India’s Relations with SAARC,

ASEAN & the EU

India’s upcoming service sector

Globalization & Regionalization (Economic)

University of Wroclaw
Meha Lodha
6th January 2010
Contents

 Introduction
 India & Regional Organizations
 SAARC
 ASEAN

 EU

 India’s Service Sector

Introduction
Facts
 Mixed Economy
 Population 1.17 billion - 1/6th of world’s population
 1.3% annual population growth
 66% Literacy rate
 22% below Poverty Line
 7.8% Unemployment Rate
 1.064 males/female
 Life expectancy 65 years
From 1991...
 From socialist inspired economy to market based
system
 Economic liberalisation
 Automatic approval of FDI in many sectors
 Constant economic growth
 Increasing life expectancy, literacy rates
 Privatization, foreign competition
India and SAARC
South Asian Association for Regional
Cooperation
 Economic and political organization
 Established 1985
 Bangladesh, Bhutan, Maldives, Nepal,
Pakistan, India, Sri Lanka & Afghanistan
 SAPTA enforced in 1995
 SAFTA – No customs duty by 2016
 Keen interest – Ch, J, SK, USA
Share of SA Regional GDP
SAARC Economic Indicators

Source: World Development Indicators 2007 and World Development Report 2008.
Far from successful
 Political differences, low trade and investment flows
 Intra-regional trade barriers – low intra-SAARC trade
 High protectionism by India
 SAFTA restrictions reduce scope of integration
India and ASEAN
India & ASEAN
 Indonesia, Malaysia, Philippines, Singapore, Thailand,
Brunei, Vietnam, Burma, Laos, Cambodia
 1992 Sectoral dialogue partner (trade, investment,
tourism, science & technology)
 1995 Full dialogue partner
 1996 ASEAN Regional Forum
 Since 2002 Summit Level Meetings
 Aug 2009 FTA signed
 Singapore – Single largest ASEAN investor in India
 ASEAN 600 m, India 1 b population
 ASEAN +6
AIFTA

 ASEAN-India Free Trade Area

 Effect from 1st Jan 2010
 ASEAN’s seventh largest trading partner
 Lift import tariff on >80% of traded products
between 2013 and 2016
 5% tariff on sensitive goods 2016
 Tariffs maintained on 489 very sensitive goods
India’s trade with ASEAN (B$)

50
45 44.1
40
35 36.1
32.6
30
27.0
25 24.4
21.7
20
15
11.4
10
5
0
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Exports Imports Growth (%) in total trade

Source: Ministry of Commerce & Industry, GOI 

India and the EU
India & the EU
 One of the 1st countries to develop relations with EU
 EU is India’s largest trading partner (20%)
 EU is the largest exporting destination of India’s
exports (21%) followed by the US (15%), UAE
(9.5%) and China (6.5%)
 Exports – Diamonds, petroleum products, textiles,
leather
 Imports – Aircrafts, machinery,
 Only 1.98% of EU’s imports
 EU has plan to pursue FTA with India
India’s trade with EU (B$)

45

40

35

30 31.1
28.7
26.9
25

20 19.7
18.8
15 15.1

10

0
2000-01 -2.6
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
-5

Exports Imports Growth (%) in total trade

Source: Ministry of Commerce & Industry, GOI 

Services

Export interest for India Import interest for India

 IT services & BPO  Banking & insurance
 Health Services (including  Retail
doctors, nurses,  Telecommunications
telemedicine, etc)  Education
 Engineering services  Environmental services
(including consultancy)
 Legal Services
 Architectural services
 Banking services
 Audio – Visual services

Source: FICCI (FEDERATION OF INDIAN CHAMBERS OF COMMERCE & INDUSTRY)

FDI
Cumulative FDI (from April 2000 to January 2008)

U.A.E 590
Switzerland 638
Japan 2,563
Countries

Singapore 2,816
USA 4,221
EU 10,227
Mauritius 20,984

0 5,000 10,000 15,000 20,000 25,000

Cumulative FDI (From April 2000 to Januray 2008) $ Million

% share in cumulative FDI Inflows (From April 2000 to January 2008)

U.A.E, 1.13 Others , 19.77

, Mauritius ,
40.05
Switzerland,
1.22
,
Japan, 4.89

Singapore,
5.37

USA, 8.06
EU, 19.52

Source: DIPP
Top 5 sectors attracting FDI inflows
from EU
Sector’s share
in total FDI
inflows
Amount of FDI
inflows From E.U

Ranks Sector In US$  

Services Sector
1 (Including Financial & Non-Financial) 2,417.32 35.92

2 Computer Software & Hardware 366.89 5.49

Automobile Industry (Including Passenger Cars

3 Etc.) 359.19 5.33

4 Chemicals (Other Than Fertilizers) 322.68 4.93

5 Electronics 241.33 3.83

Total of above 3,707.41 55.5
India’s investments in EU
 Largest overseas investment destination
 UK is the sought after destination in EU
 Food, beverages, pharmaceuticals, engineering

Growth Rate and Value of India’s Direct

Investment in EU
Year Growth (%) Value($
million)

2002-03   83.1
2003-04 297.4 330.15
2004-05 -50 164.5
2005-06 265.76 600.1
2006-07 687.3 4729.99
Arcelor Mittal

 Largest steel company in the world

 2006 Mittal Steel (India) take over of Arcelor
(Luxembourg)
 Opposition from France, Luxembourg & Spain
 Threat of trade war between India and France
 European Commission approval – no change in
European Economic Area Market Structure
India’s Service Sector
Leading exporters of commercial
services, growth 2000 - 2007
IT & BPO
USD billion

 Share in exports – 1% in Particulars FY 2004 FY 2005 FY 2006

FY2007
E

1990 to 18% in 2001 IT Services 10.4 13.5 17.8 23.7

- Exports 7.3 10.0 13.13 18.1
 Bangalore (India’s Silicon - Domestic 3.1 3.5 4.5 5.6

Valley) ITES-BPO
- Exports
3.4
3.1
5.2
4.6
7.2
6.3
9.5
8.3

 Chennai - Domestic
Engineering
0.3 0.6 0.9 1.2

services, R&D
 India and EU – Joint and Software
products 2.9 3.9 5.3 6.5

R&D - Exports 2.5 3.1 4.0 4.9

- Domestic 0.4 0.7 1.3 1.6
Hardware 5.0 5.9 7.0 8.2
Total IT industry 21.6 28.4 37.4 47.8
- Exports 13.4 18.2 24.1 31.9
- Domestic 8.3 10.2 13.2 15.9
Thank You!
 G-20
 Since 1999
 Organization of important
industrialized and
developing economies to
discuss key issues in global
economy
 India - Founding member
and chair country in 2002
IBSA
 Since 2003
 India, Brazil, South Africa
 South-South Cooperation
 Agriculture, trade, transport,
science & technology,
defense and others
 Bay of Bengal Initiative for
MultiSectoral Technical and
Economic Cooperation
 Since 1997
 Create enabling
environment for rapid
economic development
Asian Development Bank
 Fighting poverty in Asia and
the Pacific
 India - founding member
 India received micro finance
support for private
enterprises
 2009 - $ 2.9 b fund for
proposed projects in India
India’s Exports

100%

80%

60%

40%

20%

0%
2007- 2006- 2005- 2004- 2003- 2002- 2001- 2000-
2008 2007 2006 2005 2004 2003 2002 2001
WANA 19 18 16 17 16 14 13 13
North America 13 16 18 18 19 22 21 22
NE Asia 16 15 16 16 15 15 13 14
EU Countries (27) 21 21 23 22 23 23 23 24
ASEAN 10 10 10 10 9 9 8 7

ASEAN EU Countries (27) NE Asia North America WANA

Sources

 http://dipp.nic.in/fdi_statistics/india_FDI_Sept
ember2009.pdf
 http://www.economywatch.com/foreign-direct-
investment/fdi-india/
 http://business.mapsofindia.com/fdi-india/