3.

Globalization
Liberalisation Privatisation and Globalisation
in India
Owing to deteriorating trade balance, economic and financial crisis in early 1990s, India had to
borrow foreign exchange from IMF and comply with the conditions imposed by it such as stabilisation
and structural stability programme, reduction of trade barriers, revision of fiscal and monetary
policies, active role of market and integration of the Indian economy with the world economy. The
three basic elements of economic reforms were Liberalisation Privatisation and Globalisation (also

known as LPG strategy) of the Indian economy. Goals of LPG Refoms

 To achieve high rate of growth of national and per capita income;
 To achieve full employment;
 To achieve self-reliance;
 To reduce the inequality of income and wealth;
 To reduce the number of people living below the poverty line;
 To develop a pattern of society based on equality and absence of exploitation

Liberalisation Privatisation and Globalisation

Liberalisation Privatisation and Globalisation are the three constituents of economic reforms. Let us
discuss them one by one.

Liberalisation
Liberalisation refers to shifting of license dominated regime to de-licensing, deregulation and de-
bureaucratisation. A liberal policy adopted on both domestic and external fronts which included the
following measures:

 Removal of Industrial Licensing: All industrial licensing was abolished except for 18 industries relating
to security and strategic concerns, social sectors, hazardous chemicals, environmental reasons and
items of elitist consumption industries. At present only five industries are under compulsory licensing
mainly on account of environmental, safety and strategic considerations
 Dereservation of SSI Items: To promote domestic and global competition, reservation of Small-scale
industry (SSI) items is being reduced gradually since 1990s. Currently, no items are reserved exclusively
for SSI.
 Withdrawal of MRTP Act: The MRTP Act has been withdrawn and the MRTP commission stands
disbanded. This enabled business houses to undertake expansion and establishment of new businesses
as well as undertake mergers, amalgamations and takeovers.
Privatisation
Privatisation refers to any process that reduces the involvement of the state/public sector in economic
activities of a nation. Policies were framed to increase the role of private sector in the process of
development.

The four forms of Privatisation are:

1. Denationalisation: It implies complete transfer of state ownership of productive assets into private
hands
2. Joint Venture: It implies partial induction of private ownership from 25 to 50 per cent or even more in
a public sector enterprise, depending upon the nature of the enterprise and state policy. The basic aim
is to improve efficiency, productivity and profitability of the firms.
3. Workers’ Co-operative: Under this form of privatization, a loss-making public sector firm is transferred
to the workers. The basic purpose is that workers besides receiving wages for work, would also be
entitled to a share in ownership dividend. Since workers’ personal interest is linked to the interest of the
enterprise, the workers are likely to work hard to increase productivity so that they can earn more.
4. Disinvestment: It is also known as Token Privatisation or deficit privatization. It involves sale of 5 per
cent to 10 per cent shares of a profit-making public sector enterprise in the market. The objective is to
garner revenue to reduce budget deficits.

Globalisation
Globalisation is the process of integrating the various economies of the world without creating any
barriers in the flow of goods and services, technology, capital and labour/human capital. Thus it is the
process of economic integration of the country with the rest of the world. Globalisation has four
components:

1. Reduction of trade barriers in the form of custom duties or quantitative restrictions or quotas so as to
permit free flow of goods and services among different economies
2. Creation of an environment in which free flow of capital (or investment) can take place between nation-
states
3. Creation of an environment for free flow of technology
4. Creation of an environment in which free flow of labour or human resources can take place among
different countries of the world.

To achieve the objectives of globalization, the government undertook following measures:

 Reduction of custom duties

 Removal of quantitative restrictions or quotas on exports
 Adjustment of exchange rate
 Facilitating foreign investment
 Encouragement of foreign technology

Balance of Payments (BoP): Current, Capital

Account, BoT
Balance of payments (BoP) of country records its economic transactions with the rest of the world. It
records all transactions between ‘residents’ of the country concerned and foreign residents over a
stipulated period generally one year.

Balance of Payments Accounting

Balance of payments in accounting sense must always balance i.e. it should be zero. The entries are
recorded in double-entry book keeping method. Transactions which give rise to monetary receipts
are recorded in the credit side of the accounts, and transactions which lead to monetary payments
abroad are recorded in the debit side

Current Account and Capital Account

Balance of payments of a country consists of – current account, capital account and reserve account.

Current Account
Current account of the balance of payments records transactions on account of trade in goods and
services, unilateral transfers, donations etc. It shows the flow of goods and services in the form of
exports and imports for a country during a given year

Capital Account
Financial capital inflows and outflows are recorded in the capital account. It shows the volume of
private foreign investment and public grants and loans from individual nations and multilateral donor
agencies such as the IMF, World Bank, etc

Reserve Account
The official reserve assets accounts comprise its gold stock, holdings of its convertible foreign
currencies, and Special Drawings Rights (SDRs). This account is the balancing item in response to
current and capital accounts transactions.

If the balance on current and capital accounts is negative, it would represent balance of payments
“deficit”. But if the balance on current and capital accounts is positive, it would be called a balance of
payments “surplus”.

Balance of Trade vs Balance of Payments

Balance of trade refers to the difference between physical imports and exports, i.e. visible items only
for a period say, a year. Visible items are those which are physically exported and imported, like
merchandise, gold, silver and other commodities. The types of balance of trade are:

 Balanced Trade: If the value of exports and imports of a country are equal during the year, the balance
of trade is said to be balanced.
 Favourable Trade: If the value of exports of a country exceeds the value of imports, the country is said
to have an export surplus or a favourable balance of trade
  Unfavourable Trade: If the value of imports coming to a country is greater than the value of exports,
the balance of trade is said to be unfavourable

The balance of payments is broader than the balance of trade as it includes not only visible items but
also invisible items. International trade includes not only import and export of goods but also services
such as air and ocean shipping, financial and other services like banking, insurance, travel, investment
income, etc. Receipts and payments for services are items of invisible trade. The balance of payments
presents an account of all receipts and payments on account of goods exported, services rendered
and capital received by residents/Government of a country (inflows from abroad) and goods
imported, services received and capital transferred by the residents/ Government of a country
(outflows abroad).

Importance of Balance of Payment

A country’s balance of payments reveals various aspects of a country’s international economic
position.

 It presents the international financial position of the country.

 It helps the Government in taking decisions on monetary and fiscal policies on the one hand, and on
external trade and payments issues on the other.
 In the case of a developing country, the balance of payments shows the extent of dependence of the
country’s economic development on the financial assistance by the developed countries.

Export Import Policy

• Understand the features and objectives of different Trade Policies of India (pre and post the reform period)
• Critically evaluate the previous and current FTPs of India

1. Introduction

Meaning: ‘Exim Policy or Foreign Trade Policy is a set of guidelines, terms and instructions, established by the
Directorate General of Foreign Trade in/for matters related to the import and export of goods in/from India’

The EXIM Policy of India contains several policy measures and related decisions taken by the government (central) in
the sphere of imports and exports to/from the country. In addition, it also describes the various export promotion
measures, policies and procedures related thereto. The Foreign Trade Policy is prepared and announced by the Central
Government (Ministry of Commerce) of the country. India's Export Import Policy also known as Foreign Trade Policy, in
general, aims at developing export potential, improving export performance, encouraging foreign trade and creating
favorable balance of payments position.

The Directorate General of Foreign Trade is the chief governing body for the matters pertaining to such a policy. In
addition the policy is steered according to the regulations stated in the Foreign Trade Development and Regulation Act.
The current, Foreign Trade Act has replaced the earlier law in this regard, known as the imports and Exports (Control)
Act 1947.

2. History of EXIM Policy in India

Whilst the trade policies during 1950s and 1960s were designed to lay emphasis on self reliance and self sufficiency of
the country; the policies during (and post) 1970s were driven by the objectives of export led growth and increased
efficiency and competitiveness. In the year 1962, the Government of India appointed a special EXIM Committee to
review the previous export import policies of the Government. Later, Mr. V. P. Singh, the then Commerce Minister
announced the Exim Policy on the 12th of April, 1985. Initially, the EXIM Policy was introduced for the period of three
years with main objective to boost the export business in India. The trade policy, however during this period was of a
restrictive sort. In this context, the year 1991 is considered as a ‘watershed’ as far as the trade sector of the country is
concerned. It was in/during this year that the country evidenced massive trade liberalization measures and departed
from the prevalent protectionist trade policies. The period, after the year 1991 is therefore considered as the post
reform period. Major milestones in the progression from individual import and export policies to composite EXIM
policies have been summarized in the chart below:
With this backdrop, the trade policies of the country have been divided into the following phases:

Phase I: Import Restriction and Import Substitution (From 1950’s to 1970s) Phase II: Export Promotion & Import
Liberalization (From 1970s to 1990s) Phase III: Outward Orientation – (From 1990 onwards).

Phases I and II can be considered as the Pre Reform Period, and Phase III as the Post Reform Period.

2.1 FTPs in the Pre Reform Period (Phases I and II)

Following can be considered as the areas of major focus of the Foreign Trade Policies in the pre reform era:

• Import Substitution
India entered into planned development era in 1950’s. During that time, Import Substitution was a major element of
India’s trade and industrial policy. In 1950, India’s share in the total world trade was 1.78%, which reduced to 0.6% in
1995. Import substitution was thrust upon to protect and promote indigenous industries.

• Simplification of Import Licensing

The very first committee to review and recommend the Import–Export policies and procedures in the country was the
PC Alexander Committee (1978). This committee recommended simplification of the Import Licensing procedure and
provided a framework involving a shift in the emphasis from “control” to “development”.  Export Promotion
Under the EOU (1981), several Export Oriented Units were set up. These were set up to offer benefits to the export
houses, in order to boost the country’s exports. Additionally, the Export and Import Bank of India (EXIM Bank) was set
up in 1982. This bank, subsequently took over the operations of international financing of the IDBI.

• Focus on Exports as Catalysts for Growth

In the Trade Policy of 1985-88, some measures were taken based upon the recommendation of

Abid Husain Committee (1984). This committee envisaged “Growth Led Exports, rather than Export Led Growth”. The
recommendation of this committee stressed upon the need for harmonizing the foreign trade policies with other
domestic policies. Additionally, the Committee recommended announcement of foreign trade policies for longer terms.

Other Features of the pre reform FTPs included the following:

• Financial assistance to exporters

• Simplification of procedural formalities
• Minimization of the role of quantitative restrictions and reducing the tariff rates substantially.
• Import Liberalization
• Setting up of Export Processing Zones to push up exports ( now SEZ )

2.2 Trade Policies in the Reform Period (Phase III: Post 1990s) Salient Features of the FTPs

post the reform period include the following:

• Freer Imports and Exports:

Substantial simplification and liberalization was carried out in the reform period. During this period, the tariff line wise
import policy was first announced on March 31, 1996. Subsequently, 6,161 tariff lines were made free. Also, in line with
India’s commitment to the WTO, quantitative restrictions on all import items were withdrawn.

• Rationalization of Tariff Structure:

Acting on the recommendations of the Chelliah Committee (1991), the Government, over the years, reduced the
maximum rate of duty. More specifically, the Budget of 1993-94, reduced it from 110 per cent to 85 per cent. The
successive Budgets reduced it further (in stages). The peak custom duty on non-agricultural goods (w.e.f. 1-3-2007) was
also reduced to only 10 per cent.

• Decanalisation:

Earlier, public sector agencies used to canalize a large number of exports and imports in India. The supplementary
trade policy, announced on August 13, 1991, reviewed these canalized items, and decanalised 16 export items and 20
import items. The 1992-97 policy decanalised imports of a number of items including newsprint, non-ferrous metals,
natural rubber, intermediates and raw materials for fertilizers.
However, 8 items (petroleum products, fertilizers, edible oils, cereals, etc.) remained in the canalized list. Further, the
Exim Policy of 2001-02, put 6 items (rice, wheat, maize, petrol, diesel and urea) in the special list. items were put under
special list. As a result, imports of these items began to be allowed only through State trading agencies.

• Devaluation and Convertibility of Rupee on Current Account:

The government made a two- step depreciation adjustment of 18-19 per cent in the exchange rate of the rupee on July
1 and July 3, 1991. This in turn was followed by the introduction of Liberal Exchange Rate Mechanism (LERMS: partial
currency convertibility) in 1992-93; and further, full convertibility on the trade account in 1993-94, and full current
account currency convertibility in August 1994.

Since then, substantial capital account liberalization measures have been announced. Currently, the exchange rate of
the rupee is market-determined. Thus, exchange rate policy in India has evolved from the rupee being pegged to a
market related system (since March 1993). The RBI however intervenes to check against speculative activities and to
check excess volatility. The current exchange rate policy is therefore known as ‘managed floating’ policy.

• Trading Houses:

The 1991 policy allowed export houses and trading houses to import a wide range of items. The government also
permitted the setting up of trading houses with 51 per cent foreign equity for the purpose of promoting exports.

The 1994-95 policy introduced a new category of trading houses called ‘Super Star Trading Houses’. These houses were
entitled to various benefits that included membership of apex consultative bodies concerned with trade policy and
promotion, representation in important business delegations, special permission for overseas trading and special
import licenses at enhanced rate.

The third supplementary FTP (2004-09), divided the export houses into five classes, namely, ‘Export House’, ‘Star
Export House’, ‘Trading House, Star Trading House’ and ‘Premium Trading House’. This stature was given to the
exporters on reaching the export limits of Rs. 20, 100, 500, 2500 and 10,000 Crores respectively. These export houses
were and continue to be granted a variety of export benefits by the government.

• Special Economic Zones:

The Government of India, in the Export and Import Policy of March 31, 2000, announced setting up Special Economic
Zones (SEZs) in the country to promote exports out of the country. As a corollary to this, the SEZs were/are to provide
an internationally competitive and hassle-free environment for exports and are expected to give a boost to the
country’s exports.

Some of the distinctive features of these SEZ scheme are:

o A designated ‘duty-free enclave’ to be treated as foreign territory for trade operations and duties and
tariffs;
o Exemption from routine examination of export and import cargo by customs; o Full duty sale in
domestic market on o Duty-free goods to be utilized within a period of 5 years;
o Permission to subcontracting production processes for all sectors
o 100 per cent foreign direct investment through automatic route in the manufacturing sector
o 100 per cent income tax exemption for 5 years and 50 per cent for 2 years thereafter and 50 per cent
of the ploughed back profit for the next 3 years;
o Permission for external commercial borrowing through automatic route
 • EOU Scheme:

The scheme has been aiming to provide the export units, wide options in locations for sourcing of raw materials, ports
of export, hinterland facilities, availability of technological skills, existence of an industrial base and the need for a
larger area of land for the project. The EOUs have although, put up their own infrastructure.

• Agriculture Export Zones:

In order to give primacy to promotion of agricultural exports, the Exim Policy of 2001 introduced the concept of Agra-
Export Zones. These zones were set to effect a reorganization of export efforts on the basis of specific products and
geographical areas.

The focus of the scheme was to provide for a cluster approach for identification of the potential products, the region of
their growth, and adoption of an end-to-end approach of integration of the entire production process. These zones
were to have the state-of-the-art services such as pre-post harvest treatment and operations, plant protection systems,
and research and development for the processing, packaging, storage functions.

• Market Access Initiative Scheme:

The Market Access Initiative Scheme was launched in 2001- 02. It was introduced for the purpose of undertaking
marketing promotion efforts abroad. The scheme attempted to provide in- depth market studies for select products in
chosen countries to generate data for promotion of exports from India. It also helped to assist in promotion of Indian
products and Indian brands in the international market by display through showrooms and warehouses set up in rental
premises by identified exporters, display in identified leading departmental stores, exhibitions, trade fairs, etc.

• Focus on Service Exports:

The amended Export-Import Policy, 2002-07, announced on March 31, 2003, specifically emphasized on the exports of
services as an engine of growth. Accordingly, it announced a number of measures for the promotion of exports of
services. For instance, under this scheme, import of consumables, office and professional equipment, spares and
furniture was allowed up to 10 per cent of the average foreign exchange export.

• Concessions and Exemptions:

A large number of tax benefits and exemptions were granted during the 1990s to liberalize imports and promote
exports. The policy thus, Exim Policy 1992-97 and Exim Policy 1997-2002 served as the basis for such concessions.

These policies, in turn, were reviewed and modified on an annual basis in the Exim policies announced every year.
Successive annual Union Budgets also extended a number of tax benefits and exemptions to the exporters. These
included reduction in the peak rate of customs duty to 15 per cent; significant reduction in duty rates for critical inputs
for the Information Technology sector; grant of concessions for building infrastructure by way of 10-years tax holiday to
the developers of SEZs etc. additionally, a number of tax benefits were also announced for the three integral parts of
the ‘convergence revolution’ the Information Technology sector, the Telecommunication sector, and the Entertainment
industry.

2. 2.1Critical Evaluation of the Trade Policies in the Reform Period

With the sweeping process of liberalization, the new Trade Policy brought about paradigm shifts in trade openness of
the country. The openness however changed the orientation from being ‘inward’ to ‘outward’. Whilst the export
business of the country thrived on one hand, reductions in the import duty hampered the indigenous industries to
quiet an extent. This reduced the relative importance of the home market. The New Trade Policy can therefore be
critiqued on the following grounds.

• Decline in Relative Importance to Home Market

The policy of liberalization attempted to reduce the import duties. This in turn lessened the degree of protection to the
Indian industries. For a developing country like India, sustained industrialization is important and should be sustained
through internal industrialization. An appropriate strategy should attempt to strike a balance between import
substitution and export promotion. The new trade policy, while, managed to give a tremendous boost to the exports of
the country; it however failed to protect the internal industries.

• Failure in adequate adoption of Technology

It has been argued that the market structure and policy structure has still not been able to provide the necessary
environment for the absorption of the imported technology. Such technologies should try to augment the pace of
development of the indigenous industries. The government has, however failed to strategize, and provide a policy
regime for the same.

The next section aims to discuss individually the five year composite EXIM policies of the country, introduced in and
after the year 2002 (the period marking shift in the orientation of EXIM policies from import liberalization to export
promotion).

3. Foreign Trade Policy (2002-2007)

The foreign trade policy of 2002-07 was the first trade composite trade policy, drafted for a period of five years. The
policy was announced on 31st March, 2002, and marked a shift from the focus on ‘liberalization’ to ‘export promotion’.
Various objectives of the trade policy were:

• To increase the country’s share in the world trade from 0.67 per cent in 2002 to 1 per cent in 2007
• To increase the growth rate in exports to 12.4 per cent per annum
• To allow liberal import of technology
• To remove quantitative restrictions on exports
• To set up abroad ‘Business Centers’ for the benefit of Indian exporters

3.1 Measures/ Features

• Facilities for the Agriculture Sector: The following measures were proposed to be adopted to boost
the agri exports of the country:
o To remove all quantitative restrictions on exports.
o To set up 32 Agri- export zones.
o To make available transport subsidy to allow for diversification of agricultural exports.
o To liberalize restrictions on the packing of agricultural products.

• Benefits to Small, Cottage and Handicraft Industries: For this sector, the following measures were
proposed to be adopted:
o To give technological support for up gradation of technology to the export oriented units in this
sector.
o To entitle the status of an Export House on reaching the export performance of 5 crore against 15
crore for others.
o To make these unites eligible for the benefits and tax concessions, as available to the Export
Houses, on reaching the aforesaid export target.
o To remove export obligations on this sector. o Tripura for hosiery, Ludhiana for woolens, and
Panipat for blankets were notified as towns for excellence. The policy proposed to offer special
infrastructure facilities and help centers to these towns.
• Facilities to SEZs: For the SEZs, the following measures were proposed to be adopted:
o To allow Offshore Banking Units (OBUs) in SEZs. o To allow units in SEZ to undertake hedging of
commodity price risks provided such transactions are undertaken by the units on stand-alone basis.
o To permit External Commercial Borrowings (ECBs) for a tenure of less than three years in SEZs.

• Trust Based Measures

Following measures were adopted to win the trust of the exporters for facilitation and promotion of the
country’s exports:

o Liberalization of Import/Export of samples for encouraging product up gradation.

o Penal interest rate for bonafide defaults brought down from 24% to 15%.
o Cancellation of penalty for non-realization of export proceeds in respect of cases covered by ECGC
insurance package. o Simplification of procedures for advance licensing

• Industry wise Measures

o To remove all textile package restrictions by 2005

o To abolish import duty on diamonds o To liberalize import of gold and silver
o To exempt from custom duty and export obligations, the units set up in the Electronic Hardware
Technology Park

• Duty Neutralization Measures

The policy proposed to offer duty neutralization measures to promote exports. These were:

o Duty Free Entitlement Certificate: The certificate was meant to allow duty free import of raw
materials for exporters.
o Duty Entitlement Passbook: The policy aimed to provide duty credit to exporters in the pass book
maintained for it. The credit could be utilized for the import of machinery/ products by the
exporters without making payment for the import duty.
o Export Promotion Capital Goods Scheme: Under this scheme, the import of capital goods was to be
made duty free, if it resulted in the export of a specified amount and within a specified time.

• Growth Promotion Measures: Following measure were adopted to accelerate the pace of economic
growth in the country:

• Strategic Package for Status Holder: The following new/ special facilities were entitled to the status
holders:
o License/Certificate/Permissions and Customs clearances for both imports and exports on self-
declaration basis.
o Availability of finance on priority finance for medium and long term capital requirement
o Exemption from compulsory negotiation of documents through banks. The remittance, would,
however, be only received through bank networks
o 100% retention of foreign exchange in Exchange Earners’ Foreign Currency
(EEFC) account; o Extension in the period of repatriation from 180 days to 360 days .

• Neutralization of high fuel costs: In order to enhance competitiveness of the exports, fuel costs were
rebated in Standard Input Output Norms (SIONs) for all export products. The value of fuel to be
permitted as a percentage of FOB value of exports for various product groups was as under:
 Table 1: Product Wise Value of Fuel as a Percentage of FOB
Product Group Value of fuel as a percentage of FOB value of
exports

Bulk Drug and Drug Intermediates 5%

Dye and Dye Intermediates 4%

Glass 5%

Ceramic Products 5%

Paper made from wood pulp/ waste paper 5%

Pesticides (Technical)/ Pesticides formulation from Basic Stage 5%

Refractory items 7%

Ferrous engineering products manufactured though forging/ 7%

casting process

Non ferrous basic metal 4%

Plastic and plastic products from basic/ monomer stage 5%

Fibre to yarn 4%

Yarn to fabric/ madeups/ garments 3%

Fibre to fabric/ madeups/ garments 7%

• Diversification of markets: Business Centers were proposed to be set up abroad under this policy. The
Business Centers would help to find business avenues for the exporters abroad.
• Special benefits to the North Eastern States, Sikkim and Jammu & Kashmir: Transport subsidy for
exports was proposed to be given to units located in North East, Sikkim and Jammu & Kashmir so as to
offset the disadvantage of being far from ports.

3.2 Evaluation

The EXIM policy of 2002-07 was characterized by the following merits:

• Comprehensiveness
• Boost to agricultural exports
• Boost to the cottage and small scale industries
• Export promotion
• Facilities for technology up gradation
• Procedural simplification
• Neutralization of duty
• Setting up of business centers
• Diversification of business
• Focus of export led growth

Thus, all in all, the policy was export friendly in nature however, owing to a change in government from NDA to
Congress, the policy was revisited and a new EXIM policy was announced in the year 2004. The new EXIM
policy was targeted for a period of five years from 2004 to 2009, and attempted to overrule the existing FTP.

4. Foreign Trade Policy (2004-09)

4.1 The objective of the New Foreign Trade Policy announced on 31 st August 2004, were as follows:

• To double India’s percentage share of global merchandise trade by 2009. India‘s share in Foreign Trade
between 2003-2004 was 0.8%; the target in this policy was set to achieve 1.5% share in world trade by 2009.
• To act as an effective instrument of economic growth by giving a thrust to employment generation, especially
in semi-urban and rural areas.

4.2 Measures/ Features

• Measures for the Agriculture Sector: A new scheme called Vishesh Krishi Upaj Yojana was introduced to up-
pace the exports of fruits, vegetables, flowers, minor forest produce and their value added products. Also,
capital goods imported under EPCG for agriculture were permitted to be installed anywhere in the Agri Export
Zone. In addition to these, the import of seeds, bulbs, tubers and planting material was liberalized, and so was
the export of plant portions, derivatives and extracts.
• Measures for the Gems & Jewelry Business: Duty free import of consumables for metals other than gold and
platinum was proposed to be allowed up to 2% of FOB value. Additionally, duty free re-import entitlement for
rejected jewelry was to be allowed up to 2% of FOB value of exports. The limit for the duty free import of
commercial samples of jewelry increased to Rs.1 lakh.
• Handlooms & Handicrafts Sector: Duty free import of trimmings and embellishments for Handlooms &
Handicrafts sectors was increased to 5% of FOB value of exports. Handicraft Export Promotion Council was
authorized to import trimmings, embellishments and samples for small manufacturers. A new Handicraft
Special Economic Zone was also proposed to be established.
• Leather & Footwear Sector: Duty free import of specified items for leather sector was increased to 5% of FOB
value of exports. Also, machinery and equipment for Effluent Treatment Plants for leather industry was
proposed to be exempted from Customs Duty.
• Export Promotion Schemes
• Target Plus: A new scheme to accelerate growth of exports called ‘Target Plus’ was introduced. Under this
scheme, exporters who had achieved a quantum growth in exports were to be entitled to a duty free credit
based on incremental exports substantially higher than the general actual export target fixed.
• Vishesh Krishi Upaj Yojana: Another scheme called Vishesh Krishi Upaj Yojana (Special Agricultural Produce
Scheme) was introduced to boost exports of fruits, vegetables, flowers, minor forest produce and their value
added products. Exports of these products were to qualify for duty free credit entitlement equivalent to 5% of
FOB value of exports.
• Served from India Scheme: To accelerate growth in export of services so as to create a powerful and unique
‘Served from India’ brand instantly recognized and respected the world over, the earlier DFEC scheme for
services was revamped and re-cast into the ‘Served from India’ scheme. Individual service providers who earn
foreign exchange of at least Rs.5 lakh, and other service providers who earn foreign exchange of at least Rs.10
lakh were considered eligible for a duty credit entitlement of 10% of total foreign exchange earned by them. In
the case of stand-alone restaurants, the entitlement was to be 20%; it was to be 5 % for hotels and restraints.
• EPCG: Additional flexibility for fulfillment of export obligation under EPCG scheme was offered to reduce
difficulties of exporters of goods and services. Also, technological up gradation under EPCG scheme was
facilitated and incentivized. Transfer of capital goods to group companies and managed hotels was also
permitted under EPCG.
• New Status Holder Categorization: A new rationalized scheme of categorization of status holders as Star
Export Houses was introduced as under:
Table 2: Categorization of Status Holders as Star Export Houses
Export House Amount of Average Annual Exports (Rs in Crores)

1 Star Export House 25

2 Star Export House 100
3 Star Export House 500
4 Star Export House 1500
5 Star Export House 5000
Premier Star Export House 7500

• Export Oriented Units: EOUs were offered exemption from Service Tax in proportion to their exported goods
and services. Additionally, they were permitted to retain 100% of export earnings in EEFC accounts. They were
also allowed 100 per cent duty free import of raw materials and capital goods.
• Setting up of Bio Technology Parks: On the lines of the IT parks, Bio- Tech parks were proposed to be set up
under this policy. All incentives, as offered to EOUs were to be offered to the units set up in these parks.
• Free Trade and Warehousing Zone (FTWZs) Scheme: A new scheme to establish Free Trade and Warehousing
Zone (FTWZs) was introduced to create trade-related infrastructure to facilitate the import and export of
goods and services with freedom to carry out trade transactions in free currency. This is aimed at making India
into a global trading-hub. In these zones, Foreign Direct Investment (FDI) was permitted up to 100% in the
development and establishment of the zones and their infrastructural facilities. Additionally, units in the
FTWZs were to qualify for all other benefits as applicable for Special Economic Zones (SEZ) units.

4.3 Critical Evaluation

The Foreign Trade Policy of this period has been criticized on the following grounds

• The policy was considered complex as far as charging tariffs at different rates is concerned. This in turn has an
implication for procedural complexities and red tapism.
• Measures to promote export of manufacturers in the FTP were relatively few.
• Certain export promotion schemes were started during the period when India was facing an acute foreign
competition. . These measures are no more required, but have continued indefinitely in time, due to pressure
from certain exporters.
• Larger focus was on export promotion and not on the strengthing of the indigenous industries.
However, despite this criticism, the New FTP was extremely comprehensive and forward looking.

5. Foreign Trade Policy (2009-14)

On August 27, 2009, the then, Minister of Commerce and Industry of India, Mr. Anand Sharma presented the five-year
Foreign Trade Policy (FTP) for 2009-2014. Aiming to reverse contraction in exports for 10 consecutive months, the new
FTP presented several measures to ensure a steady growth of the country’s foreign trade.

5.1 Objectives

Following were the objectives of the 2009-14 FTP:

• To arrest and reverse declining trend of exports of the country.

• To Double India’s exports of goods and services by 2014.
• As a long term aim, to double India’s share in global merchandise trade by 2020
• Simplification of application procedure
• To set strategies and policies to catalyze the country’s exports’ growth
• To encourage exports through a “mix of measures, including, fiscal incentives, institutional changes, procedural
rationalization and efforts for enhance market access across the world and diversification of export markets.

5.2 What has been done?

• Expansion of Focus Market Scheme: The FTP added 26 new markets to the Focus Market Scheme. Out of these
26 markets, 16 were the ones in Latin America and 10 in the Asia-Oceania region.

• Incentives under FMS and FPS: Incentives under the Focus Market Scheme were raised from 2.5 per cent to 3
per cent; while those under the Focus Product Scheme were upgraded from 1.25 per cent to 2 per cent.
• EPCG Scheme: The FTP has allowed zero duty import of capital goods for engineering, basic chemicals,
pharmaceuticals, apparels, textiles, handicraft and leather. This is aimed to fasten the process and pace of
technology up gradation.
• EOUs: Export Oriented Units were allowed to sell products manufactured by them in Domestic Tariff Areas
(DTAs) up to a limit of 90 per cent, instead of the existing limit of 70 per cent.
• Thrust to Value Added Manufacturing: In order to encourage Value Added Manufactured export, a minimum
15% value addition on imported inputs under Advance Authorization Scheme was prescribed in the FTP.
• Flexibility to exporters: Payment of customs duty for Export Obligation (EO) shortfall under Advance
Authorization / DFIA / EPCG authorization was allowed by way of debit of Duty Credit scrips. Earlier the
payment was allowed only in cash.
• Simplification of Procedures
Following measures were adopted to simplify the procedural formalities:

• Simplification of application and redemption procedures under the EPCG scheme

• Slashing of license fee (manual applications) from Rs. 1,50,000 to Rs. 1,00,000
• Slashing of license fee (automatic applications) from Rs. 50,000 to Rs. 75,000
• Adoption of Electronic Data Interface (EDA) system to facilitate electronic message exchange between
customers and the DGFT.
• Increase in the number of samples allowed to exporters for duty free import from 15 to 60.
• Sector Specific Measures
• Gems & Jewellery Sector
To neutralize duty incidence on gold Jewellery exports, Duty Drawback on such exports was allowed.
Additionally, a new facility to allow import on consignment basis of cut & polished diamonds for the
purpose of grading/ certification purposes was introduced. Also, to promote export of Gems &
Jewellery products, the 13 value limits of personal carriage were increased from $ 2 million to US$ 5
million in case of participation in overseas exhibitions. The limit in case of personal carriage, as
samples, for export promotion tours, was increased from US$ 0.1 million to US$ 1 million.

• Agriculture Sector to reduce transaction and handling costs, a single window system to facilitate export of
perishable agricultural produce was introduced.

 Leather Sector
As regards to the leather sector, the FTP allowed re-export of unsold imported raw hides and skins
and semi finished leather from public bonded ware houses, subject to payment of 50% of the
applicable export duty

 Tea
Minimum value addition under advance authorization scheme for export of tea, under the FTP was
reduced from the existing 100% to 50%. Additionally, DTA sale limit of instant tea by EOU units was
increased from 30% to 50%.

5.3 Criticism
The Foreign Trade Policy of 2009-14 is however, not free from shortcomings. Apart from adding 26 countries
under the FMS, the policy lacked an innovative approach altogether. SMEs account for a big share in the
country’s exports; they, however were not adequately provided financial and marketing assistance under the
 current scheme. The crises situation, post the global meltdown urged the need for a much higher financial and
technical support to the exporters. The policy provided only minor tinkering and continuation.

6. Foreign Trade Policy (2015-2020)

The Government of India announced the new foreign trade policy, covering the period from 2015 to 2020, on April 1,
2015

6.1 Vision and Mission

The Vision of the Trade Policy is to make India a significant participant in the world trade by 2020. The mission and
objectives include the ideology to make the country assume a position of leadership in the international trade. The
Government of India aims to increase the exports of merchandise and services from $465.9 billion in 2013-14 to
approximately $ 900 billion by
2019-20. Additionally, the policy aims to increase the country’s share in the world exports from 2 per cent to 3.5 per
cent.

6.2 Objectives

• To provide a stable and sustainable policy environment for foreign trade.

• To link the rules and procedures with other initiatives like ‘Make in India’, ‘Digital India’ and ‘Skills India’.
• To diversify India’s exports.
• To provide a mechanism for regular appraisal in order to rationalize imports.
• To improve India’s Balance of Payment position.
• To create architecture for India’s global trade engagement with a view to expand and integrate markets,
thereby augmenting the ‘Make in India’ initiative.
6.3 Key Highlights

• Merchandise Export from India Scheme: MEIS

The FTP has introduced Merchandize Exports from India (MEIS) scheme to promote specific services for specific
Markets Foreign Trade Policy. MEIS shall subsume existing schemes, viz. Focus Product Scheme, Market Linked
Focus Product Scheme, Focus Market Scheme, Agri. Infrastructure Incentive Scrip.

• Service Export from India Scheme: SEIS

SEIS shall be available to “Service Providers located in India” as against the existing Served Form India Scheme
available to “Indian Service Providers”; and SEIS reward rates (3%/5%) specified for export of notified services and
would be based on net foreign exchange earned.

• Special Provisions applicable to MEIS and SEIS

o The duty credit scrips and the goods imported against these scrips will now be freely transferable;
o The duty credit scrips can be used for payment of Customs duty, Excise duty,
Service tax and fees for defaults relating to Advance Authorization; and o The benefit of MEIS and SEIS
has been extended to units located in Special Economic Zones – This is a welcome step and is imperative to
boost the SEZ sector.

• Trade Facilitation and Ease of doing Business o Under online filing of documents/applications and paperless
trades in 24×7 environment, few important proposals provided are:
o Development of an online procedure to upload digitally signed documents by
 Chartered Accountant/Company Secretary/Cost Accountant; o Creation of importer/exporter profile to
eliminate repeated submission of copies of permanent records/documents (e.g. IEC, Manufacturing
License, RCMC, PAN etc.) with each application; and

Other Key Highlights

• Export Obligation reduced from 90% to 75% for domestic procurement under EPCG scheme to boost the ‘Make
in India’ initiative;
• 10% of the cases to be selected on random basis (per month) as a risk measurement initiative, where scrips
have already been issued – This may lead to verification of original documents for detailed examination;
• Directorate General of Foreign Trade (DGFT) to leverage information and have access to database of Central
Board of Direct Taxes (for PAN)
• A new chapter introduced on ‘Quality Complaints and Trade Disputes’.

6.4 What needs to be done?

As per the new FTP, in order to achieve these objectives, the way forward measures require the flowing to be
undertaken:

• Deepen and widen India’s export basket

• Make efforts to reduce the cost of export credit
• Reduce transaction costs
• Incentivize potential winners
• Mainstream states and ministries in India’s export strategy
• Rationalize tax incidence: introduce GST
• Improve India’s export competitiveness
• Promote product standards, packaging and branding etc
• Promote and diversify service exports
• Improve infrastructure, for example ports, laboratories, facility centers etc

6.5 Omissions in the FTP

According to Rajiv Kumar (The Times of India, April 9, 2015), there are three major omissions in the FTP, 2015-20:

• Lack of policy for ramping up foreign tourism in which the country already is a poor performer.
• The MSME sector that produces 45 per cent of manufacturing output and 40 per cent of total export, receives
only cursory treatments without any tangible steps to make it a part of the global value chain. The current FTP
like the previous ones has lagged to adequately serve this sector.
• The FTP has also left untouched the large panoply of export promotion and facilitation of intuitions to augment
the country’s exports.

Summary

The EXIM Policy of the country contains several policy measures and related decisions taken by the
government (central) in the sphere of imports and exports to/from the country. In addition, it also describes
the various export promotion measures, policies and procedures related thereto. With regards to the foreign
trade policies in India, the year

1985 witnessed the first joint export and import policy in India. Historically, the year,
1990-91 is considered as a ‘watershed’ for FTPs. FTPs thereafter became more liberal
than the previous ones. The first 5 year trade policy was introduced in the year 1992, and subsequently in
1997. Off late, the focus of FTPs has shifted from ‘import liberalization’ to ‘export promotion’. The recent focus
is on strengthening the indigenous industries, for making the country’s exports more competitive. The recent
 FTP (2015-20) aims to make India a significant participant in the world trade by striving to increase the export
of goods and services from $465.9 billion in 2013-14 to $ 900 billion by 2019-2020.

World Bank – Functions of World Bank

The World Bank is a United Nations international financial institution that provides loans to
developing countries for capital programs. The World Bank is a component of the World Bank Group,
and a member of the United Nations Development Group.

The World Bank Group offers a wide range of solutions to meet development challenges, all designed
to support governments in reducing poverty and boosting prosperity.

 Innovative financing instruments and banking products for a wide variety of projects, sectors and
investors.
 Research, analysis, partnership coordination and technical assistance services designed to share the
best knowledge available to achieve development results.

The World Bank’s official goal is the reduction of poverty. According to its Articles of Agreement, all
its decisions must be guided by a commitment to the promotion of foreign investment and
international trade and to the facilitation of capital investment.

Founded: July 1944, Mount Washington Hotel, Bretton Woods, New Hampshire, United States.
Founders: John Maynard Keynes, Harry Dexter White
Motto:  Working for a World Free of Poverty.
Headquarters: Washington D.C., United States
Membership: 189 countries (IBRD), 173 countries (IDA)
President: David Malpass

World Bank Organisations

Since inception in 1944, the World Bank has expanded from a single institution to a closely associated
group of five development institutions. Its mission evolved from the International Bank for
Reconstruction and Development (IBRD) as facilitator of post war reconstruction and development
to the present day mandate of worldwide poverty alleviation in close coordination with its affiliate
and other members of the World Bank Group are:

 International Development Association

 International Finance corporation (IFC)
 Multilateral Guarantee Agency (MIGA)
 International Center for the settlement of Investment Disputes (ICSID).
President of World Bank
The President of the Bank is the president of the entire World Bank Group. The vice presidents of the
Bank are its principal managers, in charge of regions, sectors, networks and functions. There are two
Executive Vice Presidents, three Senior Vice Presidents, and 24 Vice Presidents.

Board of Directors of World Bank

The Boards of Directors consist of the World Bank Group President and 25 Executive Directors. The
President is the presiding officer, and ordinarily has no vote except a deciding vote in case of an
equal division. The Executive Directors as individuals cannot exercise any power nor commit or
represent the Bank unless specifically authorized by the Boards to do so. With the term beginning 1
November 2010, the number of Executive Directors increased by one, to 25.

Functions of World Bank

There are broadly three functions of World Bank:

1. Providing Loans and Guarantees: The World Bank generally channelises transfer of funds from
developed countries to developing countries. The World Bank provides loans as to the member
countries. The World Bank also aims at inducing private foreign capital to flow to developing countries.
For this the World Bank guarantees in whole or in part the loans provided by the private investors for
which it charges a guarantee commission from the latter.
2. Providing Technical Assistance: Most of the developing countries lack technical capabilities to
evaluate feasibility of development projects. They cannot judiciously determine the priorities of the
various projects. Therefore the World Bank provides technical assistance usually at the stage of the
Preparation of a project to member-countries
3. Stimulating Private Investment: Another functions of the World Bank is to stimulate a direct inter-
country flow of capital between private lenders and borrowers

International Monetary Fund (IMF) Functions,

SDR
The International Monetary Fund (IMF) is an international
organization headquartered in Washington, D.C., in the United States,
of 189 countries working to foster global monetary cooperation, secure
financial stability, facilitate international trade, promote high
employment and sustainable economic growth, and
reduce poverty around the world. Formed in 1944 at the Bretton Woods
Conference, it came into formal existence in 1945 with 29 member
countries and the goal of reconstructing the international payment
system. Countries contribute funds to a pool through a quota system
from which countries with payment imbalances can borrow. As of 2010,
the fund had SDR 476.8 billion, about US$755.7 billion at then-current exchange rates. Through this
fund, the IMF works to improve the economies of its member countries.
Special Drawing Rights (SDRs)
A Special Drawing Right (SDR) is basically an international monetary reserve asset. SDRs were created
in 1969. The value of an SDR consists of the value of four of the IMF’s biggest members’ currencies—
the US dollar, the British pound, the Japanese yen, and the euro—but the currencies do not hold
equal weight. SDRs are quoted in terms of US dollars. The following chart shows the current valuation
in percentages of the four currencies.

Currency Weighting

41.73
US dollar
percent

30.93
Euro
percent

10.92
Chinese Yuan
percent

Japanese yen 8.33 percent

Pound Sterling8.09 percent

Headquarters of International Monetary Fund

The Headquarters of IMF is situated at Washington, D.C.

Functions of International Monetary Fund

1. To promote international monetary cooperation through a permanent institution which provides the
machinery for consultation and collaboration on international monetary problems.
2. To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the
promotion and maintenance of high levels of employment and real income and to the development of
the productive resources of all members as primary objectives of economic policy.
3. To promote exchange stability, to maintain orderly exchange arrangements among members, and to
avoid competitive exchange depreciation.
 4. To assist in the establishment of a multilateral system of payments in respect of current transactions
between members and in the elimination of foreign exchange restrictions which hamper the growth of
world trade.
5. To give confidence to members by making the general resources of the Fund temporarily available to
them under adequate safeguards, thus providing them with opportunity to correct maladjustments in
their balance of payments without resorting to measures destructive of national or international
prosperity.
6. To ensure the stability of the international monetary system.
7. To work with governments around the world to modernize their economic policies and institutions, and
train their people

Key IMF activities

The IMF supports its membership by providing

 Policy advice to governments and central banks based on analysis of economic trends and cross-
country experiences;
 Research, statistics, forecasts, and analysis based on tracking of global, regional, and individual
economies and markets;
 Loans to help countries overcome economic difficulties;
 Concessional loans to help fight poverty in developing countries
 Technical assistance and training to help countries improve the management of their economies.

IMF Board of Governors

The Board of Governors, the highest decision-making body of the IMF, consists of one governor and
one alternate governor for each member country. The governor is appointed by the member country
and is usually the minister of finance or the governor of the central bank. All powers of the IMF are
vested in the Board of Governors. The Board of Governors normally meets once a year

Managing Director of International Monetary Fund

Kristalina Georgieva was selected Managing Director of the IMF on September 25, 2019. She assumed
her position on October 1, 2019

Functions of Asian Development Bank (ADB)

The Asian Development Bank (ADB) is an international partnership of several nations is engaged in
promoting the economic and social progress of its developing member countries in the Asia Pacific
Region. The functions of Asian Development Bank include helping poor countries to come out of
poverty and support their development programmes.
Headquarters of ADB
The bank started functioning in December 1966 with the headquarters in Manila, Philippines

Functions of Asian Development Bank

The functions of Asian Development Bank are:

 to give loans for the economic and social advancement of the developing member countries
 to provide technical assistance for the preparation and execution of development projects and
programmes and advisory services
 to promote investment of public and private capital for development purposes, and
 to respond to requests for assistance in co-ordinating development policy and plans of member
countries

Members of ADB
From 31 members at its establishment in 1966, ADB has grown to encompass 68 members—of which
49 are from within Asia and the Pacific and 19 outside. India was founding member of ADB.

President of ADB
The President heads a management team comprising six Vice-Presidents. The team supervises the
work of ADB’s operational, administrative, and knowledge departments.

Masatsugu Asakawa (Japanese) is the President of the Asian Development Bank (ADB) since April
2013.

Management of ADB
 Board of Governors: ADB’s highest policy-making body is the Board of Governors, which comprises
one representative from each member nation – 48 from the Asia-Pacific and 19 from outside the region
 Board of Directors: The Governors elect 12 members to form the Board of Directors, which performs
its duties full time at the ADB headquarters. The Directors supervise ADB’s financial statements,
approve its administrative budget, and review and approve all policy documents and all loan, equity,
and technical assistance operations
ADB Annual Meetings
The Annual Meetings of the ADB Board of Governors are held every year in a member country in late
April or early May

The 2019 Annual Meeting (52nd annual meeting) of the Board of Governors of the Asian Development
Bank was held in Fiji from Wednesday, 1 May to Sunday, 5 May 2019.

ADB Funding and Lending

ADB raises funds through bond issues on the world’s capital markets. It also rely on our members’
contributions, retained earnings from lending operations, and the repayment of loans. It also provides
loans and grants from a number of special funds.

Functions of Asian Infrastructure Investment

Bank (AIIB)
The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank with a mission to
improve social and economic outcomes in Asia. Chinese President Xi Jinping first proposed the AIIB in
October 2013, at the Asia-Pacific Economic Cooperation Summit in Bali, Indonesia. One of the
functions of Asian Infrastructure Investment Bank is to create resources for Asian sub-continent.

Headquarters of AIIB
The bank began its operations at its Headquarter in Beijing in January 2016.

Members of AIIB
There are 97 approved members worldwide which includes 57 founding members, 23 prospective
members. There are two classes of membership:

 Regional Members: Regional members are those located within areas classified as Asia and Oceania by
the United Nations
 Non-Regional Members

The four biggest stakeholders in bank are China 26.64%, India 7.63%, Russia 6.01%, Germany 4.18%.
Functions of Asian Infrastructure Investment Bank
The major functions of Asian Infrastructure Investment Bank (AIIB) are:

 foster sustainable economic development

 create wealth and improve infrastructure connectivity in Asia by investing in infrastructure and  other
productive sectors
 promote regional cooperation and partnership in addressing development challenges by working in
close collaboration with other multilateral and bilateral development institutions

President of AIIB
Mr. Jin Liqun is the inaugural President and Chairman of the Board of Directors for a five-year term.
He served as Secretary-General of the Multilateral Interim Secretariat tasked with establishing the
Bank.

AIIB Annual Meeting

On July 12-13, 2019 Luxembourg  hosted AIIB’s first Annual Meeting to be held outside Asia. The
theme of the 2019 Annual Meeting was “Cooperation and Connectivity”

AIIB Funding
The AIIB’s initial total capital is $100 billion, with 20% paid-in and 80% callable. China has contributed
$50 billion, half of the initial subscribed capital. India is the second-largest shareholder, contributing
$8.4 billion.

Functions of NDB (New Development Bank)

New Development Bank is a multilateral financial institution established in 2015 to mobilize resources
for infrastructure and sustainable development projects in BRICS and other emerging economies, as
well as in developing countries. The functions of NDB include sustainable development, income
equality, infrastructure development and many more.
Members of NDB
The bank was founded by five BRICS Countries viz. Brazil, Russia, India, China and South Africa in
2015. The membership is open to any member of the United Nations.

Fortaleza Declaration
In the Fortaleza Declaration, the leaders stressed that the NDB will strengthen cooperation among
BRICS and will supplement the efforts of multilateral and regional financial institutions for global
development, thus contributing to collective commitments for achieving the goal of strong,
sustainable and balanced

. The first chair of the Board of Governors shall be from Russia. The first chair of the Board of Directors
shall be from Brazil. The first President of the Bank shall be from India. The headquarters of the Bank
shall be located in Shanghai. The New Development Bank Africa Regional Center shall be established
in South Africa concurrently with the headquarters

President of NDB
The NDB’s management includes a presidency which rotates among BRICS members, and four vice
presidents who are selected from the remaining BRICS countries. Mr. K.V. Kamath was appointed as
first President of NDB.

Capital and Shareholding of NDB

The New Development Bank shall have an initial subscribed capital of US$ 50 billion and an initial
authorized capital of US$ 100 billion. The Bank shall have an initial authorized capital of US$ 100
billion. The initial subscribed capital shall be US$ 50 billion, equally shared among founding members.
The Bank is governed by a Board of Governors made up of the finance ministers of the five BRICS
countries, and a Board of Directors. Voting power within the Board is based on each country’s shares
in the bank. the five BRICS countries will retain a minimum of 55% of total shares

Functions of NDB
The broad objectives and functions of NDB are:

 Fostering development of member countries

 Supporting economic growth
 Promoting competitiveness and facilitating job creation
 Building a knowledge sharing platform among developing countries

Annual Meeting
The Fourth Annual Meeting of the NDB Board of Governors will be held on April 1-2, 2019 in Cape
Town, Republic of South Africa. The theme of the event is “Partnership for Sustainable Development,”

Functions of APEC (Asia-Pacific Economic

Cooperation)
The Asia-Pacific Economic Cooperation (APEC) is a regional economic forum established in 1989 to
leverage the growing interdependence of the Asia-Pacific. It aim to create greater prosperity for the
people of the region by promoting balanced, inclusive, sustainable, innovative and secure growth and
by accelerating regional economic integration. One of the major functions of APEC is to enhance
social equity in the region.

APEC member countries consists of around 2.8 billion people and represents approximately 59 per
cent of world GDP and 49 per cent of world trade in 2015.
Members of APEC
APEC has 21 members. These are:

 Australia
 Brunei Darussalam
 Canada
 Chile
 People’s Republic of China
 Hong Kong, China
 Indonesia
 Japan
 Republic of Korea
 Malaysia
 Mexico
  New Zealand
 Papua New Guinea
 Peru
 The Philippines
 Russia
 Singapore
 Chinese Taipei
 Thailand
 The United States
 Viet Nam

APEC Secretariat
The APEC Secretariat is based in Singapore. The APEC Secretariat is headed by an Executive
Director, Dr Tan Sri Datuk Rebecca Fatima Sta Maria. Dr Sta Maria is the first woman executive
director of the APEC Secretariat.

Functions of APEC
The functions of APEC include:

1. To enhance social equity in the region

2. It helps to improve the competitiveness of SME by promoting entrepreneurship and innovation by
connecting technology start-ups with funding and mentors
3. To reduce non-renewable energy in the region and to work toward doubling the share of renewable
energy by 2030.
4. To improve logistics and transport networks to enable component parts and final goods to travel
across multiple borders, contributing to a more efficient regional supply chain.
5. To connect the region through improving physical infrastructure linkages, people mobility and
institutional ties across the Asia-Pacific.
6. To foster transparency, competition and better functioning markets in the Asia-Pacific through
regulatory reform, improving public sector and corporate governance, and strengthening the legal
infrastructure.
7. Improved the ease of doing business in the Asia-Pacific
8. Making it Easier to Trade Across Borders
9. To promoting trade and economic growth in the Asia-Pacific

APEC Ministerial Meeting

Every year one of the 21 APEC Member Economies plays host to APEC meetings and serves as the
APEC Chair. The APEC host economy is responsible for chairing the annual Economic Leaders’
Meeting, selected ministerial meetings, senior officials’ meetings, the APEC Business Advisory Council
and the APEC Study Centers Consortium.

Association of Southeast Asian Nations

(ASEAN)
The Association of Southeast Asian Nations, or ASEAN, was established on 8 August 1967 in Bangkok,
Thailand, with the signing of the ASEAN Declaration (Bangkok Declaration) by the founding members
of ASEAN, namely Indonesia, Malaysia, Philippines, Singapore and Thailand.

The ASEAN Charter serves as a firm foundation in achieving the ASEAN Community by providing legal
status and institutional framework for ASEAN. It also codifies ASEAN norms, rules and values; sets
clear targets for ASEAN; and presents accountability and compliance.

The secretariat of ASEAN is situated at Jakarta, Indonesia.

Members of ASEAN
There are ten member states of ASEAN as follows:

 Indonesia
 Malaysia
 Philippines
 Singapore
 Thailand
 Brunei Darussalam
 Vietnam
 Lao PDR
 Myanmar
 Cambodia

Objectives of ASEAN
 To accelerate the economic growth, social progress and cultural development in the region through
joint endeavours in the spirit of equality and partnership in order to strengthen the foundation for a
prosperous and peaceful community of Southeast Asian Nations
 To promote regional peace and stability through abiding respect for justice and the rule of law in the
relationship among countries of the region and adherence to the principles of the United Nations
Charter
 To promote active collaboration and mutual assistance on matters of common interest in the economic,
social, cultural, technical, scientific and administrative fields
 To provide assistance to each other in the form of training and research facilities in the educational,
professional, technical and administrative spheres
 To collaborate more effectively for the greater utilisation of their agriculture and industries, the
expansion of their trade, including the study of the problems of international commodity trade, the
improvement of their transportation and communications facilities and the raising of the living
standards of their peoples
 To promote Southeast Asian studies
 To maintain close and beneficial cooperation with existing international and regional organisations with
similar aims and purposes, and explore all avenues for even closer cooperation among themselves

ASEAN Summits
The ASEAN Summit is a semi-annual meeting held by its members. As on date there are thirty one
ASEAN Summits held. The 31st summit held at Manila, Philippines from 13 – 14 November 2017.
  Philippines was the Chair of ASEAN for year 2017 and the theme of its ASEAN Chairmanship was
“Partnering for Change, Engaging The World.”
 Singapore is the Chair of ASEAN for year 2018.

What is BIMSTEC – Objectives, members and

summit
A regional economic cooperation of nations lying to adjacent areas of Bay of Bengal is known as Bay
of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). It came into
existence on 6th June, 1997 after Bangkok Declaration. It represents 1.5 billion population (22% of
global population). It constitutes GDP of 2.7 trillion economies.

Brief History
It was started as (BIST-EC) Bangladesh, India, Sri Lanka and Thailand economic cooperation in 1997.
With inclusion of Myanmar, the group was renamed to ‘BIMST-EC’ (Bangladesh, India, Myanmar, Sri
Lanka and Thailand Economic Cooperation). The Nepal and Bhutan has joined in 2004, then the name
of the grouping was changed to ‘Bay of Bengal Initiative for Multi-Sectoral Technical and Economic
Cooperation’ (BIMSTEC)

Members of BIMSTEC
There are seven member states of BIMSTEC, out of which five are South Asian countries and two are
South East Asian countries. These seven countries are:

 South Asian Countries

1. Bangladesh
2. Bhutan
3. India
4. Nepal
5. Sri Lanka
 South East Asian Countries
1. Myanmar
2. Thailand

Objective of BIMSTEC
The objective of BIMSTEC is to harness shared and accelerated growth through mutual cooperation. It
started with co-operation in six sectors -including trade, technology, energy, transport, tourism and
fisheries. Later it was expanded to take up specific cooperation projects in the sectors of trade,
investment and industry, technology, human recourse development, tourism, agriculture, energy, and
infrastructure and transportation ; through joint endeavours and active collaboration, provide mutual
assistance in the form of training and research facilities, on matters of common interest in the
economic, social, technical and scientific fields
Secretariat of BIMSTEC
The permanent secretariat is situated at Dhaka, Bangladesh. It was established in September, 2014.
The present chair is Sri Lanka.

BIMSTEC Summit
BIMSTEC Summit is the highest policy body making in the process. The Summit is held once every
two years. The 4th summit was held in Kathmandu, Nepal in August, 2018. Sri Lanka will host the next
Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) summit in
September 2020

BIMSTEC In News
 The 2nd Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC)
Disaster Management Exercise was recently conducted in Bhubaneswar, Odisha. The focus of the 2nd
edition of Exercise is on heritage structures’ protection.

What is G20 – Members, Summit, Recent

News on G20
G20 is a forum of leading world’s major Economies. It was conceived at G7
finance ministers and central governors meeting in 1999. It neither has a
headquarters nor any staff. It focuses on issues of global importance. Some of
the topics which were focused in the past are global economy, financial markets,
tax & fiscal policy, trade, agriculture, jobs, energy, fight against corruption, 2030
Sustainable Development Agenda etc. It covers 85% Global Economic Output,
66% World Population, 75% International Trade and 80% Global Investment.

Who are members of G20?

It consists of nineteen countries and European Union. These countries are:

1. Argentina
2. Australia
3. Brazil
4. Canada
5. China
6. Germany
7. France
8. India
9. Indonesia
10. Italy
11. Japan
12. Mexico
13. Russia
14. Saudi Arabia
 15. South Africa
16. South Korea
17. Turkey
18. UK
19. USA

Spain is permanently invited to these meetings.

Yearly Agenda
 Meetings of ministers, foreign ministry, central bank governors, world leaders
 Each year a leader summit is attended by heads of state/government where they issue joint declaration
on the policy formed by G20 throughout the year.
 Each year a new country takes presidency. It rotates between the nineteen members of the group.

Recent G20 Summit Venues

 2017 – Hamburg, Germany
 2018 – Argentina
 2019 – Japan
 2020 – Saudi Arabia

Groups of G20 Countries

The G20 countries are divided into five groups:

 Group 1: Australia, Canada, United States, Saudi Arabia

 Group 2: India, Russia, South Africa, Turkey
 Group 3: Argentina, Brazil, Mexico
 Group 4: France, Germany, Italy, UK
 Group 5: China, Indonesia, Japan, South Korea

The presidency is rotated between these groups.

G20 in News
 The Summit of the G20 Heads of State and Government will be held in Rome on October 30th and 31st,
2021.

G77 – Group of 77: Aim, Structure, Members

The Group of 77 (G77) was established on 15 June 1964 by seventy-seven developing countries
signatories of the “Joint Declaration of the Seventy-Seven Developing Countries” issued at the end of
the first session of the United Nations Conference on Trade and Development (UNCTAD) in Geneva.
Although the members of the G-77 have increased to 134 countries, the original name was retained
due to its historic significance.
Aim of G77
The Group of 77 is the largest intergovernmental organization of developing countries in the United
Nations, which provides the means for the countries of the South to articulate and promote their
collective economic interests and enhance their joint negotiating capacity on all major international
economic issues within the United Nations system, and promote South-South cooperation for
development.

Structure of G77
The Chairmanship, which is the highest political body within the organizational structure of the Group
of 77, rotates on a regional basis (between Africa, Asia-Pacific and Latin America and the Caribbean)
and is held for one year in all the Chapters. Currently the State of Palestine holds the Chairmanship of
the Group of 77 in New York for the year 2019. The Ministerial Meeting is the supreme decision-
making body of the Group of 77. It is convened annually, at the beginning of the General Assembly of
the United Nations in September in New York and also periodically in preparation for UNCTAD
sessions and the General Conferences of UNIDO and of UNESCO

Member States
G77 is a coalition of 134 developing nations. The member state are:

Afghanistan, Algeria, Angola, Antigua and Barbuda, Argentina, Bahamas, Bahrain, Bangladesh,
Barbados, Belize, Benin, Bhutan, Bolivia (Plurinational State of), Bosnia and Herzegovina, Botswana,
Brazil, Brunei Darussalam, Burkina Faso, Burundi, Cabo Verde, Cambodia, Cameroon, Central African
Republic, Chad, Chile, China, Colombia, Comoros, Congo, Costa Rica, Côte d’Ivoire, Cuba, Democratic
People’s Republic of Korea, Democratic Republic of the Congo, Djibouti, Dominica,
DominicanRepublic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Eritrea, Eswatini, Ethiopia, Fiji,
Gabon, Gambia, Ghana, Grenada, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, India,
Indonesia, Iran (Islamic Republic of), Iraq, Jamaica, Jordan, Kenya, Kiribati, Kuwait, Lao People’s
Democratic Republic, Lebanon, Lesotho, Liberia, Libya, Madagascar, Malawi, Malaysia, Maldives, Mali,
Marshall Islands, Mauritania, Mauritius, Micronesia (Federated States of), Mongolia, Morocco,
Mozambique, Myanmar , Namibia, Nauru, Nepal , Nicaragua, Niger, Nigeria, Oman, Pakistan, Panama,
Papua New Guinea, Paraguay, Peru, Philippines, Qatar, Rwanda, Saint Kitts and Nevis, Saint Lucia,
Saint Vincent and the Grenadines, Samoa, Sao Tome and Principe, Saudi Arabia, Senegal, Seychelles,
Sierra Leone, Singapore, Solomon Islands, Somalia, South Africa, South Sudan, Sri Lanka, State of
Palestine, Sudan, Suriname, Syrian Arab Republic, Tajikistan, Thailand, Timor-Leste, Togo, Tonga,
Trinidad and Tobago, Tunisia, Turkmenistan, Uganda, United Arab Emirates, United Republic of
Tanzania, Uruguay, Vanuatu, Venezuela, Viet Nam, Yemen, Zambia, Zimbabwe.

Functions of Shanghai Cooperation

Organisation (SCO)
The Shanghai Cooperation Organisation (SCO) is a permanent intergovernmental international
organization established on 15 June 2001 in Shanghai (China). It is also known as Shanghai pact that
created an international alliance to promote political, economic, and security alliance as one of the
functions of Shanghai Cooperation Organisation (SCO).

Secretariat of  SCO
The Secretariat of Shanghai Cooperation Organisation (SCO) is based at Beijing (China). It is the main
permanent executive body of the SCO.

Secretary General of SCO

The SCO Secretariat is headed by Secretary General. He is Nominated by the Council of Ministers of
Foreign Affairs and approved by the Heads of State Council. He is appointed from among citizens of
the SCO member states on a rotating basis in Russian alphabetical order for a single three-year term
with no possibility of extension. The current Secretary General of SCO is Vladamir Norov (Russia).

Functions of Shanghai Cooperation Organisation (SCO)

The main functions of SCO are:

 Strengthening mutual trust and neighbourliness among the member states

 Promoting their effective cooperation in politics, trade, the economy, research, technology and culture,
as well as in education, energy, transport, tourism, environmental protection
  Making joint efforts to maintain and ensure peace, security and stability in the region
 Establishment of a democratic, fair and rational new international political and economic order

Members of SCO
There are three type of members in SCO:

 Permanent members: The SCO comprises eight member states:

1. India
2. Kazakhstan
3. China
4. Kyrgyzstan
5. Pakistan
6. Russia
7. Tajikistan
8. Uzbekistan
 Observer States: There are four observer states:
1. Afghanistan
2. Belarus
3. Iran
4. Mongolia
 Dialogue Partners: There are six dialogue partners:
1. Azerbaijan
2. Armenia
3. Cambodia
4. Nepal
5. Turkey
6. Sri Lanka

Heads of State Council

The Heads of State Council (HSC) is the supreme decision-making body in the SCO. It meets once a
year and adopts decisions and guidelines on all important matters of the organisation. The SCO
Heads of Government Council (HGC) meets once a year to discuss the organisation’s multilateral
cooperation strategy and priority areas, to resolve current important economic and other cooperation
issues, and also to approve the organisation’s annual budget.

The historical meeting of the Heads of State Council of the Shanghai Cooperation Organisation was
held on 8-9 June 2017 in Astana. In this meeting the status of a full member of the Organization was
granted to India and Pakistan.

Official language of SCO

The SCO’s official languages are Russian and Chinese.

18th Shanghai Cooperation Organisation (SCO) Summit

The 18th SCO Summit held at Quingdao, China from June 9-10, 2018.
BRICS – Brazil, Russia, India, China, South
Africa
BRICS is a grouping of the five emerging economies of Brazil, Russia, India, China and South Africa.
The acronym BRIC(S) was first mooted by Jim O’ Neill of Goldman Sachs to represent Brazil, Russia,
India and China in the year 2001. The group met for the first time after the meeting of the leaders of
Russia, India and China in St. Petersburg on the margins of G8 Outreach Summit in 2006. The group
became formalised during the 1st meeting of BRIC Foreign Ministers on the margins of United
Nations General Assembly (UNGA) in New York in 2006. Thereafter, the 1st BRIC Summit was held in
Yekaterinburg, Russia, in June 2009. The group expanded to include South Africa at the BRIC Foreign
Ministers’ meeting in New York in September 2010. Accordingly, South Africa attended the 3rd BRICS
Summit in Sanya, China in April 2011.

AIM of BRICS
The main aim of the grouping is to foster cooperation, policy coordination and political dialogue
regarding international economic and financial matters

BRICS Members
Together these five emerging economies of BRICS represent over 40% of the world population, more
than 30% of the world GDP and 17% share in the world trade. According to statistics of the World
Trade Organisation (WTO), the participation of BRICS in global exports more than doubled between
2001 and 2011, from 8% to 16%

Contingent Reserve Arrangement

Contingent Reserve Arrangement (CRA) established in 2015 by BRICS member nations Brazil, Russia,
India, China and South Africa, is a framework for the provision of support through liquidity and
precautionary instruments in response to actual or potential short-term balance of payments
pressures

BRICS Summit
The BRICS summit is held annually. The various summits held till now are:

Sr. No. Date(s) Host country Location

1st 16 June 2009  Russia Yekaterinburg

2nd 15 April 2010  Brazil Brasília

3rd 14 April 2011  China Sanya

4th 29 March 2012  India New Delhi

5th 26–27 March 2013  South Africa Durban

6th 14–17 July 2014 Brazil Fortaleza Brasília

7th 8–9 July 2015  Russia Ufa

8th 15–16 October 2016  India Benaulim

9th 3–5 September 2017  China Xiamen

10th 25–27 July 2018  South Africa Johannesburg

11th 13–14 November 2019  Brazil Curitiba

12th TBD 2020  Russia Chelyabinsk

Objective, Structure and Functions of OECD

The Organisation for Economic Co-operation and Development (OECD) is an international
organisation formed in 1961 to build better policies for better lives. The functions of OECD include
shaping policies that foster prosperity, equality, opportunity and well-being for all.

History of OECD
The Organisation for European Economic Cooperation (OEEC) was established in 1948 to run the US-
financed Marshall Plan for reconstruction of a continent ravaged by war. By making individual
governments recognise the interdependence of their economies, it paved the way for a new era of
cooperation that was to change the face of Europe. Encouraged by its success and the prospect of
carrying its work forward on a global stage, Canada and the US joined OEEC members in signing the
new OECD Convention on 14 December 1960. The Organisation for Economic Co-operation and
Development (OECD) was officially born on 30 September 1961, when the Convention entered into
force. Other countries joined in, starting with Japan in 1964. Today, 36 OECD member countries
worldwide regularly turn to one another to identify problems, discuss and analyse them, and promote
policies to solve them

Objective of OECD
The objective of OECD is to improve the global economy and promote world trade.

Structure of OECD
OECD Council: The OECD Council is the organisation’s overarching decision-making body. It is
composed of ambassadors from member countries and the European Commission, and is chaired by
the Secretary-General. Once a year, the OECD Council meets for the Ministerial Council Meeting,
which brings together heads of government, economy, trade and foreign ministers from member
countries to monitor and set priorities for our work, discuss the global economic and trade context,
and delve further issues such as the budget, accession and other priorities.

Secretariat of OECD
The OECD Secretariat carries out the work of the OECD. It is led by the Secretary-General. Angel
Gurría was appointed as the Secretary-General of the OECD on 1 June 2006.   He is currently serving
his third five-year mandate

Member Countries
OECD countries and key partners represent about 80% of world trade and investment. There are 36
member countries span the globe, from North and South America to Europe and Asia-Pacific. These
countries are Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania,
Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia,
Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States.

Functions of OECD
The functions of OECD are:

 Promoting health and safety

 Promoting local and regional development
 Combating international tax avoidance
 Accelerating development
 Fighting corruption
 Guiding economic reforms of nations
 Improving educational system

RCEP (Regional Comprehensive Economic

Partnership)
The Regional Comprehensive Economic Partnership (RCEP) is a mega-regional economic agreement
being negotiated since 2012 between the 10 ASEAN countries and their six FTA partners.

Members
The RCEP bloc comprises 10 ASEAN group members (Brunei, Cambodia, Indonesia, Malaysia,
Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam), and their trade partners India,
China, Japan, South Korea, Australia and New Zealand.

The member countries cover half the world population, 30 per cent of world GDP and a quarter of
world trade

Goal
The stated goal of the negotiations is to “boost economic growth and equitable economic
development, advance economic cooperation and broaden and deepen integration in the region
through the RCEP”.

RCEP Negotiations
The objective of launching RCEP negotiations is to achieve a modern, comprehensive, high-quality,
and mutually beneficial economic partnership agreement among the ASEAN Member States and
ASEAN’s FTA partners. These negotiations were commenced in early 2013. The RCEP negotiation
includes: trade in goods, trade in services, investment, economic and technical cooperation,
intellectual property, competition, dispute settlement, e-commerce, small and medium enterprises
(SMEs) and other issues.

The 27th round of negotiations for Regional Comprehensive Economic Partnership will be held in
Zhengzhou, China from July 22 to 31.

Functions of RCEP
 Recognition to ASEAN Centrality in the emerging regional economic architecture and the interests of
ASEAN’s FTA partners in enhancing economic integration and strengthening economic cooperation
among the participating countries;
  Facilitation of trade and investment and enhanced transparency in trade and investment relations
between the participating countries, as well as facilitation of SMEs’ engagements in global and regional
supply chains; and
 Broaden and deepen ASEAN’s economic engagements with its FTA partners.

India’s engagement with RCEP

India’s trade deficit with the grouping is $105.2 billion, of which $53.6 billion is with China alone.

Latest News
The 9th Regional Comprehensive Economic Partnership (RCEP) Intersessional Ministerial Meeting will
be held in Bangkok, Thailand

Global Partnership on Artificial Intelligence

(GPAI) Explained
Global Partnership on Artificial Intelligence (GPAI) is an international and multistakeholder initiative to
guide the responsible development and use of AI, grounded in human rights, inclusion, diversity,
innovation, and economic growth. The initiative will look to bridge the gap between theory and
practice on AI by supporting cutting-edge research and applied activities on AI-related priorities

Four Working Group themes of GPAI

GPAI will bring together leading experts from industry, civil society, governments, and academia to
collaborate across four Working Group themes:

 Responsible AI;
 Data Governance;
 The Future of Work;
 Innovation & Commercialization

GPAI’s experts will also investigate how AI can be leveraged to better respond to and recover from
COVID-19.

Global Partnership on Artificial Intelligence

Secretariat
GPAI will be supported by a Secretariat, to be hosted by the OECD in Paris, as well as by two Centres
of Expertise – one each in Montréal and Paris. The Centres will provide administrative and research
support for the practical projects undertaken or assessed by Working Group experts from various
sectors and disciplines. The Centres will also plan the annual GPAI Multistakeholder Experts Group
Plenary, the first of which will be hosted by Canada in December 2020.
Founding members of Global Partnership on
Artificial Intelligence
The 15 founding members of GPAI are Australia, Germany, India, Italy, Japan, Mexico, New Zealand,
the Republic of Korea, Singapore, Slovenia, the United Kingdom, the United States of America, and
the European Union

India’s Initiatives of AI
To keep pace with latest development in AI and leverage its benefit, the government of India has
launched many initiatives like:

 IndiaAI: A joint initiative of MeitY, NeGD and NASSCOM is the central hub for everything AI in India
 National Strategy for Artificial Intelligence by NITI Aayog
 Responsible AI for Youth Programme