india’s foreign trade policy

Although India has steadily opened up its economy, its tariffs continue to be high when compared with other countries, and its investment norms are still restrictive.
This leads some to see India as a ‘rapid globalizer’ while others still see it as a ‘highly protectionist’ economy.
Till the early 1990s, India was a closed economy: average tariffs exceeded 200 percent, quantitative restrictions on imports were extensive, and there were
stringent restrictions on foreign investment. The country began to cautiously reform in the 1990s, liberalizing only under conditions of extreme necessity.
Since that time, trade reforms have produced remarkable results. India’s trade to GDP ratio has increased from 15 percent to 35 percent of GDP between 1990 and
2005, and the economy is now among the fastest growing in the world.
Average non-agricultural tariffs have fallen below 15 percent, quantitative restrictions on imports have been eliminated, and foreign investments norms have been
relaxed for a number of sectors.
India however retains its right to protect when need arises. Agricultural tariffs average between 30-40 percent, anti-dumping measures have been liberally used
to protect trade, and the country is among the few in the world that continue to ban foreign investment in retail trade. Although this policy has been somewhat
relaxed recently, it remains considerably restrictive.
Nonetheless, in recent years, the government’s stand on trade and investment policy has displayed a marked shift from protecting ‘producers’ to benefiting
‘consumers’. This is reflected in its Foreign Trade Policy for 2004/09 which states that, "For India to become a major player in world trade ...we have also to
facilitate those imports which are required to stimulate our economy."
India is now aggressively pushing for a more liberal global trade regime, especially in services. It has assumed a leadership role among developing nations in
global trade negotiations, and played a critical part in the Doha negotiations.
Regional and Bilateral Trade Agreements
India has recently signed trade agreements with its neighbors and is seeking new ones with the East Asian countries and the United States. Its regional and
bilateral trade agreements - or variants of them - are at different stages of development: 
• India-Sri Lanka Free Trade Agreement,
• Trade Agreements with Bangladesh, Bhutan, Sri Lanka, Maldives, China, and South Korea.
• India-Nepal Trade Treaty,
• Comprehensive Economic Cooperation Agreement (CECA) with Singapore. 
• Framework Agreements with the Association of Southeast Asian Nations (ASEAN), Thailand and Chile.  
Preferential Trade Agreements with  Afghanista, Chile, and Mercosur (the latter is a trading zone between Brazil, Argentina, Uruguay, and Paraguay).
World Bank Involvement
As a number of research institutions in the country provide the Government with good, just-in-
time, and low-cost analytical advice on trade-related issues, the World Bank has focused on
providing analysis on specialized subjects at the Government’s request.
In the last three years, the Bank has been working with the Ministry of Commerce in a
participatory manner to help the country develop an informed strategy for domestic reform and
international negotiations.
Given the sensitivity of trade policy and negotiation issues, the Bank’s role has been confined to
providing better information and analysis than was previously available to India’s policymakers.
World Bank Reports
Over the last two years, the World Bank has completed two reports:
Sustaining India’s Services Revolution: Access to Foreign Markets, Domestic Reforms and
International Negotiation: The study concludes that to sustain the dynamism of India’s services
sector, the country must address two critical challenges: externally, the problem of actual and
potential protectionism; and domestically, the persistence of restrictions on trade and
investment, as well as weaknesses in the regulatory environment.
From Competition at Home to Competing Abroad: The Case of Horticulture in India: This study
finds that the competitiveness of India’s horticulture sector depends critically on efficient
logistics, domestic competition, and the ability to comply with international health, safety and
quality standards. The study is based on primary surveys across fifteen Indian States.
A third study, dealing with barriers to the movement of professionals is under preparation.
The Bank has also held a number of workshops and conferences with a view to providing
different stakeholders with a forum to express their views on trade-related issues.
 Export promotion policy
According to "Business Line", Karnataka is aiming at an annual export growth
rate of 25 per cent and will bring out its own five-year Export Promotion Policy
next month. The policy for 2002-07 will focus on developing export
infrastructure rather than on providing fiscal incentives to exporters. Among the
various measures considered was a plan to issue `green cards' to the 160-odd
export houses and EoUs in the State, the Minister for Large and Medium
Industries, Mr. R.V. Deshpande, said after chairing the first meeting of the India's
export position has steadily deteriorated over the years since her independence.
In spite of a huge bureaucracy to facilitate exports, the effects have been dismal.
However, the 1991 reforms signal a change from an inward oriented, import-
substitution paradigm to one that is outward oriented. However, there is much
to be learnt from the experiences of other countries that have adopted an
outward-oriented perspective in their export drive. Drawing on existing
knowledge, this paper develops a export promotion framework that could be
useful to Indian policy makers.
 Relation with other countries
Since independence, India has always tried to keep healthy relation with the neighbouring
countries, especially when trading is concerned. From the following data we can see the zeal of
India government to pave the way for free trade with atleast the southern countries of Asia. By
2016, India will be trading at zero duty with a dozen countries. Now we are already enjoying free
trade with Thailand and Srilanka. Very soon we will enjoy the same with China and
SingaporeFree Trade Agreement (FTA)
Free Trade Agreement between two countries or group of countries agree to eliminate tariffs,
quotas and preferences on most of the goods (if not all) between them. Countries choose FTA if
their economical structures are complementary, not competitive. India enjoys FTA, till date, with
the following two countries: Srilanka (28 December, 1998)
Thailand (9th October, 2003) Trade Agreements
It is a bilateral or multilateral treaty or any other enforceable compact which commits two or
more nations to a specified terms of commerce, most of time involving mutually beneficial
concessions. Bangladesh
Bhutan China
Japan
Korea
Mongolia
Ceylon
Maldives
Trade Treaty Nepal
Comprehensive Economic Cooperation Agreement (CECA) Singapore
Framework Agreement
From independence in 1947 and until the dawn of 1990s, the trade policy of India was
heavily influenced by the "Swadeshi" i.e. self sufficiency mentality and the "licence raj"
system of restrictions on production and imports.

First generation of reforms took place between 1991 to 1996. It aimed at liberalising trade -
led to a reduction of import tariffs, the elimination of quantitative restrictions, exchange rate
reforms and deregulation of industries. It resulted in a yearly growth rates of around 7%
compared with 3% before the reforms.

Now, India is a member of all the major multilateral economic fora, be it International
Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB). India is even
a founding member of GATT and the World Trade Organisation (WTO).

Regionally India is a member of SAARC (the South Asia Association of Regional Co-operation)
and BIMSTEC (Bangladesh, India, Myanmar, Sri Lanka, Thailand Economic Co-operation).
India enjoys different types of trade agreements with many countries. The complete list is
given below:
* NOTE : India will eliminate tariffs in 2011 for Brunei Darussalam, Cambodia, Lao PDR,
Indonesia, Malaysia, Myanmar, Singapore, Thailand and Vietnam; Brunei Darussalam,
Indonesia, Malaysia, Singapore and Thailand will eliminate in 2011 and new ASEAN Member
States i.e. CLMV will eliminate in 2016 for India. India and Philippines will eliminate tariffs
for each other on a reciprocal basis by 2016.

Regional Agreement
South Asia Free Trade Agreement (SAFTA) with Pakistan, Nepal, Sri Lanka, Bangladesh,
Bhutan and the Maldives.

Preferential Trade Agreement (PTA)

This trade gives preferential access to only certain products. It is done by reducing tariffs,
but it does not abolish them completely. PTA is established through trade pact and it is the
weakest form of economic integration. India enjoys PTA with the following countries:
Afghanistan
Chile
MERCOSUR - It is a trading bloc in Latin America comprising Brazil, Argentina, Uruguay and
Paraguay. It has Chile and Bolivia as its associate members. MERCOSUR was formed in 1991
with the objective of facilitating the free movement of goods, services, capital and people
among the four member countries.
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