WITH REFERENCE TO INDIA.
TRADE – DEFINITION OF TRADE Trade.ppt.pptx
DIFFERENT TYPES OF TRADE
(A)Domestic,(B) Foreign trade
(A)Free trade(B)Banned trade and (C)Protected trade
DEFINITION OF FOREIGN TRADE – TRENDS IN WORLD
WHY/ IMPORTANCE OF FOREIGN TRADE – GLOBAL
FOREIGN EXCHANGE countries.ppt
DIFFICULTIES IN FOREIGN TRADE TRADE1.ppt.pptx
ARGUMENTS AGAINST INTERNATIONAL TRADE arg.pptx
COMPONENTS IN FOREIGN TRADE
CLASSIFICATION OF GOODS IN FOREIGN TRADE
(A) Merchandise goods (Visible)
Goods in service (Invisible)
(B) Free Goods
Goods with license
(C) Traditional Goods
Non traditional Goods
(D ) Raw material
• COMPOSITION OF FOREIGN TRADE
EXPORTS AND IMPORTS FACTORS.pptx
• FORMS OF FOREIGN TRADE-COUNTER TRADE
• GDP – Trade GDP Ratio Gdp.mht tradegdp.pptx
Indian Economic Outlook.htm tradoc_113390.pdf
•Foreign trade and developed countries
•General Awareness for Bank PO's and Clerks.htm
•India’s foreign trade
•Economy of India.mht
• Growth of Foreign trade in India
• Composition of India’s Foreign Trade
• Problems faced by Indian Foreign Trade sector
• Steps taken by Indian Government for improving foreign trade
PROBLEMS FACED BY INDIAN EXPORT SECTOR
• Lack of integrated approach.
• Problem recognition and action lags.
• High cost
• Poor quality image
• Supply problems
• Technological gap
• Infrastructure constraints
• Faceless presence.
• Political problems
• Marketing Constraints..
STEPS TAKEN BY GOVERNMENT
DGFT,IIFT & OTHER
CUSTOMS ACT,EXECISE Trade fairs, Symposiums
Chamber of Commerce
(b) Major and minor ports
DEPTS/CORPS/AGENCIES/FIS / FOR INDIAN FOREIGN TRADE
Min of EA
Min of Com
CHAMBER OF COMM.,LOCAL &
COUNCIL,INDIAN COUNCIL OF
I PARTIES INVOLOVED IN EXIM TRADE
2.CORPORATE AND BUSINESS HOUSES
4.BANKS AND RBI
(A)HISTORY / ORIGIN
(B)ECONOMIC INTEGRATION-MFN CLAUSE
PROCEDURE INVOLVED IN FOREIGN TRADE-INDIAN CONTEXT
•Aware of the various steps taken by the government to improve foreign trade
•Know the departments/agencies involved in foreign trade
•Should be aware of the various risks in foreign trade
•Should know the various foreign currencies/exchange rate
•Decide what type of trade100%EOU/partial EOU/SEZ
•Obtaining the license numberDGFT
•Finance required for business
•Registration with VAT/DUTY
•Clearance from RBI for handling foreign exchange
•Documents involved in foreign trade
•MarketingTechnological gap/Product lifecycle
• TRADE POLICY
•Trade – Free trade, banned trade, protected trade definition
• What is free trade? Advantages of free trade
FEATURES OF FREE TRADE.pptx:FEATURES OF FREE TRADE.
•What is banned trade?
•What is Protected trade?
• Areas of Protection
(a) Domestic key industries.
(b) Product life cycle
(c) Dependence result in risk
(e) Technology development i.e., encouraging creativity.
(f) Protecting Defence
(g) Discouraging anti dumping
(h) Improving terms of trade and balance of payment
(i) Returns for home production.
FREE TRADE IMPLIES THE FOLLOWING FEATURES:
•Trade of goods without taxes (including tariffs) or other trade barriers(e.g.,
quotas on imports or subsidies for producers)
•Trade in services without taxes or other trade barriers
•The absence of "trade-distorting" policies (such as taxes, subsidies,
regulations, or laws) that give some firms, households, or factor of
production an advantage over others
•Free access to markets
•Free access to market information
•Inability of firms to distort markets through government-imposed
monopoly or oligopoly power
•The free movement of labor between and within countries
•The free movement of capital between and within countries
(2)Deprived of knowing the world developments.
(3)Corruption, discourages innovation
(4)Resistance to change. reduces variety of choice
(5)Encourages Red tapes
THE PROCESS OF PROTECTION - TRADE BARRIERS
(a) Tariff barriers – Execise Duty, Customs Duty, Special Duty.
- WTO recommendations.
(b) Non Tariff barriers.
(a) NTB by developed countries
(b) NTB by non- developed countries.
NTB BY DEVELOPED COUNTRY
NTB BY DEVELOPING
HEALTH & SAFETY
MINIMUM IMPORT AND EXPORT
CANALISATION OF IMPORTS,STC
, GOVT. PROCUREMENT.
A variety of policies have been claimed to achieve protectionist goals. These include:
TARIFFS: Typically, tariffs (or taxes) are imposed on imported goods. Tariff rates usually vary
according to the type of goods imported. Import tariffs will increase the cost to importers, and
increase the price of imported goods in the local markets, thus lowering the quantity of goods
imported. Tariffs may also be imposed on exports, and in an economy with
floating exchange rates, export tariffs have similar effects as import tariffs. However, since
export tariffs are often perceived as 'hurting' local industries, while import tariffs are perceived
as 'helping' local industries, export tariffs are seldom implemented.
IMPORT QUOTAS: To reduce the quantity and therefore increase the market price of imported
goods. The economic effects of an import quota is similar to that of a tariff, except that the tax
revenue gain from a tariff will instead be distributed to those who receive import licenses
Economists often suggest that import licenses be auctioned to the highest bidder, or that
import quotas be replaced by an equivalent tariff.
ADMINISTRATIVE BARRIERS: Countries are sometimes accused of using their various
administrative rules (e.g. regarding food safety, environmental standards, electrical safety, etc.)
as a way to introduce barriers to imports.
ANTI-DUMPING LEGISLATION:Supporters of anti-dumping laws argue that they prevent
"dumping“of cheaper foreign goods that would cause local firms to close down. However, in
practice, anti-dumping laws are usually used to impose trade tariffs on foreign exporters.
DIRECT SUBSIDIES: Government subsidies (in the form of lump-sum
payments or cheap loans) are sometimes given to local firms that cannot
compete well against foreign imports. These subsidies are purported to "protect"
local jobs, and to help local firms adjust to the world markets.
EXPORT SUBSIDIES: Export subsidies are often used by governments to
increase exports. Export subsidies are the opposite of export tariffs, exporters are
paid a percentage of the value of their exports. Export subsidies increase the
amount of trade, and in a country with floating exchange rates, have effects
similar to import subsidies.
EXCHANGE RATE MANIPULATION: A government may intervene in the
foreign exchange market to lower the value of its currency by selling its
currency in the foreign exchange market. Doing so will raise the cost of imports
and lower the cost of exports, leading to an improvement in its trade balance.
However, such a policy is only effective in the short run, as it will most likely
lead to inflation in the country, which will in turn raise the cost of exports, and
reduce the relative price of imports.
INTERNATIONAL PATENT SYSTEMS: There is an argument for viewing
national patent systems as a cloak for protectionist trade policies at a national
•Two strands of this argument exist: one when patents held by one
country form part of a system of exploitable relative advantage in trade
negotiations against another, and a second where adhering to a
worldwide system of patents confers "good citizenship" status despite
'de facto protectionism'.
•Peter Drahos explains that "States realized that patent systems could
be used to cloak protectionist strategies. There were also reputational
advantages for states to be seen to be sticking to intellectual property
•One could attend the various revisions of the Paris and Berne
conventions, participate in the cosmopolitan moral dialogue about the
need to protect the fruits of authorial labor and inventive
genius...knowing all the while that one's domestic intellectual property
system was a handy protectionist weapon."
Extent of FT/PT/BT
What % allowed
Degree of Liberalization
Extent of Globalisation
• WHAT IS GLOBALISATION GLOBALISATIONPPT.ppt.pptx
• DRIVERS OF GLOBALISATION DRIVERSOFGLOBALISATION.pptx
• STAGES IN GLOBALISATION AND ESSENTIALS TO HAVE
STAGS OF GLOB.pptx
• ADVANTAGES & DISADVANTAGES OF GLOBALISATION
Benefits of globalisation-TABLE.doc
•GLOBALISATION WITH RESPECT TO INDIA
EVOLUTION OF GLOBALISATION IN INDIA.pptx obstofglob.pptx
•Favorable factors favofglob.pptx
COMMODITY AGREEMENT - FORMAL AGREEMENTS
•WHY COMMODITY AGREEMENTS? - UNCTAD’S ROLE
•FOUR FORMS OF COMMODITY AGREEMENT
-BUFFER STOCK AGREEMENT
-BILATERAL AGREEMENT AND MULTILATERAL AGREEMENT
•METHODOLOGY OF GOVERNMENT INVOLVING IN FOREIGN
TRADE - STATE TRADING
-STATE TRADING CORPORATION OF INDIA-STC
•OBJECTIVES OF STATE TRADING CORPORATION
• Impact of globalisation
FDI-Resource seeking investment or long term
PORTFOLIO INVESTMENT market
•MNC is a form of FDI
seeking investment or
•DEFINITION OF NATIONAL COMPANY
•FORMS OF BUSINESS ORGANISATION
•PUBLIC SECTOR –JOINT SECTOR
PRIVATE LTD , PUBLIC LTD
DEFINITION OF MULTINATIONAL COMPANIES
•A corporation that has its facilities and other assets in at least one country other than its
home country. Such companies have offices and/or factories in different countries and
usually have a centralized head office where they co-ordinate global management. Very
large multinationals have budgets that exceed those of many small countries.
•Corporation that has production facilities or other fixed assets in at least one
foreign country and makes its major management decisions in a global context.
•In marketing, production, research and development, and labor relations, its
decisions must be made in terms of host-country customs and traditions.
• In finance, many of its problems have no domestic counterpart-the payment of
dividends in another currency, for example, or the need to shelter working capital
from the risk of devaluation, or the choices between owning and licensing.
•In addition to foreign exchange risks and the special business risks of operating
in unfamiliar environments, there is the specter of political risk-the risk that
sovereign governments may interfere with operations or terminate them
DIFFERENCE BETWEEN NATIONAL AND MULTINATIONAL
1. INCORPORATED IN
MAY BE IN INDIA OR
2. OPERATIONS MOSTLY
IN INDIA. ONLY SPECIFIC
COUNTRY AND BETWEEN
3. EMPLOYS MOSTLY
EMPLOYS ALL OVER THE
WITH LOCAL CURRENCY.
MOSTLY TRANSACTS WITH
LOCAL & FOREIGN
5. MAY NOT BE
CONTROLLED BY FOREIGN
BY FOREIGN EXCHANGE
6.CAN BE GOVT, PUBLIC,
ONLY IN PRIVATE SECTOR.
•FORMS OF MNCS
3. BACK TO BACK
STRUCTURE OF MNC
1.Transfer of technology
2.Transfer of technology +investment
3.Transfer of technology+investment+management
2.Standard of living
3.Variety of products-no monopoly exploitation
6.Balance f payment
8.Infrastructure development –communication , power
9.More facilities in pharma
medical equipments, life saving drugs
10.Cultural relationship-Exchange goods in service
1.Exploitation - natural resources @ cheaper costs
2.Exploitation of labour
3.Interference in government-often in changing the laws ,arm twisting
4.Dependence in view of their investment, employment facilities
5.Killing the local domestic industries
6.Taking control of the key industries
7.Slowly converting to colonies-opportunistic
•EVOLUTION OF MNCS
•LIST OF MNCS IN INDIA
-> GOODS IN SERVICES
•GROWTH OF MNCS
•CODE OF CONDUCT FOR FUNCTIONING OF MNCS IN
• CAP IN STRUCTURE OF MNC
% OF FDI
INFRASTRUCTURE ONLY TRANSFER
IN RLY. &
OF TECH., TURN
T+ I + M
COMMUNICATION T+ I + M
• STRICT COMPLIANCE IN THE BANNED SECTOR
• ANY REVISION IN THE CAP. APPROVALM BY THE PARLIAMENT.
• STRICT COMPLIANCE ON ALL THE FOREIGN EXCHANGE TRANSA CTIONS
• ALL THE FOREIGN COMPANIES ARE TO BE REGISTERED UNDER
COMPANIES ACT 1956
• BRANCHES OF FOREIGN COMPANIES ARE STRICTLY MONITORED.
• NECESSARY APPROVAL FROM GOVT. IF NATURAL RESOURCES ARE
• LAND ACQUISITIONS ARE STRICTLY MONITORED.
• QUALITY CONTROL CHECKS
• NO INTERFERENCE IN GOVT. POLICIES
• PERFORMANCE ARE AUDITED
• IN KEY INDUSTRIES STRICT VIGILANCE.
• IN SOME SECTORS ONLY INVESTMENTS ALLOWED AND NOT EQUITY SHARE
CAPITAL . EX., INSURANCE SECTOR.
IN THE ALLOWED SECTORS , MINIMUM 25% SHARE CAPITAL BY INDIANS.
Aditya Birla Group
Advanced Micro Devices
Affiliated Computer Services
Bank of Montreal
Barrick Gold Corporation
BP (British Petroleum)
Electronic Data Systems
Emmvee solar systems
Emmvee solar Europe
Emmvee toughened glass and photovoltaics
Ericcson Ernst & Young
Goodyear Tire and Rubber Company
Hindustan Computers Limited
Hutchison Whampoa Limited
Johnson & Johnson
Ford Motor Company
JPMorgan Chase & Co.
Manthan Software Services
Namco Bandai Games
Martini & Rossi
Namco Bandai Holdings
Procter & Gamble
PSA Peugeot Citroën
Royal Bank of Canada
Sasken Communication Technologies Limited
Sega Sammy Holdings
Sony Computer Entertainment
Sony Music Entertainment
Sony Pictures Entertainment
INDIAN BANKING SYSTEM
• RBI IS THE HEAD OF INDIAN BANKING SYSTEM.
• CONTROL BY RBI
• (1) CRR
• (2) SLR
• (3) REPORATE
• (4) REVERSE REPO RATE
• (5) CAR
• (6) BASE RATE / PLR
• RBI CONTROLS THE MONEY MARKET.
• TO CONTROL INFLATION/DEFLATION THE ABOVE RATES ARE
REVISED NOW AND THEN.
LOANS AND ADVANCES
Documents in Foreign trade
2.Buyer rejecting due to reasons
NOT COVERED BY ECGC
2.Short term FCER.
3.Not getting the approval and exports
(knowingly doing mistakes)
SCHEMES OF EXPORT CREDIT
Refinancing to banks
ECGC(Export Credit Guarantee Corporation of India Limited)
-To cover the commercial risks in the EXIM trade, during 1957
Government of India setup a separate corporation called Export
Risks Insurance Corporation (ERIC)
-It was renamed as Export Credit and Guarantee Corporation Limited
-From 1990 it was again renamed as Export Credit Guarantee
Corporation of India Limited.
-It is a public sector undertaking under the control of Ministry Of
Commerce headed by chairman and has Board of directors from
banks, insurance companies, trade, DGFT,IIFT etc.
•Public sector financial institution started on January 1,1992 by an act of
•About 150 countries in the world are having their EXIM banks.
•The main objective of the bank is to promote the EXIM trade of the country.
•The main functions include
•Lending--larger loans to Indian co. Foreign co. and refinancing facilities to
•It issues line of credit exim bank1.ppt
Asian Development Bank
Fighting poverty in
Asia and the Pacific
December 19, 1966
Board of Directors
NOTABLE ADB PROJECTS AND TECHNICAL ASSISTANCE
->Afghan Diaspora Project
->Funding Utah State University led projects to bring labor skills in Thailand
->Earthquake and Tsunami Emergency Support Project in Indonesia
->Greater Mekong Subregional Program
->ROC Ping Hu Offshore Oil and Gas Development
->Strategic Private Sector Partnerships for Urban Poverty Reduction in the Philippines
->Trans-Afghanistan Gas Pipeline Feasibility Assessment
->Loan of $1.2 billion to bail it out of an impending economic crisis in Pakistan and on going
funding for the countries growing energy needs, specifically Hydro-power projects
->Micro finance support for private enterprises, in conjunction with governments, including
Pakistan and India.
->The Yichang-Wanzhou Railway project in the mountainous area of western Hubei
Province and north-eastern Chongqing Municipality, China. (A US $500,000 loan, approved
USING WRONG TARIFF NUMBERS.
SUPPLIES TO 100% EOUS / SEZ – DEEMED EXPORT.
CONVERTING FROM COASTAL RUN TO FOREIGN RUN.
ANY CHANGE IN GOVERNMENT POLICY, REVISION IN RATES ETC
ECONOMIC INTEGRATION-TRADE BLOC
Regional Trade Agreements
2.Every Country in the world is member of any Trade Bloc.
3.OBJECTIVES OF TRADE AGREEMENT
Moving Surplus to deficit
Transfer of Technology
Market access/market informalities
Exploitation by strong nations
On all issues- Domestic Industries
Free Trade Area
-----SAARC/SAPTA---•Objectives of Developing countries- South cooperation
1.Accelerate the pace of development
2.Increase the economic efficiency
3.To strengthen the status of the South Vs. North
•Areas of Economic efficiency
Finance-Trade-Industry and Business-Services-Science and Technology
-Environment and Development-Food Security-Transport and infrastructure
-IT-People to people contacts
•IndoLanka Free Trade Agreement
Association of leading emerging economies
Brazil, Russia, India, China
and South Africa
Except Russia all the other countries are newly
developing countries or newly industrialized countries.
Represent 3 billion people GDP of 13.7 US Trillion
Started in 2006 in New York
In 2010-South Africa joined
So far 4 summits have taken place.
Encourages commercial, political and cultural cooperation between the countries.
DANGERS OF FI
b.INTERFERENCE IN NATURAL POLICIES/SECURITY
c.AFFECTING DOMESTIC INDUSTRY
d.COLLAPSES THE NATURAL HERITAGE CULTURE
FACTORS AFFECTING FI
a.POLICY OF THE GOVT./STABILITY OF THE GOVT POLITICAL.
c.TECHNICAL GAP AND PRODUCT LIFE CYCLE
e.AVAILABILITY OF NATURAL RESOURCE
FI AND INDIA
FII - PORTFOLIO INVESTMENTS
EFFICIENCY SEEKING INVESTMENTS
FI IS NOT GROWING DUE TO FOLLOWING FACTORS
•MORE IMPORTANCE TO PUBLIC SECTOR
•FDI NOT INTERESTED WITH PUBLIC SECTORS ONLY WITH
•LOT OF RESTRICTIONS
•CONFUSING POLICIES/CORRUPTION/RED TAPES
[Not in Govt. and banned sectors]
Can be started in other sectors
To follow code of conduct strictly
Indian bank A/C
-Can invest in Rupee
through NRO A/C
a)Non-resident in foreign currency through
b)Foreign nationals cannot invest directly
only through FII
Share market----Fund manager-------Mutual funds
Can invest directly
Non-Resident Can invest in Rupee through NRO A/C
Non-Resident in Foreign currency through FII
Foreign national can participate through FII
Foreign Direct Investment
Foreign Institutional Investor
1.Investment can be in rupee and in
1.Investment can be in rupee and in
2.Investing in long term assets
resource seeking investment
2.Investment in market seeking
investment or short term
3.Investments in MNC in the form of
(c)JVs, Subsidiaries and Foreign
4.Cap in investment as prescribed in
EXIM policy from time to time
3.Investment in share market,
bond, commodity and gold
4.Foreign nationals cannot
participate in all markets. NRIs can
participate in NRO account.
However, anybody can invest in
mutual funds through FII. Recently
Government approved investment
by QIP in share market
5.MNCs can float shares in the Indian
market as Indian company and the
certificate is called “Share Certificate". As
foreign company, they can float shares in
India after obtaining approval from RBI/
SEBI and they called “Depository
ex: Standard Chartered Bank issue
5.FIIs issue participatory notes
otherwise called P-notes
6.Indian corporates can go abroad and
invest in foreign JVs
ex: ONGC –Sudan Refinery
6.Normally Indians are not allowed to
invest in shares of foreign companies.
NRIs only can invest in foreign
7.Indian blue chip can float shares in foreign
through foreign stock exchanges and the
certificates thus issued are called ADR/
GDR.Both are not convertible to Indian
rupee. Dividends are paid in foreign
CROSS ORDER MERGER/ACQUISITION
CAP ON INVESTMENTS
SEBI-REGISTRATION –PARTICIPATORY NOTES
FOREIGN INVESTMENTS BY INDIANS ABROAD
HELPING FACTOREXIM BANK
•Old system barter
•Barter with quantity
•Barter with value
•Gold exchange std.
(Formation of IMF)
a.5 currencies were very costly (US,UK,Italy,France and Germany)
b.Developing and underdeveloped countries found it difficult to trade with the above 5
c.Lot of blackmarketing started.
d.UK-stopped loans to non UK Traders for doing foreign trade.Trade affected
in Suez Canal(1960’s).
e.US also followed the same principle(1965-1970).
SMITH SONIAN AGREEMENT
--Devalued its currency twice.
--Reduced its interest rates for non US for bank deposits(regulation Q)
NO IMPACT ULTIMATELY
1975--IMF cancelled the quota system(gold standard) of finding out FCER.
1978—IMF gave 8 methods to be adopted by member countries.