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INDIA’S EXPORT PERFORMANCE
UNDER THE WTO REGIME
THESIS

SUBMITTED TO THE

UNIVERSITY OF LUCKNOW

FOR THE DEGREE OF

DOCTOR OF PHILOSOPHY

IN

APPLIED ECONOMICS



By

KALPANA SHARMA


Under the supervision of

Prof. NAR SINGH

M.com., Ph.D., P.D.R. (Hungary)

FMSH(Paris), FUR (Germany)

HEAD
univlogo

DEPARTMENT OF APPLIED ECONOMICS

FACULTY OF COMMERCE

UNIVERSITY OF LUCKNOW

LUCKNOW


2013

PREFACE
The role of exports has been widely recognised as an important instrument for country’s economic development process. Exports growth builds import capacity and industries engaged in exports production have the high intensity to absorb surplus of labour force of developing country like India which thereby leads to the creation of employment and increase in income which leads to rise in savings which is transferred into investment in physical and human capital, and thus in the rate of economic growth. Until Third Five Year Plan the major thrust of Government of India was on pursuing an inward oriented import substitution policy, however it entailed higher domestic resource cost and also increased dependency of the country on the industrialist world. Over time, therefore the stress on import-substitution was gradually diluted and emphasis began to be placed on exports. With this various policy incentives in order to encourage exports was introduced in foreign trade policies. The most effective means encouraging outward orientation is to lower tariffs on imports so that the anti-export bias, both in policies and mind-sets get corrected.

The economic reforms of 1990s with focus on liberalisation have enabled increased integration of the Indian Economy with the rest of the world. Further the creation of WTO had provided an export friendly environment and wider scope of access to new markets through greater liberalisation in international trade rules. The World Trade Organisation (WTO) is the successor of GATT and came into existence on January 1, 1995 with the objective to enforce an open, equitable, non-discriminatory and rule based multilateral trading system. India is the founder member of the WTO and various provision and agreements under WTO have certainly affected India’s export trade. Some study has shown India has been benefited from the new trade regime under WTO especially in absolute terms while others exhibit there has been little benefit to India. The creation of WTO had significant impact on India’s foreign trade policy and apart from reduction in tariff barriers, all quantitative restrictions imposed by India on its imports and exports have been removed. The high export growth and improved share of India in world merchandise and service exports was made possible due to greater orientation in international market brought about by WTO and of course due to the export promotion measures adopted by the Government of India.

In post WTO period there has been substantial structural changes in India’s exports with steep fall in the share of primary exports and relative increase in importance of manufactured products with the considerable improvement in the share of the exports of engineering goods, gems and jewellery, readymade garments and chemicals products. India’s exports have shown a steady trend towards higher technology content, India’s specialization in exports lies in manufactures based on labour and natural resources essentially involving low technology. Given the exports structure of India, the potential for further growth of manufactured goods, especially to the developed markets remains high. Apart from manufactured goods petroleum products exports have shown drastic rise in past decade. The share of traditional agricultural items like tea, coffee, cotton etc. in total exports has declined whereas as rice, spices, sugarcane, vegetables and fruits and marine products are the key production items for India with significant share in India’s total agricultural exports.

Indian services exports has been rising importance globally and especially in case of business and software services. India’s share in world export of services has constantly improved and had reached to 3.23 per cent in 2011 with 8th rank in world exports. UK and USA remained the top destination for Indian services export. India’s export of services has grown at faster pace than merchandise exports under WTO regime.

Markets of Indian exports diversified from exclusive reliance on the developed market economies to other developing countries. Export of many commodities like rice, spices, tea, gems and jewellery, textile products, few chemical products and leather products etc. and services like software, computer and information and communication services has exhibited competitiveness in the international market.

The major challenge the Indian export sector is facing is to enhance its productivity, share and competitiveness in an increasingly integrated global environment. The creation of WTO has culminated multilateralism and free trade regime through removal and reduction of trade barriers which has posed both challenges and opportunities for Indian exports. So realising the overwhelming importance of WTO and its role in India’s exports, it was felt imperative to study and analyse India’s export performance under WTO regime and suggest some policy measures which is conducive to India’s export growth.



The present work is divided into nine chapters. Chapter I deals with the introduction and basic framework of the study. Chapter II describes the significance of international trade in growth and development of developing country including India. Chapter III provides an overview of the impact of WTO on India’s foreign trade policy and also highlights India’s negotiation position at different Ministerial Conference held under the auspices of WTO. Chapter IV deals with the various exports promotion measures adopted by the Government of India since independence and also observes the WTO status of export promotion measures in relation to India. Chapter V gives detail of the scenario of growth, direction, and structure of India’s exports during the pre and post WTO period and finally exhibit the factors and forces underlying India’s export performance during the concerned period. Chapter VI deals with the analysis of commodity wise and country wise India’s agricultural exports during pre and post WTO period. Chapter VII analyses India’s manufactured export performance under WTO regime with special focus on major categories of commodities. Chapter VIII examines the growth in India’s exports of services and evaluates the composition and direction and comparative advantage of services exports. Lastly, Chapter IX highlights summary and conclusions of the elementary chapters and also highlights some policy measures for promotion of India’s export trade.
In course of study, various institutions offered me immense help and cooperation, so I owe my indebtedness to thank the librarians and official staff of the following institutions: Indian Institute of Foreign Trade, New Delhi, ICSSR, New Delhi, Delhi School of Economics, New Delhi, Jawaharlal Nehru University, New Delhi, University of Lucknow, Lucknow, Giri Institute of Development Studies, Lucknow and IIM, Lucknow.
I am deeply indebted to Prof K.N. Mehrotra, Former Director, Indian Institute of Foreign Trade, New Delhi for giving me constant inspiration and guidance. I am also grateful to Dr. R.S. Tiwari, Former Senior Fellow, Giri Institute of Development Studies, Lucknow for his consistent encouragement and very valuable discussions at the various stages of the study. I also express my sincere thanks to Dr. Manorama Tiwari.
I am deeply indebted to Prof Nar Singh, Head, Department of Applied Economics, University of Lucknow, the supervisor of this research work, for guiding and supporting me throughout my research work.
I also acknowledge the authors and writers of different books and journals which I consulted and referred during the compilation of this thesis. I am also thankful to the administrative staff of University of Lucknow, Lucknow for being cooperative and helpful throughout.
I thank all my family members, my parents, my brother Abhishek Sharma and my sister Upasana Sharma for being very encouraging and supportive throughout my research work. I am also thankful to all my friends and relatives particularly Tushi Sharma for being very helpful.
Date: KALPANA SHARMA

CONTENTS










Page No.



















Preface

i -iii







List of Tables

vi-ix







List of Figures

x-xi













CHAPTER

I

INTRODUCTION

1-24
















1.

Export and Economic Growth


1




2.

Present Position of India’s Exports


3




3.

WTO and Emerging Benefits and Challenges to India


6




4.

Objectives of the Study


8




5.

Hypothesis


9




6.

Sources of Data


9




7.

Research Methodology


9




8.

Review of Literature


11




8.

Chapter Scheme


17











CHAPTER

II

INTERNATIONAL TRADE AND ECONOMIC GROWTH

25-49














1.

Importance of International Trade


25




2.

International Trade and Views of Economists


26




3.

International Trade and Developing Economy


28




4.

Liberalisation and International Trade


33




5.

International Trade and India


38











CHAPTER

III

WORLD TRADE ORGANIZATION AND INDIA

50-87














1.

WTO : A Brief History


50




2.

WTO and India


57







  • WTO and India’s Foreign Trade Policy

57







  • India’s Stance at WTO

68











CHAPTER

IV

EXPORT PROMOTION MEASURES IN INDIA

88-117














1.

Institutional Setup for Export Promotion


90




2.

Export Promotion Strategy and Scheme, Including Export Incentive and Export Infrastructure

93




3.

Export Promotion Policies and WTO

95




4.

Export Promotional Measures under Foreign Trade Policy

104













CHAPTER

V

EMERGING PATTERN OF INDIA’S EXPORTS UNDER WTO

118-152














1.

Global Export Trends With Reference to India’s Relative Export Behaviour


119




2.

Trends in Export Performance of India in Pre- and Post-WTO


128













CHAPTER

VI

WTO AND INDIA’S AGRICULTURAL EXPORTS

153-207














1.

Importance of Agriculture in India


153




2.

Performance of Indian Agricultural Exports under the WTO Regime


155




3.

Commodity-wise Analysis of Indian Agricultural Exports


164




4.

Country-wise Analysis of Indian Agricultural Exports


178




5.

Impact of WTO on Indian Agriculture


197




6.

Major Problems of Indian Agricultural Export Sector


203























CHAPTER

VII

INDIA’S MANUFACTURED EXPORTS

208-275














1.

Role of Manufactured Sector in Indian Economy


208




2.

India’s Manufactured Export Performance


210




3.

Export Performance of India’s Key Manufactured Products in Post-WTO Period


221




4.

WTO and Trade Barriers to Indian Manufactured Exports: Tariff and Non-Tariff Measures


268













CHAPTER

VIII

INDIA’S SERVICES EXPORT PERFORMANCE

276-322














1.

Importance of Service Sector


276




2.

India’s Export of Services in WTO Era


281




3.

Emerging Opportunities and Challenges for Indian Services Export under WTO Regime


313




4.

Policy Development by Indian Government in the Past Decade to Facilitate Growth in Indian Services Export


318













CHAPTER

IX

SUMMARY, CONCLUSION AND POLICY IMPLICATIONS

323-340





























BIBLIOGRAPHY

341-354










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