REASONS FOR INDIA'S POOR SHARE IN WORLD TRADE

                 India's export performance is poor. Over the years, since Independence, India's share of the world export trade has been very low. At present, India's share of the world export trade is 1%. The share of export of other developing countries of Asia, namely China, South Korea, Malaysia, Singapore and Thailand is much more than of India.
                 There are several reasons for poor performance of India's export trade. The reasons or causes can be broadly divided into two groups, as shown below :

*   CAUSES OF POOR SHARE OF INDIA'S EXPORTERS :-

   I.  Exporter-Related Problems                                  

• Poor Quality 
• High Prices 
• Inadequate Promotion
• Poor Follow-up of Sales 
• Poor Negotiation Skills 

  II.  General Causes

• Poor Infrastructure 
• Presence of Good Domestic Market 
• Documentation and Formalities
• Negative Attitude of Overseas Buyer
• Problem of Trading Blocs

 
I.  EXPORTER-RELATED PROBLEMS :

1. Poor Quality :-
                     One of the main reasons for poor performance of India's exporter trade is due to the poor quality of products. A good numbers of Indian exporters, especially, the small-scale exporters do not give much importance to quality control. Due to problems in quality, the Indian exporters do not get orders from foreign buyers. There are also cases, where Indian goods are rejected and sent back to India by foreign buyers.
   
2. High Prices :-
                     The price of Indian goods is higher as compared to other Asian countries. The price of Indian exports is high due to :
    (i)   Higher value of Indian rupee is vis-a-vis the value of some of the other Asian countries such as            Malaysia, Thailand, Philippines, etc.
    (ii)  Some of the Indian exporters quote higher prices in order to make higher profits per unit sold.
    (iii) The price of Indian goods is also affected by high transaction costs, and documentation        
          formalities.
   
3. Inadequate Promotion :-
                         Promotion is vital for export marketing. However, a good number of Indian exporters do not give much importance to promotion. Apart from advertising, and sale promotion, Indian exporters must participate in trade fairs and exhibitions. But in reality, a good number of Indian exporters are not professional in advertising and sale promotion. They also do not take part in trade fairs and exhibitions, and if they do so, they lack professional approach in handling the visitors at the trade fairs and exhibitions.
   
4. Poor Follow-up of Sales :-
                         There is often poor follow-up of sales. The Indian exporters do not bother to find out the reactions of the buyers after the sale. They are also ineffective in providing after-sale-service. As a result, there is poor performance of India's exporter trade.
   
5. Poor Negotiation Skills :-
                            Indian exporters, especially the small exporters lack negotiation skills. Due to poor negotiation skills, they fail to convince and induce the foreign buyers to place orders. The lack of negotiation skills is mainly due to poor training in marketing and negotiation skills.
   

 II.  GENERAL CAUSES :

1. Poor Infrastructure :-
                            The infrastructure required for export of goods is poor. Due to poor infrastructure facilities, Indian Exporters find it difficult to get orders, and also to deliver the goods at the right time. The poor infrastructure facilities include :
     (i)   Poor port-handling facilities.
     (ii)  Inadequate warehousing facilities.
     (iii) Poor transport facilities, etc.
   
2. Presence of Good Domestic Market :-
                          In India, there is a good domestic market. Sellers find a ready market for their goods within the country. Therefore, they do not take pains to get orders form overseas markets. However, from the long-term point of view, India marketers should look beyond domestic markets, and enter in the export markets.  
   
3. Documentation and Formalities :-
                         In India, there are number of documentation and other formalities. Due to the various formalities, some of the marketers do not enter the export field. Therefore, there is a need to simplify and reduce formalities and documentation work on the part of government authorities.
   
4. Negative Attitude of Overseas Buyers :-
                         Some of the overseas buyers, especially from developed nations have a negative attitude towards Indian goods. They are of the opinion that Indian goods are of inferior quality, and that the Indian exporters provide poor service after sales. Therefore, there is a need to correct this negative attitude through effectively promotion and good marketing practices.
   
5. Problem of Trading Blocs :-
                        Indian exporters are affected due to the presence of trading blocs. There are some powerful trading blocs in the world such as NAFTA, European Union and ASEAN. The training blocs reduce or eliminate the trade barriers on non-members. Since India is not a member of the powerful trading blocs, Indian exporters do face problems to export good to the member countries of the trading blocs. 

INDIAN COUNCIL OF ARBITRATION (ICA) New Delhi

               

                              ICA was set up in 1965. It is an autonomous non-profit organisation registered under the Societies Registration Act. It was set up for promoting and encouraging amicable settlement of commercial disputes between exporters and importers. The main objectives are :

1. To develop arbitration consciousness in foreign trade.
2. To provide facilities for the amicable settlement of commercial disputes by arbitration.
3. To settle trade complaints arising out of non-compliance with arbitration awards between Indian and foreign parties.
4. To conduct tradinding courses and seminars on commercial arbitration and international law.
5. To publish information of commercial arbitration and allied matters.
6. To collaborate with such international organisations and arbitral bodies in matters concering internatioanl commercial arbitrations.

                 At the international level, the International Chamber of Commerce through its Court of Arbitration, is the most important organisation that provides facilites for settling disputes in international business through conciliation and arbitration. Exporters in their own interest should take core to ensure that specific provisiions are made in the contracts for amicable and quick settlement of disputes. In India, the help of ICA can be taken only if there is a clause in the contract that in case of dispute the matter would be referred to the ICA, otherwise both parties should agree to refer the dispute to ICA.

*  Importance Features of ICA :-

1. Membership :-
                        The council's membership comprises of Foundation members, Ordinary Associates, Individual and Honorary members.
    
2. Initiation and Arbitration :-  
                       The either party or any party can apply for dispute settlement. The applicant allong with application should pay the registration fee and furnish to the secretary a statement containing. (a) the names and address of the parties to the disputes, (b) full details of the case, (c) original or certified copy of documents and relevant information.
3. Fees/Expenses :-  
                       The fees, costs and expenses incidental to the reference and award shall include
   (i) registration fee
   (ii) admission fee
   (iii) arbitration fee.
                  The amount of registration fee is fixed whereas, the amount involved and the time that would be spent to decide it. In addition, any travelling expenses incurred by arbitrator or secretary of the council as determined by the Bench shall be payable.
4. Constitution of Bench :-  
                        Secretary of ICA makes arrangement on the recept of application to constitute a Bench consisting of one or three arbitrators selected from a panel of Arbitration.
5. Venue :-   
                       The proceeding shall be held at place (s) in India as the Bench may decide.
6. Awards :-  
                       When arbitrator (s) sign (s) the award, the secretary sahll give notice in writing to the parties concerned in respect of fees and chrges payable and true copy of the award is supplied to the partes on receipt of fees/charges. The award is binding on both the parties, if not ICA do follow legal remedies to enforce the award. 

                        

INDIAN INSTITUTE OF PACKAGING (IIP) MUMBAI

                         With a view to improve the packaging and packing standards, the IIP was set up in 1996 at Mumbai. The main functions of IIP are :

    1.   Training Programme :-
                              IIP is primarily engaged in training programmes relating to packaging industry. This institutes makes the trainees familiar with packaging technology, packaging materials, and current trends in packaging in the world markets.

    2.   Improvement in Quality of Packaging :-

                               IIP makes constant efforts to upgrade and improve the design and quality of packaging, so as to promote India products abroad.

    3.   Collection of Information :-

                                IIP collects information on latest trends in the packaging in respect of raw materials, design etc.

    4.   Supply of Information :-

                                The information collected on packaging is provided to the exporters by IIP, so that exporters can upgrade their packaging standards.

    5.   Organizing Seminars and Workshops :-

                                 IIP organised seminars and workshops on packaging designs and quality. Exporters can take the advantage of such seminars and workshops.

    6.   Consultancy Services :-

                                  It provides consultancy services to the exporters in the field of packaging .

    7.   Develops Packaging Consciousness :-

                                   Export packaging is vital as it not only protects and preserves the product, but also promotes the product in international markets. Therefore, IIP develops consciousness of the need for good packaging among Indian exporters.

    8.   Publications :-

                                   It publishes two quarterly magazines, one devoted to the technological aspects of packaging and the other to techno economic aspects of packaging.

    9.   Testing Facilities :-

                                   It provides testing facilitates in respect of packages and packaging material to the exporters.

                             The IIP is one of the founder members of the Asian Packaging Federation established for exchange of all information of packaging and for chalking out common programmes for the development of packing standards in the Asian region.

EUROPEAN UNION (UA)

                     The European Union was formerly called as European Common Market(ECM). The ECM was formed by signing the Treaty of Rome in March 1957 by six countries - France, Italy, Germany, Belgium, Netherlands, and Luxembourg.  It came into force form 1.1.1958. Between 1973 and 1995, another 9 countries joined ECM - such as Denmark, Ireland, UK, Finland, Austria, Sweden, Greece, Spain and Portugal. In 2004, another 10 countries joined the group. The 10 countries belonged to the former communist bloc - Hungary, Poland, Czech Republic, Slovenia, Slovakia, Lithuania, Latvia, Cyprus, Malta and Estonia. In 2007, two more countries are likely to join EU, i.e., Bulgaria and Romania. At present, there are 27 members nations of EU.

*  The Main Objectives of EU are :

• To eliminate trade barriers on member nations.
• To assist member nations during the times of emergencies.
• To develop cultural and social relations. 
• To promote free transfer of labour and capital among member nations. 
• To bargain collectively with the non-members by means of collective strength.
• To impose common external barriers on non-member.

*  Policies of European Union :

1. Common Agriculture Policy :-

                                           It aims at improving the agricultural productivity, and to improve the position of the EU farmers. It also aims to make available food products at reasonable rates. It allows free movement of food products among member nations.

2. Common Fisheries Policy :-
                                      It provides equal access to fishing areas to all nationals of EU. It adopts common market standards for marine products.

3.  Common Transport Policy :-
                                      It aims at integration of transport facilities of the entire community. It monitors organisation and control of transport system within the community.

4.  Fiscal Policy :-
                   It aims at unification of tax rates, and other fiscal matters. It common value added tax on products in the member states.

5.  Industrial Policy :-
                      It facilitates research and development among member nations. It aims at improving international competitiveness of industries of EU member states.

6.  Competition Policy :-
                      It prohibits agreements which lead to prevention, or restriction of competition within the EU. It aims to promote competition within the EU by restricting anti-competitive practices.

"Features of Special Economic Zones(SEZ)"

                           

                         With a ciew to enable hassle free export activity, Special Economic Zone are being set up. The units in these zones shall not be subjected to any pre-determined value addition, export obligation and input/output wastage norms. Sale in domestic tariff area by the units in such zones will be permitted on payment of full customs duty. Such SEZs has been selected, one each in Gujarat and Tamil Nadu. The existing EPZs are also being converted in SEZs.

Features :-

1.  Domestic Sales/Purchases :- 
                               Goods going in to the SEX areas from DTA (Domastic Tariff Area) shall be treated as deemed exports and goods coming from the SEZ area into DTA shall be treated as if the goods are being imported.
   
2. Export and Import of Goods :-
                             SEZ units may export goods and services including agro-products, partly processed jewellery, sub-assemblies ad components. It may also export by-producs, rejects, waste-scrap arising out of the production process.    
                         
3. Net Foreign Exchange Earning (NFE) :-
                             A SEZ unit shall be a positive net foreign exchange earner. NFE shall be calculated cumulatively for a period of five years from the commencement of commercial production.            
   
4. Domestic Tariff Area (DTA) Sales & Supplies :-
                             Sales to SEZs from DTA are to be treated as exports. Sales to DTA from SEZ are to be exempted from special additional duty (SAD) from SEZ 4% cheaper than imports. DTA sale by service/trading units shall be subject to achievement of positive NFE.
   
5. Export through Status Holder :-
                             A SEZ unit may also export goods manufactured by it through a merchant exporter / status holder or any other EOU / EPZ / SEZ unit.
   
6. Inter-limit Transfer :-
                             Transfer of manufactured goods or imported goods from one SEZ unit to another EPZ / EOU / SEZ unit is allowed, but not counted towards export performance.
   
7. Administration and Setting up of SEZ :-
                              SEZ will be under the administrative control of Development Commissioner. A SEZ may be set up in the public, private or joint sector. The existing EPZs may also be converted into SEZ by the Ministry of Commerce and Industry.
   
8. Export Proceeds :-
                              Units in SEZ can bring back their export proceeds in 360 days as against normal period of 180 days and can retain 100% of the proceeds in the EEFC Account.                                                                                     

"World Trade Organization(WTO)"

                       The World Trade Organization (WTO) is an organization that intends to supervise and liberalize international trade. The organization officially commenced on 1 January 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements, which are signed by representatives of member governments:fol.9–10 and ratified by their parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (1986–1994).

                           The organization is attempting to complete negotiations on the Doha Development Round, which was launched in 2001 with an explicit focus on addressing the needs of developing countries. As of June 2012, the future of the Doha Round remains uncertain: the work programmed lists 21 subjects in which the original deadline of 1 January 2005 was missed, and the round is still incomplete. The conflict between free trade on industrial goods and services but retention of protectionism on farm subsidies to domestic agricultural sector (requested by developed countries) and the substantiation of the international liberalization of fair trade on agricultural products (requested by developing countries) remain the major obstacles. These points of contention have hindered any progress to launch new WTO negotiations beyond the Doha Development Round. As a result of this impasse, there has been an increasing number of bilateral free trade agreements signed.  As of July 2012, there are various negotiation groups in the WTO system for the current agricultural trade negotiation which is in the condition of stalemate.

                         WTO's current Director-General is Roberto Azevêdo, who leads a staff of over 600 people in Geneva, Switzerland.

                               The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was established after World War II in the wake of other new multilateral institutions dedicated to international economic cooperation – notably the Bretton Woods institutions known as the World Bank and the International Monetary Fund. A comparable international institution for trade, named the International Trade Organization was successfully negotiated. The ITO was to be a United Nations specialized agency and would address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements. But the ITO treaty was not approved by the U.S. and a few other signatories and never went into effect.

                         In the absence of an international organization for trade, the GATT would over the years "transform itself" into a de facto international organization.

"COMPUTATION OF INCOME"

                 Let us take a quick survey of the steps involved fin the assessment (computation) of income under the Act.

1)   Determine Scope of Total Income :-      

                                          The "scope" of income means - What items are to be included in the income, and what items are to be excluded. The scope of income depends upon three factors - (a)  whether the  person earning the income is resident in India or not, (b)  whether the income arises during the previous 

     year and   (c) whether the income arises in India or outside. 

          

            (a)  Residence :  What items are to be included in the income depends upon whether a person is a  "resident"in India or not. A person is said to be "resident" in India, if, broadly speaking, he has stayed in India for the major part of the previous year (i.e. 6 moths or more); otherwise he is called a "non-resident".

            (b)  Year :  The income to be taxed must have arisen during the previous year only, i.e. neither before nor after the previous year.

             (c)  Place :  What items are to be included in the taxabbles income of a person, depends, next, upon whether the income is Incian of Foreign, i.e. arising within or outside India. Broadly speaking, a Resident has to pay Income-tax only on Indian as well as Foreign income, while a Non-Resident is liable to pay Income-tax only on the Indian income.

                 

2)   Classify Income Under Different Heads :-     

                                            After determining what is to be included, the next step is to classify the income under different "heads of income" prescribed under the Act. The major heads of income are - Salary,  Income from Property, Profits from Business, Capital Gains, and Income from Other Sources.

      

3)   Compute Income Under Each Head :- 

                                            The rules for computing income under each head are different. Such rules prescribe as to what is to be included under each head, what are the deductions allowed under each head and so on. This is the most important step in the computation of income. The Act grants exemption from tax, on certain items of income, such as agricultural income, or Leave Travel Allowance; or to certain persons such as Foreign Technicians, Foreign Teachers etc. Such exempted items are to be totally ignored and excluded while computing the taxable income.

4)   Determine Gross Total Income :-

                                           Though income is classified and computed under different heads, in the end, the income under all the heads is added together to arrive at the "Gross Total Income" of the assesses.

5)   Deduct Claims For Deductions :-

                                           The Income-tax Act allows certain deductions from the Gross Total Income.Such deductions are given to encourage savings in National Savings Certificates, PPF, etc. Deductions are also given on income earned by a handicapped person etc.           

6)   Compute Net Taxable Income :-

                                           Net Taxable Income is equal to Gross Total Income Less Deductions Allowed.This is the final step in the computation of income. Income-tax is charged on such bet taxable income.