India Foreign Trade and Policy-2


SKU: AMSEQ-111 Category:

Assignment – A

Question 1. Within three years, SEZs in India have witnessed phenomenal success with incremental investment of Rs.97,871 crores and incremental direct employment provided to 231,629 persons with twice that number getting employed outside. Considering the statement, examine the role of Export Oriented Units / Export Processing Zones / Special Economic Zones in promoting export from India.

Question 2. What are the main provisions in Foreign Trade Policy of India 2009-2014. How will these initiatives help the Government to promote export from the Country?

Question 3. What are the steps taken by the Government of India to promote export of Pharmaceutical products from India. Highlight the problems faced by the Indian Pharmaceutical companies in venturing the Foreign Market.

Question 4. What is the role of WTO in promoting Internatioanl Trade. What are the challenges faced by the organization in facilitating global trade of Agriculture products?

Question 5. Write a short note of trend in export from India for last three years. Which are the major destinations of India’s export? What is the role of USA in India’s total export in the current scenario?

Assignment – B

Question 1. What is the role of World Bank in promoting International Trade? What are the functions of IDA and IRDB?

Question 2. How International Monetary Funds helps its member countries in their economic development? What steps were taken by IMF to help the member countries to come out of the recession?

Question 3. What the major function of EXIM Bank of India? Which are the major initiatives taken by the Bank to promote export from our country?

Case Study

Organic Food Consumption in India is on the Rise.

Some people believe that organic food is only a “concept” popular in the developed countries. They think that when it comes to organic food, India only exports organic food and very little is consumed. However, this is not true. Though 50% of the organic food production in India is targeted towards exports, there are many who look towards organic food for domestic consumption.

ACNielsen, a leading market research firm, recently surveyed about 21,000 regular Internet users in 38 countries to find their preference for functional foods – foods that have additional health benefits. The survey revealed that India was among the top ten countries where health food, including organic food, was demanded by the consumers.

The most important reason for buying organic food was the concern for the health of children, with over 66 percent parents preferring organic food to non organic food. Though organic food is priced over 25 percent more than conventional food in India, many parents are willing to pay this higher premium due to the perceived health benefits of organic food.

The increase in organic food consumption in India is evident from the fact that many organic food stores are spurring up in India. Today (2006) every supermarket has an organic food store and every large city in India has numerous organic food stores and restaurants. This is a huge change considering that the first organic food store in Mumbai was started in 1997.

What do Indian organic food consumers prefer? The pattern of organic food consumption in India is much different than in the developed countries. In India, consumers prefer organic marmalade, organic strawberry, organic tea, organic honey, organic cashew butter and various organic flours.

However, the Indian organic food consumer needs education. There are many consumers who are unaware of the difference between natural and organic food. Many people purchase products labeled as Natural thinking that they are Organic. Further, consumers are not aware of the certification system. Since certification is not compulsory for domestic retail in India, many fake organic products are available in the market.

Organic Farming in India

Organic farming was practiced in India since thousands of years. The great Indian civilization thrived on organic farming and was one of the most prosperous countries in the world, till the British ruled it.

In traditional India, the entire agriculture was practiced using organic techniques, where the fertilizers, pesticides, etc., were obtained from plant and animal products. Organic farming was the backbone of the Indian economy and cow was worshipped (and is still done so) as a God. The cow, not only provided milk, but also provided bullocks for farming and dung which was used as fertilizers.

Shift to Chemical Farming in 1960s

During 1950s and 1960s, the ever increasing population of India and several natural calamities lead to a severe food scarcity in India. As a result, the government was forced to import food grains from foreign countries. To increase food security, the government had to drastically increase the production of food in India. The Green Revolution (under the leadership of M. S. Swaminathan) became the government’s most important program in the 1960s. Large amount of land was brought under cultivation. Hybrid seeds were introduced. Natural and organic fertilizers were replaced by chemical fertilizers and locally made pesticides were replaced by chemical pesticides. Large chemical factories such as the Rashtriya Chemical Fertilizers were established.

Before the Green Revolution, it was feared that millions of poor Indians would die of hunger in the mid 1970s. However, the Green Revolution, within a few years, showed its impact. The country, which was greatly relied on imports for its food supply, reduced its imports every passing year. In 1990s, India had surplus foodgrains and once again became and exporter of food grains.

As time went by, extensive dependence on chemical farming has shown its darker side. The land is losing its fertility and is demanding larger quantities of fertilizers to be used. Pests are becoming immune requiring the farmers to use stronger and costlier pesticides. Due to increased cost of farming, farmers are falling into the trap of money lenders, who are exploiting them no end, and forcing many to commit suicide.

Both consumer and farmers are now gradually shifting back to organic farming in India. It is believed by many that organic farming is healthier. Though the health benefits of organic food are yet to be proved, consumers are willing to pay higher premium for the same. Many farmers in India are shifting to organic farming due to the domestic and international demand for organic food. Further stringent standards for non-organic food in European and US markets have led to rejection of many Indian food consignments in the past. Organic farming, therefore, provides a better alternative to chemical farming.

According to the International Fund for Agriculture and Development (IFAD), about 2.5 million hectares of land was under organic farming in India in 2004. Further, there are over 15,000 certified organic farms in India. India, therefore is one of the most important suppliers of organic food to the developed nations. No doubt, the organic movement has again started in India.

Organic Food Exports from India

Organic food exports from India are increasing with more farmers shifting to organic farming. With the domestic consumption being low, the prime market for Indian organic food industry lies in the US and Europe. India has now become a leading supplier of organic herbs, organic spices, organic basmati rice, etc.

RCNOS recently published a report tilted ‘Food Processing Market in India (2005)’. According to its research, exports amount to 53% of the organic food produced in India. This is considerably high when compared to percentage of agricultural products exported. In 2003, only 6-7% of the total agricultural produce in India was exported.

Exports is driving organic food production in India

The increasing demand for organic food products in the developed countries and the extensive support by the Indian government coupled with its focus on agri-exports are the drivers for the Indian organic food industry.

Organic food products in India are priced about 20-30% higher than non-organic food products. This is a very high premium for most of the Indian population where the per capita income is merely USD 800. Though the salaries in India are increasing rapidly, the domestic market is not sufficient to consume the entire organic food produced in the country. As a result, exports of organic food is the prime aim of organic farmers as well as the government,

The Indian government is committed towards encouraging organic food production. It allocated Rs. 100 crore or USD 22.2 million during the Tenth Five Year Plan for promoting sustainable agriculture in India.

APEDA (Agricultural and Processed Food Export Development Authority) coordinates the export of organic food (and other food products) in India. The National Programme for Organic Production in India was initiated by the Ministry of Commerce. The programme provides standard for the organic food industry in the country. Since these standards have been developed taking into consideration international organic production standards such as CODEX and IFOAM, Indian organic food products are being accepted in the US and European markets. APEDA also provides a list of organic food exporters in India.

Organic food costs in India are expected to decrease driving further exports in future

Organic food production costs are higher in the developed countries as organic farming is labor intensive and labor is costly in these countries. However, in a country like India, where labor is abundant and is relatively cheap, organic farming is seen as a good cost effective solution to the increasing costs involved in chemical farming. Currently most of the organic farmers in India are still in the transition phase and hence their costs are still high. As these farmers continue with organic farming, the production costs are expected to reduce, making India as one of the most important producers of organic food.

Organic food products exported from India include the following:

Organic Cereals: Wheat, rice, maize or corn

Organic Pulses: Red gram, black gram

Organic Fruits: Banana, mango, orange, pineapple, passion fruit, cashew nut, walnut

Organic Oil Seeds and Oils: Soybean, sunflower, mustard, cotton seed, groundnut, castor

Organic Vegetables: Brijal, garlic, potato, tomato, onion

Organic Herbs and Spices: Chili, peppermint, cardamom, turmeric, black pepper, white pepper, amla, tamarind, ginger, vanilla, clove, cinnamon, nutmeg, mace,

Others: Jaggery, sugar, tea, coffee, cotton, textil

Question 1. What are the initiatives taken by the Government of India to boost export organic food products from India?

Question 2. What are the reasons behind the increase in the demand for organic food products?

Question 3. What are the future prospects for export of organic food products from India?

Assignment – C

1. A situation where any advantage given by one member of the WTO to another member must be extended to all WTO members.
(a) The excessive invoicing principle
(b) The comparative advantage principle
(c) The intra-regional principle
(d) The most favored nation principle

2. A situation where countries export a product at a price below the cost of its production.
(a) Full cost pricing
(b) Price skimming
(c) Dumping
(d) Price discrimination

3.” SEZ” was launched in which year ?
(a) 1999
(b) 2000
(c) 2004
(d) 1992

4.” Millennium Development Goals ” are introduced by __________?
(a) United Nations Organization
(b) World Bank
(d) IMF

5. Vishesh Krishi Upaj Yojana was announced as part of the Special focus Initiative for agriculture in the Foreign Trade Policy in —
(a) 2003
(b) 2004
(c) 2005
(d) 2006

6. As part of commitment to WTO India transited to a product patent regime from —
(a) January 1, 2005
(b) December 31 2004
(c) January 1, 2006
(d) January 1, 2004

7. Which of the following is not the role of IMF?
(a) Country Surveillance
(b) Financial Assistance to members to correct balance of payments problems
(c) Technical assistance in its areas of expertise
(d) Dispute Settlement

8. The various rounds of multilateral trade negotiations carried out under the auspices of the GATT have–
(a) Addressed mainly the concepts, principles and rules of the GATT;
(b) Dramatically reduced tariffs worldwide, in particular in developed countries;
(c) Worked towards the establishment of the WTO; or,
(d) Established global standards to be enforced by the dispute settlement mechanism.

9. In the context of the WTO Agreements, “non discrimination” means:
(a) Products imported from all trading partners should be given the same treatment as national products;
(b) Once in the domestic market, imported goods and services from all trading partners cannot be treated differently from domestic products;
(c) All trading partners should be extended “most favoured” nation;
(d) A WTO Member can impose customs duties, but once the imported product has cleared customs, it cannot be treated less favourably than the like national product.

10. The “Enabling Clause” favours WTO developing country members by:
(a) Exempting them from the Most Favoured Nation obligations;.
(b) Permitting them to raise bound tariffs;
(c) Providing the legal possibility for developed countries to offer them more favourable treatment in terms of tariff preferences; or,
(d) Encouraging developing country Members to grant duty free access to products imported from other developing countries.

11. The Anti-dumping Agreement:
(a) Allows States to react against dumping, that causes injury to the competing domestic industry;
(b) Can be invoked when a company exports a product at a price lower than the price it normally charges on its own home market;
(c) Requires States to act against dumping; or,
(d) Can be invoked when the unfair competition practiced by a company causes injury to the domestic market.

12. Technical barriers to trade are regulations that are:
(a) Never permitted in Member countries;
(b) Admissible as long as they do not offer disguised protection to domestic industry, and do not create unnecessary obstacles to trade;
(c) Admissible only when international standards are employed; or,
(d) Always admissible provided that they are directed to protect human, animal or plant life in a WTO Member country.

13. Customs and administrative procedures:
(a) Are used to protect the local industry;
(b) Cannot be maintained by WTO Members;
(c) Are subjected to non-discrimination and transparency by the relevant agreements; or,
(d) Are not dealt with in the WTO.

14. The GATS differs from GATT among other things, because:
(A) It does not adopt the principle of non discrimination rule with respect to trade in services;
(B) It provides the same rules as GATT, but it applies them to domestic regulation, rather than to tariffs;
(C) National treatment is not an obligation under the GATS;
(D) The GATS has Sect oral Annexes that modify the application of the Agreement.

15. The need for “balance” under TRIPS means that:
(a) Having balance between the protection of the inventor’s rights and the interest of producers, users and society at large;
(b) Only creations which benefit the society at large are covered by the Agreement;
(c) The level of protection accorded to a creation is proportional to the social need for it; or,
(d) The patenting of an invention is only permissible if it results in an incentive to the development of new technology.

16. Ministerial Conferences are:
(a) Periodic rounds of negotiations;
(b) Meetings of ministers with the sole objective of launching new multilateral trade negotiations;
(c) Enlarged meetings of the General Council, which take place every two years;
(d) Periodic meetings of ministers in charge of WTO matters.

17. The Doha Development Agenda:
(a) Sets development of developing countries as the basic goal of the work programme contained in the Doha Ministerial Declaration;
(b) Is a broad work programme addressed to developing countries;
(c) launched a new round of negotiations on market access, trade and environment, TRIPS, and the Singapore issues; or,
(d) Set a three years deadline for the opening of agriculture and industrial goods market, to the benefit of developing countries.

18 What are the forms of assistance that the World Bank provides to its members?
(a) Technical and financial
(b) Political and financial
(c) Political and economic
(d) Technical and military

19. The World Bank Group is made up of how many organisations?
(a) 3
(b) 5
(c) 8
(d) 10

20. Which organisation of the World Bank Group deals with matters related to the development of the poorest countries in the world?
(a) The International Bank for Reconstruction and Development
(b) The International Development Association
(c) The International Finance Corporation
(d) The Multilateral Investment Agency

21. What are countervailing measures?
(a) Measures which a State may initiate against another State when that other State has legally subsidized any of its domestic industries
(b) Measures which a national government may initiate against another State when that other State has not subsidized any of its domestic industries
(c) Measures which a State may initiate against another State when that other State has illegally subsidized any of its domestic industries
(d) Measures which a national government may initiate against another State when that other State has not illegally subsidized any its domestic industries

22. EPCG is an initiative of government of India to allow duty free import of
(a) Raw material
(b) Fuel
(c) Capital Goods
(d) Semi finished products

23. Which of the following is not a Town of Excellence as per the Foreign Trade Policy of India
(a) Jodhpur
(b) Karur
(c) Kollam
(d) Jaipur

24. Main objective of the Focus Market Scheme of the Foreign Trade Policy of India is to
(a) Offset high freight cost and other externalities to select international markets
(b) Incentives export of such products, which have high employment intensity in rural and semi urban areas
(c) Incentives export of High Technology products
(d) promote export to focus countries

25. Which of the following is a duty remission scheme as per FTP of India?
(a) Advance Authorization
(b) Duty Entitlement Passbook scheme
(c) Advance Release Order
(d) Duty Free Import Authorization

26. Pre-shipment finance is provided to the Indian exporter by EXIM bank for
(a) Providing access to finance at the manufacturing stage
(b) Providing finance before shipping the goods
(c) Financial assistance for providing credit to the overseas buyer
(d) Providing finance to the foreign buyer

27. What is the role of the IMF?
(a) It controls the budgets of national governments
(b) It acts as a forum for international economics
(c) It observes world exchange rates, balance of payments and multilateral payments
(d) It seeks to promote free international trade

28. Who is currently the governor of IMF for India?
(a) Mr. Pranab Mukherjee
(b) Dr. Manmohan Singh
(c) Dr. Montek Singh Ahluwalia
(d) Dr. D. Subbarao

29. Which country has the largest quota with IMF?
(a) USA
(b) EU
(c) Canada
(d) China

30. Who is currently the Managing Director of IMF?
(a) Mr. Pascal Lamy
(b) Mr. Dominique Strauss-Kahn
(c) Mr. Robert B. Zoellick
(d) H.E. Dr. Ali Abdussalam Treki

31. Which of the following is not a role of IMF?
(a) Country Survellience
(b) Providing Financial Assistance
(c) Conduction technical sessions
(d) Take initiatives for reform for climate change

32. EXIM Bank of India was setup in the year
(a) 1981
(b) 1975
(c) 1990
(d) 1995

33. Which of the following is not the role of EXIM Bank?
(a) Technical assistance
(b) Financing
(c) Develop Policy for Export and Import
(d) Research

34. The World Bank consists of the Bank itself and:
(a). The International Bank for Reconstruction and Development.
(b). The International Finance Corporation.
(c). Multilateral Development Banks.
(d). The International Monetary Fund.

35. The International Monetary Fund Articles of Agreement were adopted at the Bretton Woods Conference in 1944. In general terms, the International Monetary Fund’s objectives today are, to foster:
(a) Fixed exchange rates.
(b) Balance of payments disequilibria.
(c) Convertible currencies
(d) Predictable supplies of capital to developing nations.

36. The Bank for International Settlements deals with:
(a). Private individuals.
(b). Corporations.
(c). Governments.
(d). Other banks.

37. The World Trade Organization, headquartered in Geneva, Switzerland currently has _____member countries.
(a) 130
(b) 140
(c) 150
(d) 153

38. Which of the following is not a duty exemption/remession scheme in FTP of India?
(a) DEPB
(b) Advance Authorization
(c) Duty Drawback
(d) ECGC

39. Which of the following categories of supply of goods by main/subcontractors
Is not regarded as “Deemed Exports”
(a) Supply of goods to EOU
(b) Supply to projects funded by UN Agencies;
(c) Supply of goods to DTA
(d) Supply of goods against Advance Authorisation

40. The Foreign Trade Policy of India is prepared by
(a) DGFT
(b) DGCI&S
(c) EXIM Bank
(d) WTO


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