers feeling the heat. The increased demand for dollars vis--vis the India rupee has led to a sharp depreciation with rupee falling close to 18% from the Aug 2011 levels, and hitting an all time low of 54.32/USD on 15th December 2011, making it the worst performing Asian currency of the year. Taking a closer look at these issues, the fall in rupee can be attributed primarily to 3 broad factors.
Firstly, the grim global economic outlook, essentially due to the European debt crisis. Due to turbulence in European markets, investors are considering dollars as a safe haven for their investments in the longer run. This led to an increased demand for dollars vis--vis the supply for rupee and thus the depreciation. Another line of thought could be that while investors are shifting from European markets, why are they not investing in the Indian markets? The Indian economic scenario for the entire 2011 has been plagued by high rate of inflation, hovering above 8%, and extremely low growth in manufacturing sector. The HSBC-PMI (Purchasing Managers index) fell to 51 in the month of December 2011. The cumulative effect of these factors is leading to a shift in investor sentiments towards dollar market.
55
Secondly, the fall in rupee can be largely attributed to the speculations prevailing in the markets. Due to a sharp increase in the dollar rates, importers suddenly started gasping for dollars in order to hedge their position, which led to an increased demand for dollars. On the other hand exporters kept on holding their dollar reserves, speculating that the rupee will fall further in future. This interplay between the two forces further fuelled the demand for dollars while sequestering its supply from the market. This further led to the fall in rupee. Lastly, there has been shift of FIIs (Foreign i nstitutional investors) from the Indian markets during the current financial year 2011. FIIs leads to a high inflow of dollars into the Indian market. As per a recent report, the share of Indias FII in the developing markets has decreased considerably from 19.2 % in 2010 to 3.8% in the year 2011. As FIIs are taking their investments out of the Indian markets, it has led to an increased demand for dollars, further leading to a spiraling rupee.
Encompassing all these factors, there is a lack of firm initiative by government on issues such as allowing FDI in retail. Recent debacles such as 2G have further rendered the Indian market unattractive to a certain extent.
Evaluating the impact of the falling rupee on the Indian economy The first major impact of the falling rupee can be seen on the rising import bill. India imports close to 70% of its net fuel requirements. This means the companies importing oil have to shell out more rupees for the same dollar invoices. As is clear from Fig.1 although the price of oil has gone down from $118 per barrel to $109 per barrel, not much benefit can be derived since exchange rate too shoot up from Rs. 44 to Rs. 52.7 a dollar.. Instead, the price of importing oil increased to an extend of RS 489 (as is clear from Fig2 (b)). This has severely impacted the bottom line of these companies as well as the subsidy bill of the Indian government. Huge buying of dollars from the market in order to meet the import bill has further added to the existing woes. Additionally, the falling rupee has added further to the inflationary pressures, as imports have become costlier and thus increasing the prices of key commodities such as oil, imported coal, minerals, and metals. However the falling rupee has substantially appreciated the revenues for the exporters, who receive more rupees for their dollar receipts. These industries include the IT Services industry, textiles and other export oriented industries. Increasing imbalance in trade i.e. increasing imports over exports is bound to have severe impact on countrys fiscal deficit, which is pegged to increase by .8 percentages to 5.4% of GDP from the originally estimated value of 4.6% of GDP.
56
Figure 1 oil prices and exchange rates Source RBI Role played by RBI: RBI has been extremely cautious in its intervention during the entire rupee depreciation crises. RBI has however reacted with timely interventions by selling dollars intermittently to tame sharp fall in the currency. The outflow of dollar reserves from RBI coffers has been extremely cautious, mostly due to the dwindling foreign exchange reserves. The foreign exchange reserves of India in December 2011 stood at 270 billion USD. Recently RBI has intervened with key policy initiatives such as intervening in the forward contracts policy. As per new RBI policy the cancelled forward contracts cannot be rebooked. Exporters in order to rake in more profits, were booking forward contracts, then cancelling the contracts, and again rebooking at better rate. This process led to a further depreciation in rupee and fuelled speculations. Also, RBI intermittently put trading limits for the banks in the foreign exchange market in order to tame the speculative forces. Looking at the current economic outlook, the currency crises seems to stay for a much longer period this time around. However, a structuring of Greek debt coupled with higher inflows from FIIs can lead to an arrest in the falling rupee.
57
Raghuram Rajan meets Chidambaram, discusses economic situation PTI | Oct 3, 2013, 03.56PM IST NEW DELHI: Ahead of the RBI's central board meet, the central bank chief Raghuram Rajan on Thursday met finance minister P Chidambaram and is understood to have discussed economic issues. "Our meeting was part of regular interaction that takes place between RBI and finance ministry," Rajan said after his hour long meeting with the minister and economic affairs secretary Arvind Mayaram. The central board of Reserve Bank of India will meet in Raipur on Friday to discuss key economic and financial developments. The RBI board meets at least once every quarter. The meeting would be chaired by Rajan.
The four deputy governors are the official directors on the board, while Mayaram and financial services secretary Rajiv Takru are the government nominees. There are also 11 non-official directors on RBI board. The meeting assumes significance in the wake of economic growth falling to a four year low of 4.4 per cent and current account deficit (CAD) at an elevated level of 4.9 per cent in the April-June quarter. While the government has been emphasising on measures for incentivising growth, the RBI in its policy review last month had hiked interest rates by 0.25 per cent. The RBI is scheduled to announce its second quarter policy review on October 29. Although Prime Minister Manmohan Singh and other government functionaries are expecting the growth to improve in the second half of this fiscal, Asian Development Bank in its recent report lowered India's growth projection for 2013-14 to 4.7 per cent. The economic growth rate slipped to a decade's low level of 5 per cent in 2012
58
Economy is stressed, hard decisions soon, Chidambaram says
We are going through a period of stress...We have to take some hard decisions, Chidambaram said. PTI | Sep 7, 2013, 09.00PM IST NEW DELHI: The government plans to take some "hard decisions" to trim wasteful expenditure and curb the import of inessential items to deal with the stressed economic situation, although there will be no hasty increase in petrol and diesel prices. "We are going through a period of stress...We have to take some hard decisions. Many of these measures are being taken and many measures will be announced in the next few days and weeks. Some measures to curb import of inessential items will also be announced," Finance minister Chidambaram said while winding up a debate on the Appropriation Bill in the Rajya Sabha. "When you are facing a gloomy situation, wasteful expenditure has to be curbed...You call it austerity measures, you call it cut in non-plan expenditure...while we must continue to spend and continue to find money for productive investment," he said.
On concerns expressed by members of Parliament on fuel prices, Chidambaram assured them the government will not take any decision in haste to increase diesel and petrol prices. "No decision has been taken. No decision would be taken hastily and certainly no decision will be taken without weighing the pros and cons of the larger
59
public interest," he said. On the rupee, the finance minister said the domestic currency has shown improvement in the past few days but he is keeping his fingers crossed. "We are fighting many unknown factors in the currency markets. Yes, the currency has appreciated in last 3-4 days. But I keep my fingers crossed," he said. The rupee, which fell to almost 69 against the US dollar last month, has started strengthening on the back of announcements by new RBI governor Raghuram Rajan. The rupee rose 77 paise yesterday to close at 65.24, the highest level in almost two weeks. Chidambaram also spoke about the stimulus packages, days after blaming them for the current economic mess in comments that were seen as an attack on his predecessor Pranab Mukherjee, who is now the President. "We allowed the fiscal deficit target to breach. We allowed CAD to swell. I blame nobody. We include all of us in government, we include all in Parliament," he said. Chidambaram said that like India, many countries had provided stimulus packages to help the industry tide over the impact of the global financial meltdown of 2008. The stimulus, he said, had its consequences on the fiscal deficit and the current account deficit (CAD). "We anchored growth but that resulted in some consequences. The fiscal deficit went high, to what I call unacceptable (level). CAD swelled," he said. Referring to price increases, Chidambaram said although Wholesale Price Index inflation was about 5-6%, retail inflation was high. Inflation, he said, had to be tackled by addressing supply-side constraints and removing distribution bottlenecks. "First step is to focus on supply side. Distribution side is antiquated...We have to focus on distribution system also," he added.
60
Inflation adds to headaches for RBI's new governor Raghuram's first meeting
Raghuram Rajan, who has received the sort of media attention usually reserved for Bollywood stars, stunned financial markets on his first day in the job on Sept 4 by announcing a blaze of measures to support the currency. Reuters | Sep 16, 2013, 05.48AM IST NEW DELHI: When he holds only his first policy review this week, India's new central bank chief has to confront what may well prove to be the biggest challenge of his time in office. Raghuram Rajan has already warned he does not have a "magic wand" to deal with India's economic crisis, but dubbed "The Guv" by a gushing Indian media, hopes are high he can find a formula to stabilise the rupee, calm inflationary pressure and at the same time spark a revival in economic growth. But first he will have to deal with the outcome of a pivotal meeting on Tuesday and Wednesday of the US Federal Reserve. The Fed is likely to announce measures to rein in its massive economic stimulus, an expected policy tapering that has already sparked an emerging market selloff contributing to the rupee's fall to a record low. In a reminder of the economic pressures facing the Reserve Bank of India, wholesale inflationdata on Monday is expected to show price pressures at a sixmonth high. It is the last major data point before the former IMF chief economist, who famously predicted the global financial crisis, holds his first policy meeting on Friday. "These data points will not mean much for the upcoming RBI monetary policy as their hands are tied at this stage and a lot will depend on what comes
61
out of the (Fed) meeting," said Rupa Rege Nitsure, chief economist at Bank of Baroda. The Fed is expected to reduce its $85 billion a month bond-buying programme, but financial markets are uncertain about the extent of the reduction. Concerns that India, along with other emerging markets, will see reduced capital inflows once the Fed trims its stimulus programme have been a major factor in the rupee's slump. Many analysts say the economy is more vulnerable than most because of a record current account deficit and a fiscal deficit, both bloated by the increasing cost of oil imports as global crude prices are rising. Imported inflation New Delhi is contemplating a near 10 percent hike in diesel prices soon to ease its oil subsidy burden, government officials have told Reuters. Disruption in supplies of vegetables and onions due to summer rains has exacerbated price pressures. "It looks like over the next few months WPI inflation might be headed up towards 9-10 percent," said Daniel Martin, Asia Economist at Capital Economics in Singapore. That makes the central bank's job more difficult because measures to stifle inflation, such as raising interest rates, could at the same time undermine economic growth, already strained and running at a decade low. That partly explains why the central bank has not raised its policy rate to support the rupee, unlike Brazil and Indonesia. Instead, it forced up short-term rates. Rajan, who has received the sort of media attention usually reserved for Bollywood stars, stunned financial markets on his first day in the job on Sept 4 by announcing a blaze of measures to support the currency and open up markets that triggered a rebound in the rupee and stock markets. The rupee has recovered more than 6 percent against the dollar since Sept 3. Indian stocks have gained about 8 percent since then. The euphoria spread beyond financial markets. India's top dairy brand, Amul, launched an ad slogan: "Welcome Raghuramul Rajan!".
62
How to face the current deficit situation around the globe and what measures to be taken by:IMF M.D. Christine Lagarde on oct3,2013. Managing the New Transitions in the Global Economy an Address by Christine Lagarde Managing Director, International Monetary Fund George Washington University, Washington DC, October 3, 2013 As prepared for delivery Good morning. It is a real privilege to visit one of our closest neighbors. Let me thank President Knapp for graciously hosting me, as well as Gordon Gebert and Julia Susuni for kindly inviting me. On behalf of the IMF, let me also express our appreciation to everyone at George Washington University for partnering with usand providing this venue as well as othersfor our Annual Meetings which kick off next week. I am impressed to see so many students from such diverse backgrounds in this room today. Remember, your generation will shortly inherit the global economy. Looking at your faces, I know it will be in safe hands. Let me begin by quoting Ralph Waldo Emerson, who said, Not in his goals but in his transitions is man great. This might apply to your own lives, but it also applies to the global financial crisiswhich is really the story of transitions on an epic scale. Five years ago, the global economy avoided a second Great Depression. Five years on, the journey is not yet complete, but the fog of crisis is liftingand we can see that its aftermath leaves us with multiple new transitions. Two in particular stand out: a transition in the patterns of economic growth, and a transition toward a different kind of financial sector. We at the IMF are very familiar with the ebb and flow of economic cycles, with the shift from recession to recovery. Experience tells us that this process usually
63
Christine Lagarde
takes a year or two, or a bit longer if the situation is especially severe. The transitions I am talking about today are different. They will likely play out over the rest of the decade, if not longer. They are different also because they will require not only activenational policy management, but also active international policy collaboration. So my main message today is: these new global transitions need a new global agenda. This, of course, is precisely where the IMFwith our global membership of 188 countriesis uniquely wellplaced to help. We provide a platform for global cooperation, as well as tools to support itwith our economic analysis, financial resources, and technical expertise. One thing of which I am sure: with the right policies, these transitions can be managed. But of course, they can be derailed by the wrong policies. Today, I will focus on two key transitions:
1. The transition in the pattern of economic growth with two distinct paths: o (i) advanced economies o (ii) emerging markets and developing countries; and 2. The transition toward a different financial sector 1. Transition in the pattern of economic growth (i) Advanced economies Let me start with the transition in the advanced economies. In a few days time, the IMF will release its latest economic forecasts. Overall, the global outlook remains subdued. In many of the advanced economies, however, we are finally seeing signs of hope. Growth is looking up, financial stability is returning, and fiscal accounts are looking healthier. Notwithstanding the current development to which I will return later on, nowhere is this clearer than the United States. We see it all around us. Households are in better shape, the housing sector is looking brighter, and the private sector engine is humming again. And yet, growth this year will still be too lowbelow 2 percentdue to too much
64
fiscal adjustment. This should ease up next year, with growth about a percentage point higher. The Euro Area too is going through a major transition, following a banking and sovereign crisis that threatened the very fabric of the monetary union. Now, after six quarters of recession, the region came up for air last spring, and growth should be back in positive territory next yearalmost 1 percent. Yet unemploymentat 12 percentis still far too high. In some countries, one in four people cannot find work, and one in two young people. This challenge is nested in a more sweeping transition as the Euro Area pushes on with integration, based on the belief that the strongest house is the one that is built together. We are witnessing the march of history, with evercloser European fiscal and financial integrationeven if we recognize that much more still needs to be done. Japan too is going through transitionas it seeks to overcome longstanding deflation and stagnation. The governments aggressive stimulus policy seems to be workingboosting GDP by about 1 percent. Deflation is coming to an end and a newfound optimism is in the air. Yet this Japanese effort is not complete either. What policies are needed to manage these transitions and ensure their success? Let me start with monetary policy, which I believe rescued the global economy from the abyss and put it back on the road to recovery. Central bankers pushed policy to the limit, and beyond the limitinto the terra nova of unconventional policy. Clearly, it has a different role to play in each region. Most people think that U.S. monetary policy has reached a turning point, where the exit from unconventional measures will begin soon. This turn needs to be managed very carefully. Because the normalization of monetary policy affects so many markets and people across the globe, the U.S. has a special responsibility: to implement it in an orderly way, linking it to the pace of recovery and employment; to communicate clearly; and to conduct a dialogue with others. This transition will be part of the global policy landscape
65
for some time. Beyond the United States, monetary policy might yet be called upon to do moreto further strengthen recovery in the Euro Area, and escape the deflation danger zone in Japan. What is clear is that in all regions, monetary policy has bought time and space. The key now is to use this time wisely and not waste the space. As the playwright Tom Stoppard said, look on every exit as being an entrance somewhere else. This means different things in different countries. All advanced economies need to move on a broad policy front, but with different emphasesfinancial in the Euro Area, fiscal in the United States and Japan, structural in the Euro Area and Japan. Starting with financial: we know that the recovery in many parts of Europe is still being hobbled by weak banks, high corporate debt, and a fragmented financial system. This is raising the cost of loans to small and medium enterprises by 1-2 percentage points in stressed regions. So it is imperative to restore European banks to health by assessing and filling capital shortfallsas the IMF has been recommendingand pushing ahead with banking union to make the entire edifice safer and sounder. Turning to fiscal: I have said many times before that the U.S. needs to slow down and hurry upby that I mean less fiscal adjustment today and more tomorrow. That means replacing the sequester with more back-loaded measures that do not hurt the recovery. At the same time, the U.S. needs to do more to make debt sustainable down the roadby containing the growth of entitlement spending and raising revenues. In the midst of this fiscal challenge, the ongoing political uncertainty over the budget and the debt ceiling does not help. The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the U.S. economy, but the entire global economy. So it is mission-critical that this be resolved as soon as possible. Japan also needs a credible plan to bring down its debt,
66
which is approaching 250 percent of GDPand amounts to about $90,000 for every man, woman, and child in Japan. The initial consumption tax increase is a welcome first step. Entitlement reform is the next one. Without these policy fundamentals, any gains made so far could easily melt away. The fiscal and financial efforts must be complemented bystructural reformsto make sure that policies to boost demand are supported by policies to boost supply. We know this can pay off where it matters mostin terms of growth and jobs. For the Euro Area, the IMF estimates that comprehensive and coordinated reforms of product and labor markets could boost GDP by 3 percent after five years. For Japan, increasing female participation in the labor force to match the G7 average would boost per capita GDP by 4 percent by 2030. We should remember that this group of economies accounts for about 40 percent of world GDP. So what happens in these regions has profound implications for the rest of the world. This makes engagement with the international community all the more important. National policies alone cannot do it. (ii) Emerging markets and developing countries Let me now turn to emerging markets and developing countries. Emerging markets Todays emerging markets are much stronger than in the past, having come a long way since the crises of the 80s and 90s with flexible exchange rates, higher reserves, and lower external debt. For the past five years, they drove the recovery and kept the global economy afloat accounting for three-quarters of total growth. The ultimate goal of their transition is clearliving standards that are closer to the advanced economies. They can get there, but they face new obstacles in their way. Momentum is slowing, with growth 2 percentage points lower than in 2010. A lot of this reflects the turn of the economic cycle, but part of it reflects deep-rooted structural impediments too. These countries are also facing a more challenging external environment. Over the past five years, capital flooded into
67
emerging marketspartly due to loose monetary policy in the advanced economies. Bond inflows alone rose by over $1 trillionmore than 2 percentage points of GDP a year for the recipient countries. Now, with markets getting jittery over the perceived end of easy money, this financial tide is starting to recede. This, in turn, is exposing tensions that were less visible when times were goodincluding from easy credit and growing corporate debt. By IMF estimates, the turbulence in train since last May could reduce GDP by to 1 percent in major emerging markets. Of course, some countries are more vulnerable than others. What does it mean for policies? The immediate priority is to ride out the turbulence as smoothly as possible. Currencies should be allowed to depreciate. Liquidity provision can help deal with dysfunctional market behavior. Looser monetary policy can also help, although there is less room for maneuver in countries with inflation pressuressuch as Brazil, India, Indonesia, and Russia. Likewise, there is not much space left across many emerging markets for using fiscal policy, given high debt and deficits. Some countries also need to knock down lingering barriers to long-term growthpushing ahead with infrastructure investment in places like India and Brazil, deepening financial markets, and opening up trade regimes. In this vein, China needs to keep moving to a growth path based less on creditwhich hit 180 percent of GDP this yearand more on higher productivity, higher incomes, and higher consumption. This means liberalizing interest rates, ramping up financial sector oversight, opening up protected sectors to private initiative, and further strengthening the social safety net. This emerging market transition will not be fast or easy. These countries will likely spend the rest of the decade adjusting to the new reality. As part of this adjustment, they need to keep cooperatingamong themselves and with others. Again, international collaboration is the only way forward.
68
Low-income countries The same holds true for the low-income countries. These too are in the process of profound transition. In many cases, the developing countries of yesterday are poised to become to the frontier economies of tomorrow. Sub-Saharan Africa is now the second most dynamic region in the world after developing Asia, and is getting ever closer to the beating heart of the global economy. Growth rates over the past several years have been around 5 percent. Their transition, however, is not without risk. The lowincome countries sit between the advanced country rock and the emerging market hard place. More fragility in these regions means more fragility in the low-income countries. So these countries need to take action, by having enough foreign and fiscal reserves to deploy when necessary, including by mobilizing more revenue. Beyond that, they need to make growth more inclusiveincluding by boosting public investment and making sure that all have access to decent healthcare, education, and finance. Again, this will take most of the next decade and will require deeper engagement withand the support ofthe international community and multilateral institutions like the IMF. Arab transition countries There is one more transition that I must mention: the Arab countries and their ongoing quest to build more open and inclusive societies. In this region, economic transition is deeply entwined with social and political transition, and has become increasingly challenging. Much of this is wrenching. How can we not be deeply concerned by the tragedy in Syria, when so many people have lost their lives or homes? Through this, we must help them to keep up the drumbeat for economic reform. This means breaking down vested interests so that the energy of the private sector can be released to help create jobs for all who need them. It also means bringing down fiscal deficits, which are in the 5-15 percent range across the regionbut at the right pace and with the support of external financing, to lessen the hardship faced by ordinary people.
69
In many ways, this may be the most complicated transition of all, and will probably take the longest to play out. Again, to succeed, it needs the unwavering support of the international community. The IMF is highly engagedwe are partnering with Jordan, Morocco, and Tunisia through financing arrangements and are in discussions with Yemen. 2. Transition in the financial sector So far I have talked about the first of the big transitions, the economic one: for advanced economies, emerging markets, low-income countries. Yet as I said at the beginning, there is a second fundamental transition taking place in parallel in the global financial sector. Under the old model, the financial sector took on outsized risk in pursuit of outsized rewards, causing outsized ruin and precipitating the crisis we have been experiencing for the last five years. Since then, the international community has been struggling to build something better. This is not easy. It means throwing away old blueprints and designing new ones. It means dealing with the perverse incentives of financial firms and the inability or unwillingness of authorities to act. How is this transition doing? In the IMFs assessment, it remains a case of mission not yet accomplished. Yes, we have seen progress. The tougher capital standards, agreed under Basel III, are being implemented. We have agreement on new liquidity standards, and plans for a leverage ratio to keep excess risk in check. We have moved forward in identifying the systemically-important financial institutionsthe ones whose failure has the largest global falloutand holding them to a higher standard for both regulation and resolution. Yet progress is still too slow. It is being held back by complexity, but also by delay and divergence across countries. Delay is a real problem. A key concern, for example, is the lack of progress in establishing effective cross-border resolution regimesframeworks and agreements to unwind the global systemically-important institutions and market infrastructures in an orderly way. The same is true for derivatives market reform, where lack of transparency is still a huge issue. At the end of last year,
70
total outstanding derivatives amounted to $633 trillion, of which only $24 trillion were traded on organized exchanges. Adequate supervision of the remaining part requires countries and markets to speedily implement the agreed derivatives reforms. Another danger zone is shadow banking, which is attracting a lot of riskier activity. In the United States, the nonbanking sector is now twice the size of the banking sector. In China too, about half of the new credit extended so far this year has come through the shadow banking system. There has been some progresswith the adoption of principles for money market funds and proposals for regulating securities lending and repos. For sure, non-bank financial intermediation can provide a valuable alternative to banks in providing credit, but it needs more oversight. What about divergence? The problem here is that when countries pull in different directions, the fabric rips apart. We have already seen some evidence of discrepancies in capital requirements. Different countries have also taken different approaches to business model restrictionssuch as the Volcker Rule in the United States. Putting this all together in a globalized world is a headache. And yet, it must be donenothing less than global financial stability depends on it. Building a new financial sector is not the job of policymakers alone. It is also the responsibility of the financial industry. We know that as the sands shift, business models shift too, sometimes in unpredictable ways. The new rules are changing the economics of banking. For example, some large banks might no longer be in the business of project or infrastructure financing, or mortgage lendingand their geographical footprints might shift substantially. This must be taken into account when designing the new framework. What is ultimately important, however, is that the financial sector stays focused on its true purpose serving the real economy: financing the investment and innovation that drive us forward. This transition too will take time. It can be managedonly if all parties unite around shared goals. This means industry and regulators accepting co-responsibility for the public
71
good. It means countries acting in harmony, so that the new financial framework looks more like a color-coordinated mosaic than a clash of unmatched colors. It means international collaboration. Conclusion: Mutual help is the best form of self-help Let me conclude. In each of the two major transitions that I have discussedeconomic and financialthe international community faces a common challenge: to make sure that all can gain from globalization and prosper in our increasingly interconnected world. The global financial crisis has shaken the faith of many in the virtues of being open and engaged with the world. Managing these transitions well is the best way to demonstrate the benefits of interconnectednessthrough trade, well-regulated finance, and more equitable growth. This can only be done if countries work together, sincere in the belief that mutual help is the best form of self help. As they say in Latin, pro omnibus et singulisfor all and for each. As I said at the outset, this is exactly the function of the IMF. Our job is to help countries manage transitionand to help the world solve common problems with common purpose. We have done it beforefor instance, when we helped the world transition after World War II, and again after the Cold War. Now the world is transitioning to the new global economy of the 21st centuryyour economy, your century. In this world, cooperation will be needed more than ever before, which means that the IMF will need to be more helpful than ever before. I began with Emerson, an American, so let me end with a Frenchman, Albert Camus, who once said: Don't walk in front of me, I may not follow. Don't walk behind me, I may not lead. Walk beside me and be my friend. That is how I see the IMFnot leading, not following, but helping. Thank you very much
72

International Marketing

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

International Marketing

Uploaded by

Copyright:

Available Formats

International marketing

Global marketing is marketing on a worldwide scale reconciling

The International Marketing Process

Importance of international market

A)Importance from the consumer's point of view:

B)Importance from the producer's point of view:

Increase in production More profitable Reduce business risk Reduce cost

C)Importance from economic point of view:

EXPORT PROMOTION MEASURES

Andaman & Nicobar 2.00 2.00 Islands Bihar 3.00 3.00

2.00 0 3.20 3.20

2.00 0 3.50 1.75

3.00 0 2.00 0 6.00 6.00

2.00 0 2.65 0 3.73 3.73

2.00 0 2.65 2.65 6.09 6.09

2.00 0 2.90 1.45 6.70 0

Harayana 6.00 6.00

6.00 6.00 4.00 4.00

5.00 5.00 5.00 0

5.25 5.25 5.00 0

5.80 2.90 5.50 2.75

Lakshadw 2.00 2.00 eep Madhya Pardesh

Pondicher 3.00 3.00 y Punjab 9.00 9.00

10.00 10.00 9.68 9.68

12.17 12.17 13.4 6.70

Uttaranch 4.00 4.00 al West

14.50 14.50 20.00 13.00 36.00 31.49 40.00 40.00 44.00

Releases to state (including N.E Region) 241.00 252.00

2002325.46 03 2003- 350.00

Box 4.2 - New Agencies eligible under MAI Scheme

Review of export credit for non-star exporters

Economy is stressed, hard decisions soon, Chidambaram says

You might also like