Indian Institute of Management

Lucknow (Noida Campus)

India in Global Context

A Case Report
Submitted By: WMP (Group 1)
(2014-17, Term 5th)

This Report is submitted on 29th of August 2015 at 1700 Hours to facilitate the project
requirement of the course International Business Environment.

Submitted to: Prof. K.L Chawla

Declaration

Group Participants:
Abhinav Ramaria ( WMP10047 )
Abhishek Jain ( WMP10048 )

Anshul Verma(WMP10055)
Ashutosh Mathur ( WMP10062 )
Divya ( WMP10066 )
Syed Fuzail Hasan ( WMP10087 )

Table of Contents

Contents
Declaration................................................................................................................. 2
Table of Contents........................................................................................................ 3
Contents..................................................................................................................... 3
Introduction................................................................................................................ 4
Global Economy An Analysis.................................................................................... 5
Prospects for the world economy in 20152016 - Global growth prospects............5
Major Challenges Faced by World Economy............................................................7
Why Go Global?.......................................................................................................... 9
The need to capture new markets...........................................................................9
The need to expand capabilities and assets..........................................................10
The need to expand product or service portfolio...................................................11
The pressures of domestic competition.................................................................11
Indias way forward.................................................................................................. 12

Looking forward towards 2050.............................................................................. 12

An Integrated approach......................................................................................... 14
References:............................................................................................................... 19

Introduction
Every man lives by exchanging
.. Adam Smith
Ever since the evolution of mankind man is exchanging the goods and services in some form or
another. The economic history of the world is a record of the economic activities (i.e. the
production, distribution and consumption of goods and services) of all humans, spanning both
recorded history and evidenced prehistory. The context of the trade revolution was increasing
with the changing times and the human civilization was leading to the path of global exchanges.

World trade revolution started with the passage of time in the early modern era when many
voyagers like Christopher Columbus opened up new opportunities for trade with the new world.
The economic growth in the modern sense first occurred during the Industrial revolution.
Economic growth spread to all regions of the world during the twentieth century, when world
GDP per capita quintupled. The highest growth occurred in the 1960s during post-war
reconstruction. Trade revolutionized in the second half of the century by making it cheaper to
transport goods especially internationally.
New terms of trade evolution at the global context is termed as Globalization of trade in the
modern era. In the broadest sense globalization refers to the broadening sense of
interdependent relationships among people from different nations. The term refers to the
integration of world economies through the reduction of barriers to the movement of trade,
capital, technology and people.
With the broad sense of the growth of world economies, there is a greater need of
understanding the global facet of this evolution in the current era. Trade policies, bilateral ties,
emerging markets, declining markets, industrial policies, trade policies, economic policies,
economic wealth of the nations, are all related to the deeper understanding of the trade
economic functions which needs deeper understanding. Macro and Markets examines the forces
influencing the global economy, macroeconomic policies, and financial markets. It is common to
limit questions of the world economy exclusively to human economic activities and the world
economy is typically judged in monetary terms, even in cases in which there is no efficient
market to help valuate certain goods or services, or in cases in which a lack of independent
research or government cooperation makes establishing figures difficult.

So, let us examine the current market situation, the problems and challenges faced by the world
economies in general.

Global Economy An Analysis

Prospects for the world economy in 20152016 - Global growth prospects

The global economy continued to expand during 2014 at a moderate and uneven pace, as
the prolonged recovery process from the global financial crisis was still saddled with unfinished
post-crisis adjustments. Global recovery was also hampered by some new challenges, including
a number of unexpected shocks, such as the heightened geopolitical conflicts in various areas of
the world. Growth of world gross product (WGP) is estimated to be 2.6 percent in 2014,
marginally better than the growth of 2.5 per cent registered in 2013, but lower than the 2.9 per
cent projected in World economic situation and prospects as of mid-2014.
The world economy enters 2015 at a fork in the road. One track leads to the self-sustaining
vigorous recovery that policy makers have sought in vain ever since the financial crisis erupted
in 2007. Lower oil prices get consumers spending and businesses investing. Memories of the
biggest recession since the 1930s are finally banished. The rest of the world starts to look like a
revitalized the US

The other track leads back towards recession. Problems that have been stored up since 2008-09
can be contained no longer. A financial crisis erupts in the emerging markets. China has a hard
landing. Greece sparks off a fresh phase to the euro zones struggle for survival. Deflation sets
in. The rest of the world starts to look like Japan.
The world is becoming more globalized; there is no doubt about that. While that sounds
promising, the current form of globalization, neoliberals, free trade and open markets are
coming under much criticism. The interests of powerful nations and corporations are shaping
the terms of world trade. In democratic countries, they are shaping and affecting the ability of
elected leaders to make decisions in the interests of their people. Elsewhere they are promoting
narrow political discourse and even supporting dictatorships and the stability that it brings for
their interests. This is to the detriment of most people in the world, while increasingly fewer
people in proportion are prospering.
The western mainstream media, hardly provides much debate, gladly allowing this economic
liberalism (a largely, but not only, politically conservative stance) to be confused with the term
political liberalism (to do with progressive and liberal social political issues). Margaret Thatcher's
slogan of there is no alternative rings sharply. Perhaps there is no alternative for such
prosperity for a few, but what about a more equitable and sustainable development for all?

Major Challenges Faced by World Economy

Global Financial Crisis - Six years after the global financial crisis, the world economy still
looks as unstable, unbalanced, uncoordinated and ultimately unsustainable as ever. Almost
everywhere is mired in its own particular form of economic unhappiness. For much of the rest of
the emerging markets economy, its the end of the Chinese dependent commodities boom,

leaving many resource dependent countries scratching around to pay their bills and service
mountainous foreign currency debts. In Japan, whose economy, like Chinas, is similarly
dependent on investment and exports, Bionomics is also struggling to counter the effects of the
Chinese slowdown. Greece may have achieved a stay of execution, but Europe as a whole
remains engulfed by a political and economic crisis of almost biblical proportions, with no sign of
the shift in political attitudes necessary to solve it. The main Anglo Saxon economies are at least
growing, but in both Britain and the US, these are manufactured recoveries still heavily
dependent on rising consumption and record low interest rates. Britains near 6pc current
account deficit is testament to just how beholden to foreign inflows of capital the UK has
become to fund its expenditures and support aggregate demand. None of this is to represent
the Anglo-Saxon model in its current form as an economically more sustainable one. America
and Britain are in many respects the reverse image of China, with far too little investment in the
economic mix, and too much credit-fuelled consumption. Both models, it would seem, have
through their love of debt made themselves prone to financial and economic crisis. The Chinese
authorities may succeed in staving off the moment of truth a while longer yet, but the summer
storm in stock markets has very much sounded the warning bell.

Global Inequality and Unequal Economic development - Considered one of the long term
economic problems, income inequality and wealth concentration hinders growth in the long run.
Early statistical studies comparing inequality to economic growth had been inconclusive,
however in 2011, International Monetary Fund economists showed that greater income equality,
less inequality and increased the duration of countries' economic growth spells more than free
trade, low government corruption, foreign investment, or low foreign debt.

Global Poverty - Poverty reduction is a major goal and issue for many international
organizations such as the United Nations and the World Bank. The World Bank estimated 1.29
billion people were living in absolute poverty in 2008. Of these, about 400 million people in
absolute poverty lived in India and 173 million people in China. In terms of percentage of
regional population sub-Saharan Africa at 47% had the highest incidence rate of absolute
poverty in 2008. Between 1990 and 2010, about 663 million people moved above the absolute
poverty level. Nevertheless, given the current economic model, built on GDP, it would take 100
years to bring the world's poorest up to the standard poverty line of $1.25 a day. It has been
argued by some academics that the neoliberal policies promoted by global financial institutions
such as the IMF and the World Bank are actually exacerbating both inequality and poverty.

Why Go Global?
The need to capture new markets
A key motivation for going global was to find new markets to sustain top-line growth. Entry to
overseas markets via M&A may be attractive for reasons that include increased proximity to
customers, access to resources, competition at home, or domestic regulatory barriers. From
1995 to August 2006, 29 percent of Indian cross-border M&As occurred in the European Union
and 32 percent in North America. These developed economies are attractive because of their
large consumer markets, transparent business processes, rule of law, advanced technologies,
skills and knowledge capital. Moreover, as the markets in these economies tend to be mature

and saturated, it often proves difficult for Indian companies to gain market share without
acquisitions. In line with this trend, the more developed economies of Singapore, Hong Kong and
South Korea together account for 40 percent of the cross-border acquisitions conducted by India
within Asia in the first half of 2006.
Research has found that 76 percent of Indian companies that expanded abroad did so in order
to operate more closely to global customers. Targeting established firms, particularly in
developed economies, is an effective way to gain market share as well as provide a platform for
regional growth. Further, it is usually easier to access other resources and benefits once a
company is established in a foreign market. Once companies have a foothold in a market, they
can explore further acquisition opportunities to consolidate their local presence, reach new
customers, and acquire new sources of supply and further assets and capabilities.
Less developed economies also have their attractions, such as low acquisition costs and
favorable terms due to a high demand for foreign direct investment (FDI) and capital. The recent
global spending spree by Tata which has concluded deals in the United States (Eight Oclock),
the United Kingdom (Tetley) and Thailand (Millennium Steel) - illustrates some of the strategic
thinking behind location decisions: the groups industrial and manufacturing businesses have
clearly found it more attractive to target acquisitions in developing markets, while the services
companies in the group tend to seek opportunities in developed markets. Emerging markets
also may be attractive to Indian companies because they provide access to consumer markets
which are often overlooked by Western firms. In contrast to India, China has invested heavily in
emerging economies in Africa, Central Asia and Latin America, largely to secure the natural
resources essential for its own economic growth. The urgency for India to step up its efforts to
do the same is quickly becoming apparent. But competing with China on this global hunt for

resources will prove a major challenge for India which cannot begin to match its neighbors
state-leveraged financial power.

The need to expand capabilities and assets

Many Indian companies are seeking to expand their distinctive capabilities by acquiring specific
skills, knowledge and technology abroad that are either unavailable or of inadequate quality at
home. Sun Pharmaceutical Industries, for example, acquired Able Laboratories Inc. of New
Jersey for US$23.15 million in December 2005 to gain its in-house manufacturing and
development capabilities for generic pharmaceutical products.
Indian companies are also using M&As to assimilate technologies that have been tried and
tested abroad. i-Flex, for example, the software company based in Mumbai, recently paid US$11
.5 million for the US company Supersolutions Corp5 to access technology that is widely used in
US banks. At a broader organizational level, such acquisitions can also improve overall
standards of customer service, processes and quality.
Analysis suggests that M&As are helping Indian companies to capitalize on their traditional lowcost structures. Indian companies are able to identify foreign firms that have value-added
offerings which complement their own low-cost products and services to create an efficient
integrated global business model - turning the conventional direction of such deals on its head.
In this way they can more closely replicate the model of Western multinationals involving a mix
of high-value and low-cost capabilities distributed across different geographic locations.
In more direct ways, larger Indian companies also look to their foreign M&As to provide new
assets. When Tata Motors purchased the Daewoo Commercial Vehicle Company in 2003 for
US$188 million, it did so for the state-of-the-art production facilities of the South Korean

company. Acquisitions are increasingly prompted, too, by the need for less tangible assets,
brand equity in particular. Welspun India bought an 85 percent stake in CHT Holdings for US$24
million to benefit from the premium UK brand Christy, while the Indian pharmaceutical giant
Ranbaxy Technologies acquired the French company RPG Aventis in 2003 for US$70 million to
gain access to its well-established and respected name.

The need to expand product or service portfolio

A significant number of Indian companies are endeavoring to increase their market share by
building the size of their product and service portfolios. This is particularly true in the
pharmaceutical sector. Ranbaxy, for example, acquired 18 generic drug patents from Spanish
company EFARMES. Similarly Nicholas Piramal, an Indian healthcare company, entered into a
US$350 million, five-year manufacturing agreement with Pfizer to gain 12 products. Acting on a
similar imperative Sobha Renaissance Information Technology acquired Billing Components to
sell products in the telecoms market; previously it had provided only services. While these
companies are purchasing particular foreign expertise to stay competitive, a number of Indian
companies are already competing at a global level and need acquisitions to secure scale. This is
a key driver behind Indias latest and biggest cross-border announcement - the US$8.1 billion
bid by Tata Steel to acquire Corus11 a bold but necessary move to stay competitive in the
new, Mittal-Arcelor-dominated global steel market.

The pressures of domestic competition

As well as pursuing the desire to enter new markets for competitive advantage some companies
are being pushed away from India by increasingly stiff domestic competition. In some cases
this has encouraged companies to explore opportunities in less competitive markets, thereby
spreading

their

risk

across

geographies.

Though

Indias

operating

environment

is

unrecognizable from that of a decade ago, some companies still look outside India to avoid
domestic obstacles. Indian pharmaceutical companies, for example, often prefer to carry out
certain stages of clinical trials in developed markets because of the lag times that are inherent
in Indias bureaucratic processes, despite the other cost advantages of keeping them in India.

Indias way forward

Looking forward towards 2050
Most growth scenarios for the future are based on an extrapolation of growth from the past. In
attempting such projections, most exercises assume that growth rates in China and India, as also in the
industrialized countries, would remain at levels observed in the recent past. Of course, it is Russia, rather
than South Africa, that is an integral part of projections for, and scenarios in, 2050. And even if South
Africa has some potential, it is not yet on a trajectory of rapid economic growth.
The construction of future scenarios began with the Goldman Sachs study which attempted to project
levels of GDP and GDP per capita for Brazil, Russia, India and China (BRICs) in 2050. The exercise is
based on a simple model of capital accumulation and productivity growth combined with demographic
projections. The broad conclusions of the study are as follows - In 2000, the GDP of these four economies
was less than 15 per cent of the GDP of the G-6: US, Japan, Germany, UK,
France and Italy. By 2025, in terms of GDP, the BRICs would be more than 50 percent of the G-6. And, in
2040, the BRICs economies together would have a larger GDP than the G-6. In terms of GDP, each of the
BRICs economies would overtake each of these G-6 economies, except the US, by 2040. And, by 2050, of
the G-6, only the US and Japan would remain among the six largest economies in the world. It is

estimated that about two-thirds of the increase in GDP of the BRICs, measured in US dollars, would come
from real growth while the remaining one-third would be attributable to currency appreciation. The catchup of BRICs is expected to be most dramatic until 2030.
Thereafter, growth in BRICs would also slow down and only India might have growth rates higher than 3
per cent per annum in 2050. The catch-up would be less in terms of GDP per capita. On average, with
the exception of Russia, citizens in the BRICs are likely to be poorer than citizens in the G-6. It needs to
be stressed that the projected growth path for the BRICs, even in the Goldman Sachs study, depends on
critical assumptions about policies and institutions, as also the capacities of these countries to resolve
their problems, so that outcomes are neither predictable nor certain. In a more sophisticated exercise for
India, that uses simple convergence equations, Robert Rowthorn (2006) projects that, in 2050, at
purchasing power parity, per capita income in India would be 45 per cent of per capita income in the
United States. It is also projected that India should comfortably overtake the United States in GDP
measured at purchasing power parity. This catch-up is not confined to PPP-GDP comparisons. The
Rowthorn projections show that, even at market exchange rates, by 2050, total output in India and the
US would be roughly equal. It needs to be said that these projections suggest broad orders of magnitude
rather than precise predictions. Even so, such projections highlight the power of compound growth rates.
For growth rates do indeed matter. If GDP grows at 10 per cent per annum, national income doubles in
seven years. If GDP per capita grows at 7 per cent per annum, per capita income doubles in ten years. If
GDP grows at 7 per cent per annum, national income doubles in ten years. If GDP per capita grows at 5
per cent per annum, per capita income doubles in fourteen years. Growth rates in China and India have
been in this range for some time. And growth rates in India have accelerated in the early 2000s. Growth
rates in Brazil were also in this range during the period 1951-80 and could return to that path once
again. If such growth rates are sustained, their cumulative impact over time is no surprise. However,
growth is not simply about arithmetic. In fact, it is about more than economics. Therefore, it is necessary
to consider the economic determinants of growth.

In principle, China and India may be able to sustain high rates of economic growth for some time to come
for the following reasons. Brazil may also be able to attain high rates of growth for similar reasons
although their relative importance may be different. First, their population size is large and income levels
are low. Second, their demographic characteristics, in particular the high proportion of young people in
the population, which would mean an increase in the work force for some time to come, are conducive to
growth. Third, in China and India more than in Brazil, wages are significantly lower than in the world
outside while there are large reservoirs of surplus labour. Fourth, emerging technological capabilities
have the potential to support productivity increase. In practice, however, China, India and Brazil may not
be able to sustain their high rates of growth because of constraints that are already discernible. In China,
the declining productivity of investment at the margin and the sustainability of the political system are
both potential constraints. In India, the crisis in agriculture, the bottlenecks in infrastructure and the
limited spread of education in society are potential constraints. In Brazil, the level and the productivity of
investment, both of which are low, constrain growth at a macrolevel. Of course, these constraints are
illustrative rather than exhaustive. And there are many other problems in these countries, which could
slow down the process of growth. Even if growth slows down, however, a catch-up scenario is plausible
but it would require a longer period of time.

An Integrated approach
Weak growth and exchange rate depreciation characterized the Indian economy in the initial months of
2013-14. The economy also witnessed a parallel widening of the current account deficit to 4.9 % of GDP
in the Q1 of 2013-14. The economy bounced back such that the CAD narrowed sharply to US $ 1.2 billion
(0.2% of GDP) in Q4 of 2013-14 from US $ 18.1 billion (3.6% of GDP) in Q4 of 2012-13. The decline in
CAD was primarily due to decline in import of gold and improvement in exports.

In order to further bring down the current account deficit, India has to deal with the twin issues of
boosting exports and bringing down the import content of exports (reducing the dependence on foreign
intermediaries for production).
Growth through Export
In order to bring greater momentum to Indias growth process, focus has been on exploring wider and
newer areas that have greater export potential. In this regard, two major areas which may be focused
upon are: E-Commerce and Global Value Chains (GVCs). In the current global economic scenario, ecommerce has emerged as an innovative and rapidly expanding technique of promoting, selling and
buying commodities. E-commerce means sale or purchase of goods and services conducted over
network of computers by methods specifically designed for the purpose of receiving or placing orders.
According to Internet and Mobile Association of India (IAMAI), the E-commerce market in India has
witnessed a CAGR of 54.6% during 2007-11 (IAMAI, Aranca Research). Most of the transactions in India
are of Business to Business (B2B) nature. In India under the Business to Consumer (B2C) transaction, the
travel segment accounts for 81.4% of the entire market in 2011. Greater scope exists in online retail with
increased internet penetration and advent of 3G/4G telecom services.
Another potential area which may aid Indias economic growth is through linking India to GVCs.
Participation of a country in GVCs can be assessed through what percentage of a countrys exports are
part of GVCs. Two types of participation are backward participation (use of foreign intermediaries in
Indias exports) and forward participation (use of Indian intermediaries in other countries exports). In
case of India, backward participation is higher than forward participation (OECD-WTO Trade in Value
Added (TiVA)).
As per the Organization for Economic Co-operation and Development (OECD), India participates in
manufacturing GVCs for chemicals, electrical equipment and manufactures (e.g. jeweler). In case of

services major participation is in business services, mainly driven by the use of Indian intermediaries in
the exports of other countries. Policies are now being undertaken to encourage Indian producers to
capture higher value from GVCs, so that they move up the value chain by performing value added
activities.
The gain from GVCs depends upon the value a country creates in GVCs. India specific indicators on GVCs
based on OECD-WTO Trade in Value-Added (TiVA) database shows that Indias domestic value added
content in final demand across countries was 74% in 2009, while the foreign value added share was 26%
in 2009. On the other hand, share of India in value added exports was 1.9% of world exports in 2009.
There is a need to make business entrepreneurs aware of the upcoming growth focus on enhancing
exports from Micro Small and Medium Enterprises (MSME) Sector in areas such as: Pearls and precious
stones, apparel and accessories, pharmaceutical products, leather goods, electrical & electronic
equipment etc., along with emphasis on issues such as: Technology development, Standardization,
Compliance Platform, Identifying and nurturing specific sectors with significant export potential etc. The
WTOs permits an exporting country to provide tax concessions on exported products and on inputs
consumed in the production of the exported product. However, for the exporting country to avail all this
benefit, exporters need to establish an unbroken trail of all indirect taxes paid on the exported product
and on the inputs consumed in its production process. In the absence of uniform Goods and Services Tax
(GST) in India, frequently exporters are unable to get rebate or drawback on all indirect taxes paid on the
exported product and its inputs. This significantly enhances the final price of the exported product.
The current global situation offers an opportunity for measures to strengthen the business environment,
attract more Foreign Direct Investment (FDI), and increase productivity. These measures would include
steps to reinforce the financial sector via capitalization and broader banking/financial sector reforms,
simplifying the regulatory environment for firms, and strengthening fiscal balances through continued

fiscal discipline and the adoption of GST. The reform momentum has accelerated in the last several
months, and further steps to boost greater growth are expected to be undertaken to achieve medium
term and long term growth targets.
In the coming time, macroeconomic environment is expected to improve and growth is expected to
accelerate gradually. The situation provides an opportunity to accelerate growth through promoting
exports and enabling growth in upcoming market segments. The business and trade segments of ecommerce and global value chains provide an opportunity to compete at par with other world economies
and expanding our technology base.
Agriculture-led Growth:
We are of the view that states would essentially require an agriculture-led growth strategy. In short, the
development strategy should focus along the following lines:
1) Agriculture-led growth as the main area of focus; under which, some of the key objectives may be:
a) Productivity improvements, including agricultural extension, research and development, and crop
diversification. Higher agricultural productivity is a key factor in rural poverty reduction & to set up agrobased industries.
b) Bringing in larger areas under irrigation so as to reduce monsoon dependence
c) Enhanced focus on agricultural exports
2) Much greater focus on building up rural infrastructure, with specific focus on power, roads, and
availability of safe drinking water.
3) Rural industrialization wherein agro-based industries (like the Chinese Township and Village
enterprises) should be the first order of business.
4) Improving primary health care facilities and primary schools in rural areas. Higher public spending
along with sectorial reforms can bring large gains, and
5) Strengthening wide scale usage of information and communications technology (ICT).

In India, agricultural-productivity-led growth occurred in one major historical period, the Green
Revolution, dating from 1965-66 to the early 1980s. The Green Revolution was centered on shortstemmed, high-yield wheat, and to a lesser extent paddy rice, with both crops depending on irrigation
and intensive application of fertilizer. In short, not only is a second Green Revolution needed, but it is
needed in the hugely populated states of Uttar Pradesh, Bihar, Madhya Pradesh, and Orissa. With the
right policy framework and incentives in place, we believe, individual states can take the lead and set an
example by using the right mix of modern agricultural techniques along with efficient water resource
management and region specific agricultural R&D.
The second green revolution in agricultural production can occur by considering several natural factors.
Among the natural factors: 1) natures bounty in fertile alluvial soil of the Indo-Gangetic river systems of
northern India; 2) geographical and geo-morphological advantage of perennial Himalayan rivers
amenable for multipurpose dams supplying cheap power and water to the canal systems; and 3)
topographical advantage to lay canal systems and road networks at considerably lower costs as against
those in peninsular India. The man-made factors, on the other hand needs to be improved by improving:
1) consolidation of holdings; 2) assured irrigation13; 3) rural electrification and supply of cheap power to
agriculture14; 4) agricultural research and extension network15; and 5) less exploitative agrarian
structure.
The above findings underscore the imperative for extensive domestic reforms in all areas of logistics,
manufacturing, fiscal, financial, agricultural and overall economic performance on the part of both the
government and industry, with targeted initiatives for improving infrastructure and international
shipments required on a priority basis. In an increasingly globalised and integrated economy, unless
domestic reforms, productivity, quality, standards related issues etc. are addressed and benchmarked
against global competitors our exports cannot grow at the desired rate.

Growth and Trade (World and WTO)

TRADE AND INVESTMENT REGIME
General Framework
India is a founding Member of the WTO. It provides MFN treatment to all other WTO

Members and other trading

partners. India has also accepted the Fourth and Fifth Protocols and is a party to the Information
Technology Agreement. It has been an observer to the WTO Government Procurement Agreement since
10 February 2010.
India's most recent notifications include those for domestic support for agriculture, import licensing
procedures, and quantitative restrictions with regard to the WTO Trade Facilitation Agreement. India has
not yet submitted its Category a notification.
Regional and preferential agreements
Regional trade agreements
While India remains a supporter of multilateral trade liberalization, like other WTO Members it has
negotiated a number of regional trade agreements. India currently has a network of 15 RTAs in force that
have been notified to the WTO. These are mainly with its neighbours and other Asian countries. In
addition, it has a few RTAs with countries in Latin America (Chile, MERCOSUR), and is a party to the
Global System of Trade Preferences (GSTP) but these are partial in their scope and cover very few tariff
lines.
Since the previous Review in 2011, two agreements, with Malaysia and Japan, have entered into force. In
addition, the parties to the South Asian Free Trade Area (SAFTA) have now completed negotiations to add
services commitments to the Agreement, although this has not yet been notified to the WTO. India is
also party to an early harvest agreement in goods with Thailand but this has also not been notified to the
WTO. According to the authorities the process to notify these agreements will be initiated in
consultations with India's trading partners. On 9 September 2014, India signed the Trade in Services and
Investment Agreement with ASEAN (the Agreement on Goods has been in force since 1 January 2010 and

was notified by the parties to the WTO). The Services and Investment Agreement is expected to come
into force on 15 July 2015.
With regard to its RTA negotiations, India has made "early announcements" of negotiations with the
European Union, EFTA, SACU and the Bay of Bengal Initiative on Multi-Sectoral Technical and Economic
Cooperation (BIMSTEC) with Bangladesh, Bhutan, Myanmar, Nepal, Sri Lanka and Thailand. Negotiations
are also ongoing with Australia, Canada, GCC, Indonesia, Israel and New Zealand and being considered
with Egypt and Mauritius. Finally, India is also a party to negotiations on a Regional Comprehensive
Economic Partnership (RCEP) Agreement between the 10 members of the Association of South East Asian
Nations (ASEAN) and six of their FTA partners (Australia, China, India, Japan, the Republic of Korea and
New Zealand); negotiations which commenced in August 2012 are expected to be completed by end
2015.
Out of 15 RTAs notified by India to the WTO, four include provisions on services as well as goods (with the
Republic of Korea, Malaysia, Japan, and Singapore) although, as noted, the SAFTA Trade in services
(SATIS) agreement is in force but not notified to the WTO while India and ASEAN have recently signed a
Services and Investment Agreement. India's tariff liberalization in its RTAs tends to vary greatly
depending on the negotiating partner. Among its notified RTAs that have been considered by either the
Committee on Regional Trade Agreements or the Committee on Trade and Development, India's tariff
liberalization commitments range from zero tariffs liberalized in the partial scope Agreement with Chile,
to 23.6% in its FTA with Singapore, 75.3% with Malaysia and 86.6% with Japan. With ASEAN, India
commits to liberalize 75% of its tariff lines for imports from ASEAN countries. According to the authorities
partial scope agreements should not be a measure for computing the level of liberalization; liberalization
should be looked at only in reference to full scope agreements.
In services, India's agreements are largely based on a GATS positive list approach and they have made
incremental improvements to its GATS commitments. However, as stated by India in its most recent
services agreement with ASEAN "all the schedules tabled by India are well within the existing

autonomous regime of India"20, suggesting that while commitments on services go beyond its GATS
commitments, India's applied regime remains more liberal.

WTO was formed on 1 Jan, 1995. It took over GATT (General agreement on tariff & trade). In 8th round
of GATT, popularly known as Uruguay Round, member nations of GATT decided to set up a new
organization, 'World Trade Organization' in place of GATT. A Forum where member countries met from time
to time to discuss & solve world trade problems. It Enjoys identical legal status, privileges, Immunities
that the world bank & IMF get.

OBJECTIVES OF WTO

The primary aim of WTO is to implement the new world trade agreement.

To promote multilateral trade.

To promote free trade by abolishing tariff & non-tariff barriers.

To enhance competitiveness among all trading partners so as to benefit consumers.

To increase the level of production & productivity with a view to increase the level of
employment in the world.

To expand & utilise world resources in the most optimum manner.

To improve the level of living for the global population & speed up economic development of
the member nations.

To take special steps for the development of poorest nations.

FUNCTIONS OF WTO

Implementing WTO agreements & administering the international trade.

Cooperating with IMF & World Bank & its associates for establishing coordination in Global

Trade Policy-Making.

Settling trade related disputes among member nations with the help of its Dispute Settlement

Reviewing trade related economic policies of member countries with help of its Trade
Policy Review Body (TPRB).

Providing technical assistance & guidance related to management of foreign trade & fiscal
policy to its member nations.

Acting as forum for trade liberalisation.

GATT
It all began with trade in goods. From 1947 to 1994, GATT was the forum for negotiating lower
customs duty rates and other trade barriers; the text of the General Agreement spelt out
important rules, particularly non-discrimination. Since 1995, the updated GATT has become
the WTO's umbrella agreement for trade in goods. It has annexes dealing with specific sectors
such as agriculture and textiles, and with specific issues such as state trading, product
standards, subsidies and actions taken against dumping.
GATS
Banks, insurance firms, telecommunications

companies, tour operators, hotel chains and transport

companies looking to do business abroad can now enjoy the same principles of freer and fairer trade
that originally only applied to trade in goods.
These principles appear in the new General Agreement on Trade in Services (GATS). WTO
members have also made individual commitments under GATS stating which of their services

sectors they are willing to open to foreign competition, and how open those markets are.
TRIPS
The WTO's intellectual property agreement amounts to rules for trade and investment in ideas
and creativity. The rules state how copyrights, patents, trademarks, geographical names used
to identify products, industrial designs, integrated circuit layout-designs and undisclosed
information such as trade secrets "intellectual property" should be protected when trade
is involved. In Nutshell , the TRIPs Agreement covers 7 categories of intellectual property .
DISPUTE SETTLEMENT SYSTEM
The WTO's procedure for resolving trade quarrels under the Dispute Settlement Understanding
is vital for enforcing the rules and therefore for ensuring that trade flows smoothly. Countries
bring disputes to the WTO if they think their rights under the agreements are being infringed.
Judgments by specially- appointed independent experts are based on interpretations of the
agreements and individual countries' commitments.
WTO AND INDIA

Introduction
After over 7 years of negotiations the Uruguay Round multilateral trade negotiations were
concluded on December
1993 and were formally ratified in April 1994 at Marrakesh, Morocco. The WTO Agreement on
Agriculture was one of the main agreements which were negotiated during the Uruguay Round.

The WTO Agreement on Agriculture contains provisions in 3 broad areas of agriculture.

1. Market access.
2. Domestic support.
3. Export subsidies.
MARKET ACCESS
This includes tariffication, tariff reduction and access opportunities. Tariffication means that
all non- tariff barriers such as :
1. Quotas.
2. Variable levies.
3. Minimum import prices.
4. Discretionary licensing.
5. State trading measures.
DOMESTIC SUPPORT
It measures that have a minimum impact on the trade also known as green box policies. It includes
general government services like: As in the areas of research, disease control, infrastructure and
food security. Also includes direct payments to producers in form of income support etc.
EXPORT SUBSIDIES
The Agreement contains provisions regarding members commitment to reduce Export Subsidies.
Developed countries are required to reduce their export subsidy expenditure by 36%. For
developing countries the percentage cuts are 24%.
CONCLUSION
India, as a developing economy, has been benefitted being a founding member of the World trade
Organization. The country at large has seen many significant changes which have taken place after the
formation of WTO. There are some issues which are yet to be sorted out with the WTO and but by and
large things are falling in shape for the Indian

BRICS NATIONS FUTURE BANK Brazil, Russia, India, China, South Africa
BRICS is international political organization of leading emerging economies its Five members are
all developing and newly industrialized countries.
Objective of BRICS nations.
1-To achieve regional development
2-To remove trade barriers.
3-Economic development.
4-Optimum use of resources.
5-Builiding relationship.
Background of future bank
In this world we have been enjoying many International organizations for developing and enhancing
countries needs and wants to making sustainable development, such as
1-World bank
2-Assain development bank
3-IMF
in the same way the BRICS nations are going to develop a joint bank writhen the BRICS nations for
assistant them self,
and to meet the following reasons.
Background of future bank
1-To get currencies apparitions.
2-GDP growth rates are more than the developed countries.
3- Growing emerging markets.
4 Climate change, food and energy security
5-International economic exchange
6-Financial assistant
7-international terrorism
8-Populations control

Brazil
10th fastest growing economies in the last centuries
Extremely rich in resources such as coffee, sugarcane, crude oil and iron etc.
Focus on equitable development has resulted in significant poverty reduction.
Textiles, chemicals, iron ore , steel and motor vehicles industries.
31% of people in middle income group.
Brazil today is the most popular of the BRICs so far as foreign direct investment is concerned
Russia
Russia has capability in high-technology sectors
Accounts for around 20% of the worlds oil and gas reserves
2

 Fall in the number of people living below the poverty line

Consumer market of over 140 million people
68% of people comes under middle income group
Highly educated workforce
Third largest exporter of steel and aluminium
India
1.2 billion People
2nd largest labour force
Holds second place followed by China in BRICS
Democratic country
Broad knowledge economy.
China
18Th fastest growing economy
Third largest country in land size
Biggest of all BRIC nations GDP wise
13% of people comes under middle income group
Holds more than $3 trillion forex reserves.
Largest exporter/ importer for 32 and 34 countries respectively.
Cheap labour work force
South Africa
The South African economy is now the 23rd largest in the world
Inflation is below 6.6% and falling.

25% of goods produced in South Africa are for export

Richest in terms of its mineral reserves.

Trade between Brazil, Russia & Rest of BRICS

Trade between India, China & Rest of BRICS

BRICS Developments
Russia
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Treasury bonds known as OFZs

Large sporting events.

China

Recent reforms by the China securities and regulatory Commission (CSRC) have sought
to bolster investor confidence.

Financial help to SMEs

600 million citizen have been lifted out of poverty in China.

Chinas state owned enterprise produced over 50% of its goods and services and
employed over half of the nation labour force.

South Africa

Invested Rs.300bn in expanding Its Railway, Ports and fuel pipelines.

10% of the worlds oil reserves, 40 % of gold ore and 95% of platinum

Brazil

Development of new oil fields and refineries in order to increase production capacity
in Brazil.

Improved efficiency of agricultural output

India

Access to affordable drugs to global countries.

BRICS

Signing Bilateral accords on air defense, gas and education among nation members

21% of worlds GDP,

20% Global Trade,

11% accumulated investments.

Growth rate of new business formation

Gap between the G7 nations and BRICS economies narrowed in 2013, according to research.

BRICS had a rate of over seven times greater than the G7 countries from 2007-2011, posting

a 5.8 percent Combined Annual Growth Rate (CAGR) versus a 0.8 percent increase by the G7.
In 2012 the BRICS rate was 4.9 percent, generating 1.2 million new businesses & G7s was

1.9 percent, adding 531,000 companies.

China grew at 9.1 %.
Brazil grew by 3.4 %.
France exhibited the fastest rate of 16.7 %.
Italy declined by 0.3 % and Canada dropped by 13.6 %.
The report indicates that well targeted government interventions can boost the survival rates
of startup companies that require time and capital to translate their competitive assets into

sustainable growth.
Future Prospects

Sustainable solution for inclusive growth

Broadening multi-dimensional co-operation
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Mutual Trade and Investment

New Development Bank (BRICS Bank)
Lending for Infrastructure projects
Aid to other small economies
Contingent Reserve Arrangement
Export Credit & Guarantee Agencies
Significant Role in International Affairs
Trade in local currency

Working Population across the World

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Rising Middle Class

Infrastructure Investments

11

BRICS Challenges
Development of BRICS bank
Reducing the rural/urban income gap
Maintaining macroeconomic stability
Inadequate Financial reforms

Managing Supply Chain

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Conclusion

Conclusion
It is possible that China could become as big as the US by 2027
India and Russia will individually be larger than Spain, Canada or Italy by 2020
By 2025 BRICS will be over half the size of the G7
Long-term projections BRICs could account for almost 50% of global equity markets by 2050
Of the current G7, only the US and Japan may be among the seven largest economies in US
dollar terms in 2050

By 2050, the largest economies in the world (by GDP) may no longer be the richest (by

income per capita)

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References:
1) International Business Environment and Operations 12th Edition John. D. Daniels |
Lee H. Radebaugh | Daniel P. Sullivan | Prashant Salwan
2)
3)
4)
5)

http://www.un.org/en/development/desa/policy/wesp/wesp_archive/2015wesp_chap1.pdf
https://en.wikipedia.org/wiki/Economic_history_of_the_world
http://ner.sagepub.com/content/225/1/F2.abstract
https://www.imf.org/external/np/speeches/2014/100214.htm

6) Discussion Paper No. 2008/05, China, India, Brazil and South Africa in the World
Economy. Engines of Growth? Deepak Nayyar, June 2008
7) The Global Economic Situation and Indias External Sector
8) INDIAS DECADE OF DEVELOPMENT: LOOKING BACK AT THE LAST 10 YEARS AND
LOOKING FORWARD TO THE NEXT 20 Nirupam Bajpai and Jeffrey D. Sachs CGC | SA
Working Paper No. 3 , July 2011 , WORKING PAPERS SERIES , Columbia Global Centers
| South Asia, Columbia University , Express Towers 11th Floor, Nariman Point, Mumbai
400021, globalcenters.columbia.edu/southasia/

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