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IBO-03: India’s Foreign Trade

IBO-03: India’s Foreign Trade

IGNOU Solved Assignment Solution for 2021-22

If you are looking for IBO-03 IGNOU Solved Assignment solution for the subject India’s Foreign Trade, you have come to the right place. IBO-03 solution on this page applies to 2021-22 session students studying in MCOM, PGDIBO courses of IGNOU.

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Assignment Solution

Assignment Code: IBO-03 / TMA/ 2021 - 2022

Course Code: IBO-03

Assignment Name: India’s Foreign Trade

Year: 2021 - 2022

Verification Status: Verified by Professor


Attempt all the questions:


Q 1. How did India adopt economic reforms to get integrated with the world trade? (20)

Ans) Despite having a large domestic market, a broad-based industrial infrastructure, a large pool of training manpower, impressive entrepreneurial and managerial skills, an abundant supply of cheap labour, and adequate natural resources, among other things, India could not play the role of a global marketer due to its inward-looking attitude. Because of its disproportionate concentration on import substitution, shielded markets, and a regulated economy, India missed out on export possibilities at a time when global commerce was rapidly expanding. The situation did not improve until 1991, when the government made the daring decision to liberalise the Indian economy and integrate it with the global economy.


 Faced with a dangerous foreign exchange position, a negative balance of payments, and a massive external debt, India's government began a comprehensive macroeconomic stabilisation and structural reform programme in June 1991. The programme comprised far-reaching trade, fiscal, monetary, and industrial policy initiatives, with a focus on improving the competitive efficiency of Indian businesses by leveraging foreign investment and technology to a far higher extent than previously. In reaction to the crisis, a set of measures aimed at stabilisation and structural changes were implemented. While stabilisation measures attempted to get the house in shape in order to rectify fiscal and balance of payments imbalances, structural reforms aimed to avoid similar crises from happening again.


Despite the fact that India has achieved significant progress in enacting economic and structural reforms since the early 1990s, the reform process has slowed in recent years, partly owing to political instability and partly due to the Asian financial crisis spreading to India. To achieve sustained greater economic development, the government must not only resume and expedite economic reform, but also broaden its scope. Financial sector reform, infrastructure reform, public finance consolidation, agribusiness, and expanding access to basic education and health services are among the many sectors that require attention.


The goal of the reforms was to remove restrictions on industry's external trade and foreign investments, as well as to create a climate of trust between the government, business, and industry. The new policy emphasises market forces rather than government control in deciding the country's future economic growth and development. Furthermore, the administration has come out in favour of outward-oriented and industrial policies that prioritise exports for the first time.


Q 2. What were the objectives for establishing EPZ? How are export houses benefited by the EPZ? (10+10)

Ans) Developing nations establish Export Processing Zones (EPZs) to encourage the growth of export-oriented industrial companies. The zones are designed to create a low-cost, duty-free environment for export manufacturing on a global scale. This makes EPZ goods competitive on the worldwide market, both in terms of quality and price. The major driver is likely to be foreign investment.


The objectives for setting up of EPZs generally are as follow:

  1. Obtaining foreign exchange profits

  2. Creating chances for employment

  3. Attracting foreign investment

  4. Technologies transfer (attracting sophisticated technology)

  5. Linkages between EPZ industries and the domestic economy are a wiring and upgrading labour management.


Free Trade Zones / Export Processing Zones are industrial estates that create enclaves inside a country's customs area and are typically located near an international port or airport. Normally, the whole output of such Zones is exported. Imports of raw materials, intermediate goods, equipment, and machinery used in export manufacturing are exempt from customs duty. The speed and ease with which import, and export operations may be completed is a distinguishing feature of EPZs. Imports into the Zones and exports from the Zones are restricted to a bare minimum of time-consuming customs processes.


Benefits by EPZ to Export Houses

Furthermore, EPZ Units in India provide benefits such as duty exemption on all items imported for the purpose of project development, as well as procedural efficiency for quick dispute resolution, clearances, approvals, and customs processes. They are eligible for the Duty Entitlement Passbook Scheme, Advance Licensing for Physical Export, Intermediate Supplies, and Assumed Automatic Licensing, as well as a formal undertaking.


Furthermore, EPZ Units in India have a plethora of commercial and public bank chains that provide financial support to businesses, as well as other amenities like as a proper sewage and drainage system and a pollution-free environment. EPZ Units in India have several advantages, including in-house customs clearance, a large supply of skilled labour, and easy access to the railway station and airport. They can get marketing development help if they need it.


There are no limits on foreign ownership in building the Zone's infrastructure, and there are no restrictions on repatriation, among the many advantages of EPZ Units in India. The numerous advantages of EPZ Units in India include the year-round operation of bulk container handling and artificial harbours, the simplification of labor-related procedures, and the exemption from VAT/ excise on products supplied locally for the purpose of project construction.


Q 3. Describe India’s competitive advantages and disadvantages in the exports of leather goods. (10+10)

Ans) The leather sector has been migrating from developed to underdeveloped countries. China, Indonesia, Thailand, Malaysia, and the Philippines are India's key competitors.


Advantages in exports of leather goods

The first and most important strength of India is its raw material basis. India is home to the world's biggest cattle population. The availability of competent labour at acceptable salary levels is India's next big strength. There are parts of the sector that make products that are on par with the best in Italy and Germany. Even bigger segments are now able to compete with South Korean and Taiwanese goods. Increased productivity and a dedication to quality are the concerns to be addressed here. Because of the significant salary increases in South Korea and Taiwan, we have received a lot of business.


A greater supply of higher-quality hides and skins will only lead to a higher price realisation.

Orders are sometimes lost because an exporter is unsure that he or she will be able to cover raw material in the appropriate grades. To supplement their domestic purchases, exporters are increasingly turning to imports from around the world. Despite the obstacles that have hampered the leather industry's ability to develop smoothly, it has improved its performance in recent years.


The Indian leather industry is divided into two categories: organised and unorganised (small-scale). Given the fast advancements in contemporary genetics and genetic engineering in recent years, concentrated efforts are needed to apply the technique to breeding cattle and other animals that provide hides, skins, and furs. Genetics and genetic engineering can ensure that animals grow quicker (with hormones) and have skins with greater strength and finish. Technologies for using slaughterhouse by-products to make adhesives, animal feeds, and a range of other goods will bring in a lot of money for those involved in these operations. The first and most important strength of India is its raw material basis. India is home to the world's biggest cattle population. The availability of competent labour at acceptable salary levels is India's next big strength. There are parts of the sector that make products that are on par with the best in Italy and Germany. Even bigger segments are now able to compete with South Korean and Taiwanese goods. Increased productivity and a dedication to quality are the concerns to be addressed here. Because of the significant salary increases in South Korea and Taiwan, we have received a lot of business.


A greater supply of higher-quality hides and skins will only lead to a higher price realisation.

Orders are sometimes lost because an exporter is unsure that he or she will be able to cover raw material in the appropriate grades. To supplement their domestic purchases, exporters are increasingly turning to imports from around the world. Despite the obstacles that have hampered the leather industry's ability to develop smoothly, it has improved its performance in recent years.

The Indian leather industry is divided into two categories: organised and unorganised (small-scale). Given the fast advancements in contemporary genetics and genetic engineering in recent years, concentrated efforts are needed to apply the technique to breeding cattle and other animals that provide hides, skins, and furs. Genetics and genetic engineering can ensure that animals grow quicker (with hormones) and have skins with greater strength and finish. Technologies for using slaughterhouse by-products to make adhesives, animal feeds, and a range of other goods will bring in a lot of money for those involved in these operations.


Disadvantages of exports of leather goods

Our competitors in Taiwan, Korea, Hong Kong, and China produce high-quality goods, putting us at a disadvantage. To produce leathers with the flare of an Italian finish, we'll need to enhance both our equipment and our abilities. Taiwanese and Koreans have had a lot of success in this area. Increases in pay must be related to increased production and quality. This is the only way to get a greater return. The lack of an effective national regulation on animal slaughter, as well as inadequate storage and transit conditions for hides and skins, is our first significant flaw. Apart from the environmental risks, a lot of fine leather is either degraded or lost as a result of this. We also need to build huge training centres to supply trained labour to the increasing number of manufacturing plants.


With the exception of a few well-organized units in strategic locations, the majority of output comes from tiny and cottage units that are still disorganised and lack appropriate financial and other assets. Those attempting to put a last nail in the coffin have designated it as a polluting business, with the ensuing rigorous environmental regulation currently presenting a danger to the industry's growth. Lately, synthetic replacements, intense competition from other emerging nations, changes in fashion and design, rigorous environmental controls, innovation, and the use of contemporary technologies have all posed threats to the leather industry. This has prompted a pressing need to equip the country's leather production facilities with sophisticated technology and equipment by imposing research and technical progress for the benefit of all segments of the sector.


Q 4. Describe the salient features of India’s trade with EU. (20)

Ans) Working toward a sound, transparent, open, non-discriminatory, and predictable regulatory and commercial climate for European businesses dealing with or investing in India, including the protection of their investments and intellectual property, is a fundamental EU goal in its trade ties with India. The goal is to help unleash the latent potential of two-way commerce between India and the EU.


India's trading policy and regulatory environment are now rather restrictive. TBT, SPS, departure from international norms and agreements, and discrimination based on legislative or administrative actions by India affect a wide variety of industries, including products, services, investment, and public procurement.


The EU works with India through all relevant channels and fora to guarantee fair market access and predictable investment conditions, as well as to encourage both parties to fully fulfil their multilateral commitments under the World Trade Organization (WTO). The EU-India Trade Sub-Commission, as well as its specialised technical working groups, were created under the 1994 Cooperation and Partnership Agreement between the EU and India.


India is not seen as a significant commercial partner by the European Union. India's share of non-EU imports was less than 1.5 percent in the 1990s. However, it should be noted that the figures in Annexure I include imputed values for 1993, when the Union's membership was less than 15, limiting a comparison between 1998 and the prior year to that degree. India's share of non-EU imports, on the other hand, is likely to be less than 2%. Even if EU imports from ACP countries are eliminated, India will continue to be a minor supplier to the EU.


India's standing as a market for EU products is not much better, with India's share of extra-EU exports not reaching 1.6 percent between 1993 and 1998. India is also not a big market for EU products among non-ACP nations. The European Union, on the other hand, is a significant commercial partner for India, accounting for little more than a quarter of India's global exports and imports. The major markets for 1 Indian product in the EU are the United Kingdom, Germany, Belgium, Italy, France, the Netherlands, Ireland, and Spain, in that order, while the major suppliers are the United Kingdom, Belgium, Germany, Italy, France, and the Netherlands, with Luxembourg being the least important market and supplier.


Machinery and parts, unworked precious and semi-precious stones, iron and steel and articles thereof, optical, measuring, controlling, and other scientific equipment, organic chemicals, and aircrafts and components are the primary products exported by the EU to India. Apparel, diamonds, cotton, cotton yarn & textiles, Market's leather, woollen and silk carpets, coffee, tea, spices, leather goods, footwear, maritime products, boilers, equipment and components, edible nuts, organic chemicals, manufactured fibres and rags are the primary things imported by the Union from India. The products listed above account for about 70% of the Union's total imports from India.


Q 5. Write short notes on the following: (4X5)

Q 5. (a) EPCG Scheme

Ans) The Export Promotion Capital Goods Scheme (EPCG Scheme) may be summarised as "Duty-Free (Zero Customs Duty) Import of Capital Goods/Machinery for the manufacturing of export-oriented items." Capital Goods can be utilised throughout the manufacturing, pre-production, and post-production stages of a product. This programme is also known as the EPCG zero duty programme. Companies must pay high customs charges on capital machinery imported for manufacturing needs, which causes businesspeople to avoid importing it and reduce the quality of the items. The greater the price of the machinery, the higher the custom duty, and this feature began to have a significant impact on the manufacturing sectors' competitiveness and quality.

 

To alleviate the issue, the Indian government devised a plan that enabled capital items to be imported duty-free. The EPCG Scheme was created by the Indian government to make it easier to import capital goods and machinery for the production of high-quality goods and services. The EPCG Scheme's primary goal is to increase India's manufacturing competitiveness.

 

Q 5. (b) Indian Textiles Export

Ans) lndia has a long history of exporting textiles to numerous worldwide markets; lndia's cottons, muslins, and silks were well-known around the world even in the past. However, the fact that it has not been able to keep up with technical advances in the textile sector in other countries has hampered the industry's export efforts in recent years. As a result, the Indian government has given the task of technical upgradation in this sector top importance in order to enable it to compete effectively in international markets.


Indian textile exports play a significant part in the country's economic profile, accounting for roughly 35 percent of total Indian commodity exports. Textiles are India's greatest single net foreign exchange earner, with cotton accounting for the majority of its exports (indigenous cotton).


Q 5. (c) SWOT Analysis

Ans) ANALYSIS OF STRENGTHS AND WEAKNESSES (Strength, Weakness, Opportunity, Threat)

A SWOT analysis is a framework for assessing a company's competitive situation and formulating strategic plans. Internal and external variables, as well as present and future possibilities, are all evaluated in a SWOT analysis.


A SWOT analysis is a tool for taking a realistic, fact-based, data-driven look at an organization's, initiative's, or industry's strengths and weaknesses. The organisation must maintain the accuracy of the study by avoiding preconceived notions or grey areas and instead concentrate on real-world scenarios. It should be used as a suggestion rather than a prescription by businesses.


Some key features

  1. SWOT analysis is a strategic planning method that gives you tools to analyse your situation.

  2. Fact-based analysis, new views, and new ideas result from identifying key strengths, weaknesses, opportunities, and threats.

  3. When many groups or voices inside an organisation are allowed to give genuine data points rather than predefined message, SWOT analysis works best.


Q 5. (d) India – ASEAN Trade Prospects

Ans) For numerous reasons, India's commercial prospects are dependent on the ASEAN area. According to all forecasts, this is the region that has seen the most development in the past and is projected to continue to do so in the future. On a bilateral level, a deeper engagement with regional economic blocs. As a result, India must establish a stronger partnership with ASEAN. Investment flows drive trade flows, according to trade flow patterns in many nations, especially when the biggest increases in trade flows occur in the form of intra-industry or intra-firm trade. Increasing bilateral investment flows is thus the key to a stronger economic partnership with ASEAN.


It is beneficial for Indian firms to form joint ventures in Southeast Asian nations in order to benefit from cheaper tariffs, however there are local content criteria that must be satisfied in order to qualify for lower tariffs. Second, at the policy level, it is critical for Indian policymakers to strengthen both official and informal interactions with ASEAN in order to advance the interests of Indian exporters. At the very least, this entails systematic collecting and rapid distribution of important ASEAN decisions and policies to Indian firms, as well as early involvement to influence ASEAN policies that affect Indian interests, when practicable.


There is the potential for significant trade and investment growth between India and ASEAN nations if focused programmes and initiatives encompassing trade liberalisation, facilitation, and promotion are implemented.

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