India International Trade

International Trade

“India”

19 October 2007

Executive Summary

India has been a country with various social issues, such as dialect barriers, gender inequality, levels of poverty rates, and trouble with severely polluted areas to name a few. India has also faced some political problems, such as the border conflicts with Pakistan, as well as clashes between Hindu nationalists and secular political groups. However, internationally, it is currently being supported by the world’s major powers, like the US and Japan. This is due to India’s growing economy, stable government and its secure political relationships with the rest of the world. As globally competitive IT firms and various services are being praised upon, the country’s future is looking optimistic as it is being seen as a strategically as well as thriving partner for international trade.

India is believed to be the world’s second fastest growing economy with an average growth of 8 percent per year starting 2004. India’s comparative advantage lies in its skilled labour force in IT at relatively low costs. The growth of the economy of India in general is closely behind the US and the Republic of China. However, while there is a lot of optimism around the growth itself, there is also a calculated fear of major inflation in years to come.

Table of Contents

EXECUTIVE SUMMARY 2

TABLE OF CONTENTS 3

1. COUNTRY BACKGROUND 4

2. REASON FOR SELECTING INDIA 4

3. ENVIRONMENT – PRESENT AND MAIN FUTURE CONCERNS 5

3. 1. POLITICAL 5

3. 2. ECONOMIC 5

3. 2. 1. Comprehensive Economic Cooperation Agreement (CECA) 6

3. 2. 2. Framework Agreement 6

3. 2. 3. Regional Agreement 6

3. 3. SOCIAL 7

3. 4. TECHNOLOGICAL 8

4. BALANCE OF PAYMENT 9

4. 1. HISTORY 9

4. 2. MERCHANDISE TRADE 10

4. 3. TRADE DEFICIT 11

4. 4. INVISIBLES 11

5. TRADE BALANCE 12

5. 1. HISTORY 12

5. 2. CURRENT ACCOUNT 13

5. 3. CAPITAL ACCOUNT 14

5. 4. TRADE AGREEMENTS 15

6. EXCHANGE RATE POLICY 21

6. 1. HISTORY OF RUPEE 21

6. 2. CURRENT CONDITION 21

6. 3. FORECAST 23

7. GROWTH RATE OF THE ECONOMY 24

8. CONCLUSION 25

REFERENCES 27

1. Country Background

India, composed originally as The Indus Valley civilization, retains its history dating back to at least 5000 years. Arab and Turkish incursions started between the 8th and 12th century, followed by European traders in the 15th century. By the 19th century, Britain attained political control of all the Indian lands and its reign ended on August 15 1947. Some of India’s natural resources include Coal, Iron ore, Manganese, Mica, Bauxite, Titanium Ore, Chromate, Natural Gas, Diamonds, Petroleum, Limestone, and Arable Land. India’s population, as of July 2007, consists of 1.1 billion people composed of ethnic groups such as Indo-Aryan, Dravidian, Mongoloid and others. The primary religion is Hindu, followed by Muslims, Christians, Sikhs, and other unspecified. With English being the national, political and commercial language, Hindi and 14 other languages are