International business is of prime importance in today’s era amongst economies of the world. It holds more significance for the fast-growing economies like the BRICS countries (Brazil, Russia, India, China, and South Africa). The annual rate of growth of India in the international business is above 8%.
India has rich resources that are way above those of other nations. That is why India is seen as the right nation to explore business opportunities. Amongst many of the resources that make India lucrative for business, the top ones are:
Highly and semi-skilled manpower.
Technologies within the country.
Rich natural resources.
Budding middle-class segment.
The willingness of the Indian government to participate in the world trade
India is known to be one of the fastest-growing economies in the world, next only to China. It holds the place of the 10th largest economy in the world. It is predicted that the top three countries that are likely to dominate the 21st-century economy are; the United States, China, and India. Forty percent of the world’s GDP (gross domestic product) comes from these countries. India, which is already using the World Bank’s PPP (Purchasing power parity) exchange rate, has the 3rd largest GDP in the world.
The growth of India’s GDP to 203.39 trillion USD in 2019-20 owes it to the integration of the domestic economy through two channels; trade and capital flow. The per capita income of India has also become three times in these years.
In the Indian economy, the services sector holds tremendous value. Almost 55 percent of India's GDP comes from services. India's trade in services has been a significant driver in its exports in the last two decades. India tops the chart as the fastest growing nation in global service trade.
The service sector has been beneficial to India in many ways such as:
Attracting significant foreign investments.
A significant contribution to export
Providing large scale employment.
The service sector of India comprises a wide range of activities such as transport, trade, hotels and restaurants, business services, financing, insurance, etc. From the year 2014-2018, India’s export of services has shown an upward trend.
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The Indian government has come up with SEIS (Service exports from India scheme) which is geared towards promoting the export of services from India. The SEIS provides duty scrip credit for eligible exports. The service providers in India would get rewards under the SEIS scheme for all the eligible exports. Check out the salient points of the SEIS scheme:
Any service provider (company, firm, and partnerships) who has net free foreign exchange earnings of more than 15000 USD in the preceding financial year are eligible for duty credit scrip.
For individual service providers, the minimum net free foreign exchange earning required is 10,000 USD.
The service provider must have an active import-export code (IE code) to be eligible under the SEIS scheme.
The net foreign exchange earning SEIS is calculated, as shown below:
Net Foreign Exchange = Gross Foreign Exchange earnings – Total foreign exchange which has been remitted, spent or paid.
Successful bilateral and multilateral trade negotiations have boosted world trade in the past decades. There has been a considerable reduction in tariffs on exported goods. India's involvement in world business increased its external trade by getting into trading agreements with numerous different countries.
To facilitate the rate of export and import in India, a web-based Indian Trade Portal has been designed by the department of commerce (government of India). The key features of this Indian Trade Portal are:
Goods are classified as per country-specific disaggregated harmonized system (HS) levels 6,7,8, etc.
The portal has updated tariff data for Indian, ASEAN, and India’s 25 foremost export destinations.
It has the list of SPS (Sanitary and Phytosanitary) and TBT (Technical barriers to Trade) requirements for India and India’s 25 foremost export destinations.
One can search the data based on HS codes and product names.
The goods foreign trade by India was 31.4% of the total GDP in the 2019 financial year. India's Foreign Trade in Goods primarily happens with the United States, UAE (United Arab Emirates), China, Saudi Arabia, Hongkong, Singapore, and Iraq.
Recently India signed up for free trade agreements with South Korea and ASEAN. India is also in negotiation with various partners like Australia, the EU, New Zealand, MERCOSUR, and South Africa.
The main goods exported from India are:
Petroleum oils (14.6%)
Jewellery products (3.8%)
India imports the following commodities:
Petroleum oils (22.6%)
Coal and similar solid fuels (4.8%)
Petroleum gas and other gaseous hydrocarbons (3.7%)
The table below gives a snapshot of India’s import and exports of goods from 2015 till 2019.
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Q1. What are the Top Ten Exports of the Indian Export Service?
Ans. India is situated strategically near highly populated countries like China, Bangladesh, and Pakistan. In the year 2019, India shipped goods around the globe which had a total value of 322.8 billion USD. The top 10 rankers of this impressive amount of export are:
Mineral fuels including oil formed 13.7% of total exports with a value of 44.1 billion USD.
Gems, precious metals formed 11.4% of total exports with a value of 36.7 billion USD
Machinery including computers formed 6.6% of total exports with a value of 21.2 billion USD.
Organic chemicals formed 5.7% of total exports with a value of 18.3 billion USD.
Vehicles formed 5.3% of total exports with a value of 17.2 billion USD.
Pharmaceuticals formed 5% of total exports with a value of 16.1 billion USD.
Electrical machinery, equipment formed 4.5% of total exports with a value of 14.7 billion USD.
Iron, steel formed 3% of total exports with a value of 9.7 billion USD.
Clothing, accessories (not knit or crochet) formed 2.7% of total exports with a value of 8.6 billion USD.
Knit or crochet clothing, accessories formed 2.5% of total exports with a value of 7.9 billion USD.
Q2. What is RCEP and Why Did India Opt-out of It?
Ans. RCEP stands for regional comprehensive economic partnership, and it is the largest regional trading agreement to date. RCEP was originally negotiated by 16 countries, i.e. ASEAN members and the countries with which they have entered free trade agreements (FTAs). Those countries were New Zealand, Australia, India, Korea, Japan, and China. RCEP was formed to make it easy for these countries to import and export products and services across these regions. Since 2013, the countries have been in negotiation, and India was supposed to be one of the signatories until it decided to op-out in November 2019. India decided to opt-out since RCEP failed to address India’s outstanding concerns and issues. This decision was taken to safeguard the interests of sectors like agriculture and dairy. This decision also gives an advantage to countries’ services sectors.