Influences from World Institutions, Trading Blocs, and the Indian Governments Import Policies - Essay Example

India’s Market 13th February India’s Market Issue: The importance of this Briefing is to assess the important factors and influences from world institutions, trading blocs and the Indian Government’s import policies. Background The international trade policy of India had been designed to protect her local market against foreign competition. Until the past three decades, India was unwilling to open her economy to foreign investors or even export her goods to other countries. This economic policy was founded on the principle that the country should develop independently without foreign intervention. At the end of 1980, most Asian countries were experiencing economic boom while India was still struggling with its declining economy (Chittoor & Ray 2007). In early 1990s, poor economic performance prompted a change in the trade policy of the country; consequently, India introduced a new policy of deregulation, globalization, as well as privatization of its economy. India is a member of several multinational and regional trade organizations, which play a major role in her international trade. Some of these organizations include WTO, Asian-Pacific Economic Community (APEC), and the association of South-East Asia Nations (ASEAN) (Chan et al. 2006). Status In the past few years, the electronic industry in India has recorded high returns like never before. There are various factors, which have contributed to the demand of electronics in India. These factors include the improvement of the standards of living among the middle class in the country, and the fact that their disposable income has also increased considerably (Hill 2011). Moreover, the country has in the recent years taken some liberalization steps for instance reducing tariffs on imports, relaxing equity regulations as well as foreign exchange regulations, and last but not the list the banking policies have been refined to meet the needs of foreign and local market. The role of the Indian government cannot be ignored in boosting the electronic industry to where it is now (Banga 2006). More foreign investors have ventured in the electronic business in India following the increase in the demand for electronic in the country and the liberalization steps taken by the country has further created a conducive environment that is capable of sustaining an enduring high growth for the electronic industry. Several factors must be assessed prior to importing electronics to India. Before venturing into exporting electronic to India there is a need to carry out a PEST analysis to determine the factors that may affect an organization. The initials PEST is used to mean the social, economic, and Technological factors that might affect the business (Baruch & Budhwar 2006). Political environment: In the past few years, the government of India has shifted it role in international trade from that of a controller to a facilitator. The major focus of the government has been to design economic policies that are attractive to investors as well as providing better infrastructure in the country. For these reasons, the country has one of the most competitive environment for business and therefore a viable destination for the UK Electrical Goods Trade Association (UKEGTA) to export electronics. The liberalization steps undertaken by the country for instance improving banking policies, reducing tariffs on imports, relaxing equity regulations, and relaxing foreign exchange regulations will enable UKEGTA to easily export electronic to India (Kumar 1994). Economic environment: In the past five years, India has experienced a continuous rise in its GDP. As a result, the purchasing power in the country has increased tremendously. There is also a rise in per capita income coupled with high competition in the electronic market among a number of players. Most importantly, India is experiencing a rapid urbanization of rural areas across the country. Consequently, there is increase in sales of electronic goods across the country (Kedia et al. 2006). The economic environment is therefore, suitable for any investor interested in exporting electronic in India because the market base is increasing by the day and it may not be decreasing any time soon (Acedo & Casillas 2005). Social environment: There are a number of social factors that have fueled the demand for electronic in India. One of the factors is that most Indian families are abandoning the extended family setting and adopting the nuclear family setting. As such, there is an increase in the demand for more electronics because there are more nuclear families being formed from the extended families. It is also worth noting that the propensity to spend is also increasing in the country as the middle class group expands. Most importantly, the number of working women in India has increased than ever before, thus, there are more members of the family earning and income. It is obvious that more families in India are able to buy purchase electronic because there is more disposable income in the family. The UKEGTA therefore, has better opportunities in respect to exporting electronic to the country (Lasserre & Schütte 2006). Technology: The ever changing and increasing technological advancements have created a very high demand for more electronics with new technology to meet individual needs. The internet has enabled customers to communicate with the manufactures of different kinds of electronics and place orders that can meet their customized demands. For these reasons, there is a very large and untapped market for electronic in India and a venture in the industry can be a worthwhile venture. UKEGTA however, needs to be highly alert of the existing level of technology in the country so that it can be able to make an appropriate decision on what to export to India and what to avoid (Elango & Pattnaik 2007). Since early 1990s, the Indian government undertook to implement crucial trade policies in an effort to boost its economic development. It is worth noting that even though India is a Trade Organization (WTO) member, the country never utilized all the mechanism provided under the institution to maxims its benefits in international trade. India remained very reluctant to trade with other countries until 1991 when the country launched a new policy (Nayak et al. 2010). Through its policy reforms, India became a significant player in the world economy and could no longer be ignored. The policies reforms, which are in line with the WTO regulations, have enable India to create a conducive and free environment for trade. These measures and the efforts of the government of India have enabled the country to increase its sends overseas to other countries as well as imports from other countries. Arguably, trade plays a central role in the economy of India today. In international negotiations and Doha Development Agenda, India has not essentially changed its position, which is to retain its control of the trade policy it, makes (Chacar & Vissa 2005). In addition, India has continuously refused to make enforceable commitments or to make new commitments that may limit its development under the Doha Development Agenda. Moreover, in the past few decades, India has recorded significant reforms in its domestic legislation in an effort to align them with WTO agreements relating to (TRIPIS) Trade Related Aspects of Intellectual Property Rights. India has amended its legislations relating to intellectual property rights for not less than three times following complaints through the WTO from the United States and the European Union. There were complaints that India was not doing enough to protect the priority and novelty of products imported in the country (Douma et al. 2006). With the comprehensive amendments of intellectual laws in 2005 which even exceeds the expectation of TRIPS requirements, exporting electronics to India not only a profitable business venture to the UK Electrical Goods Trade Association (UKEGTA) but also a sustainable business with the understanding that the novelty of such electronics will be protected by intellectual property laws of the country. In addition, the risk of duplicating such commodities will be minimal (Bhaumik et al. 2010). India is also a member of Asia-Pacific Economic Community (APEC) and South Asia Association for Regional Cooperation (SAARC). As a member of these regional trade blocks India is able to export and import her products to the member countries easily. Products that are imported to India can therefore be re-exported from India to other member countries of the regional trade block thus, increasing the market base of the exporting company (Capelli et al. 2010). Key Considerations There are limited custom duties reductions in India and this could be explained by the actuality that a good number of lower duties are non-bound. It is however evident that India has a done a great job in the external tariff reductions. Except for products related to agriculture, there was an overall full in the average applied MFN tariffs from over thirty two percent to about sixteen percent. The government of India in the past few years has reduced significantly the applied MFN tariffs except for agricultural products. This reduction was prompted by the desire of India to comply with goals of ASEAN a regional block, which had set tariff levels that were to be met by all the member countries (Baliga & Santalainen 2006). Diversification of product is one of the major trends in the Indian export trade. India understands that its performance in international trade is fully dependant on the openness of it economy to world market competition. Appreciating this fact, the country has put in place crucial structural reforms that are geared towards liberalizing it market for purposes of attracting more foreign direct investments (Asakawa & Som 2008). With these facts in mind, the UK Electrical Goods Trade Association (UKEGTA) is at a better position to start it export business with India because it is assured of incentives and fair completion. In fact, one of the major steps taken by India in an effort to liberalize its market is through passing The Competition Act of 2002. The statute prohibits any form of agreements that might result to anti-competitive behavior between or among players (World Bank 2009). Even though India opened its doors for international trade, the country still wants to maintain full control of the policies it makes regarding international trade (World Bank 2007). The insinuations of UK relationships of the EU for trading with India; UK membership of the EU may have a number of implications in relation to UK trading with India. To begin with, UK may have trade advantage as it can get goods from any other EU member country and export to other non-EU countries such as India. This is held up by the fact that all EU member states are guaranteed ‘four freedoms’ in the economic interaction of the union. Another implication is that even though UK may negotiate with India about the trade deals the EU may renegotiate such deals because it has exclusive capability to negotiate investment and trade deals with non-EU countries (Elango & Pattnaik 2007). As such, UK trade relations with other countries that are not affiliates of the EU can be affected profoundly. Indias attitude to imports of electrical goods: The attitude of Indian toward imported goods has changed significantly. Prior to the liberalization of the Indian market in the 1990s, Indians had a negative attitude towards imported goods or foreign trade. However, after embracing international trade, Indians realized that some of the imported products were of better quality than those produced in the country especially electronic products. Consequently, more Indians purchase imported electronics because such products have been confirmed to be of good superiority and more players in the electronic industry continue to import more products thus enabling consumers to get better quality electronics at a lower price. Indeed, the majority of Indians today have more confidence on imported electronics than those produced in their own country because of the difference in quality (Bhaumik et al. 2010). Indian tariff and non-tariff barriers to electrical imports: Although India has reduced, the tariffs for imported products such electronics and maintained a higher tariffs for agricultural products, the import duties for electronic goods are relatively high as compared to other tariffs applied globally (Cavusgil et al. 2008). The country also retains quite a large number of non-bound tariffs. The equity and foreign exchange regulations are still stringent. It is also worth noting that importing goods to India entails a long and tedious process of verification and inspection before such goods are released to the market. This is especially so with foreign companies operating in the country (Banga 2006). Conclusion Indeed, over the last two decades, India has recorded a tremendous growth in its international trade. This followed a decline in its economic growth because of the development strategy adopted in the country in the four decades after its independence. Exporting electronics to India needs a thorough consideration of a number of factors. One of the ways to assess these factors can be through PETS analysis. This analysis considers the political, economical, social, and technological factors that may affect the exportation of electronic goods to India. Most of these factors are conducive for export trade with India. The country also happens to be a member of WTO and it has complied with most of the organizations requirements. 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