WTC Article 2012

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World Trade

The International Trade Journal of

Research and Information Report

WORLD TRADE CENTRE

MUMBAIVol. 12 No. 5 October-December 2011

ContentsEDITORIAL 2

FOCUS 3

National Manufacturing Policy

CURRENT RESEARCH 11

WORLD ECONOMY 19

INDIA & WORLD MARKETS 21

INDIAN ECONOMY 25

INDIAS FOREIGN TRADE 27

WTO HIGHLIGHTS 30

WTC MUMBAI EVENTS 33

ChairmanMr. Kamal M. Morarka

Vice ChairmenMr. Vijay G. Kalantri

Capt. Somesh C. BatraMr. Sharad P. Upasani

Executive DirectorMr. Y. R. Warerkar

Editorial BoardMr. Y. R. Warerkar, Editor/Publisher

Ms. Debjani Chowdhury, Joint Director-ResearchMr. A. O. Kuruvila, Deputy Director-Research

Mr. Bhalchandra Akut, Deputy Director-Finance & AccountsMs. Khyati Naravane, Assistant Director-Trade Promotion

Ms. Rohini Salve, Sr. Officer-Legal & Secretarial

The information contained in this Journal has been reviewedfor accuracy and is deemed reliable but is not necessarily

complete and cannot be guaranteed. The views expressed inthe articles appearing in this Journal are those of the authors

and do not necessary reflect the views of the Centre

Printed atUnion Press

13 Homji Street, 16 Horniman Circle,Fort, Mumbai 400 001.

Editorial OfficeM. Visvesvaraya Industrial Research and Development Centre

(Member : World Trade Centres Association Inc.)Centre 1, 31st Floor, World Trade Centre

Cuffe Parade, Mumbai 400 005 (India)Tel. : 6638 7272 Fax : 91-22-2218 8385

E-mail : [email protected] : www.wtcmumbai.org

For Private Circulation


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From the Editors Desk

The current issue of WTRIR contains salient features and examines issues and concerns

of the National Manufacturing Policy (NMP). The policy proposes to raise the share of

manufacturing output in GDP from the current 15% to 25% in next 20 years. While

population in India will continue to grow, the expanding domestic market will also grow.

Since, the wages in India are lower than those in Organisation of Economic Cooperation

and Development (OECD) member countries or even in Taiwan or in China which are

the manufacturing hubs in the world, the growth of employment in India with the growing population will not

have as large incidence of wage costs as with OECD member countries.

NMP has suggested planning large scale investments in manufacturing zones and building infrastructure

like Delhi Mumbai Industrial Corridor. The new policy is based on the ability of the Indians to contribute to

creation of wealth. A skilled workforce of large population is a dividend, but an untrained and unproductive

labour is a drag on the economy. So the emphasis in the next 20 years should be on the need to

vocationalising our schools and colleges as West Germany did after the World War II.

India is friendly with FDI, is IPR-complaint and trade oriented as the last two decades of reforms have

shown. India has also to its credit sustainable models involving private developers in providing electricity,

roads and port facilities. These factors would help attract foreign investment and boost manufacturing.

The issue also contains a note on Industrial Developement and Environmental Issues which are important

aspects and emphasises that in the 12th Five year Plan the low carbon inclusive growth is one of the key

pillars of the five year plan.

The issue carries an article on Malta Gateway to Europe, North Africa and Middle East. With its strategic

location, Malta is seeking to exploit many new opportunities which have arisen in the context of EU membership

and the increased visibility it has given. The new foreign policy of Malta is set out with this aim in mind.

The current issue also carries a note on Emerging Prospects in India-EU Co-operation, which is again an

important subject as Eurozone is in the grip of acute sovereign debt crisis. While, we do trust that these

topics will be of great interest to you, we wish you a very Happy and Prosperous New Year 2012.

Y. R. Warerkar


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The Government of India hasannounced a national manufacturing

policy with the objective of enhancing

the share of manufacturing in GDP to

25% within a decade and creating 100

million jobs. It also seeks to empower

rural youth by imparting necessary skill

sets to make them employable.

Sustainable development is integral to

the spirit of the policy and

technological value addition in

manufacturing has received special

focus.

The share of manufacturing in Indias

GDP has stagnated at 15-16% since

1980 while the share in comparable

economies in Asia is much higher at

25 to 34%. Inadequate physical

infrastructure, complex regulatory

environment and inadequate

availability of skilled manpower haveconstrained the growth of

manufacturing in India. Recognizing

that the manufacturing sector has a

multiplier effect on the creation of jobs,

even in allied sectors, the government

has brought out this policy.

The policy is based on the principle of

industrial growth in partnership with the

States. The Central Government will

create the enabling policy frame work,provide incentives for infrastructure

development on a Public Private

Partnership (PPP) basis through

appropriate financing instruments, and

State Governments will be encouraged

to adopt the instrumentalities provided

in the policy.

Salient Features of the National Manufacturing Policy

The proposals in the policy aregenerally sector neutral, location

neutral and technology neutral except

incentivization of green technology.

While the National Investment and

Manufacturing Zones (NIMZs) are an

important instrumentality, the

proposals contained in the Policy apply

to manufacturing industry throughout

the country including wherever

industry is able to organize itself into

clusters and adopt a model of self-

regulation as enunciated.

The National Manufacturing Policy is

to bring about a quantitative and

qualitative change with the following

six objectives:

i. Increase manufacturing sector

growth to 12-14% over the

medium term to make it the

engine of growth for the economy.

The 2 to 4 % differential over the

medium term growth rate of the

overall economy will enable

manufacturing to contribute at

least 25% of the National GDP by

2022.

ii. Increase the rate of job creation

in manufacturing to create 100

million additional jobs by 2022.

iii. Creation of appropriate skill sets

among the rural migrant and urban

poor to make growth inclusive.

iv. Increase domestic value addition

and technological depth in

manufacturing.

v. Enhance globalcompetitiveness of Indian

manufacturing through

appropriate policy support.

vi. Ensure sustainability of growth,

particularly with regard to the

environment including energy

efficiency, optimal utilization of

natural resources and

restoration of damaged/

degraded eco-systems.

In order to achieve these goals:-

i . Foreign inves tments and

technologies will be welcomed

while leveraging the countrys

expanding market for

manufactured goods to induce

the building of more

manufacturing capabilities and

technologies within the country;

ii. Competitiveness of enterprises

in the country will be the guiding

principle in the design and

implementation of policies and

programmes;

iii. Compliance burden on industry

arising out of procedural and

regulatory formalities will be

reduced through rationalizationof business regulations.

iv. Innovation will be encouraged

for augmenting productivity,

quality, and growth of

enterprises; and

v. Effect ive consultat ive

mechanism with all stake

Focus

OCTOBER - DECEMBER 2011 | 3


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WORLD TRADE RESEARCH AND INFORMATION REPORT


holders will be instituted to ensure

mid-course corrections.

The following industry verticals will be

given special attention:

i. Employment intensive industries:

Adequate support will be given to

promote and strengthen

employment intensive industries

to ensure job creation. Special

attention will be given in respect

of textiles and garments; leather

and footwear; gems and jewellery;

and food processing industries

ii. Capital Goods:

A robust economic growth would

necessitate a strong demand for

capital goods. Such growth would

create a strong and continuing

demand for capital goods. The

capital goods industry, which is the

mother industry for manufacturing

has not grown at the desired pace.

A special focus will be given to

machine tools; heavy electrical

equipments; heavy transport,

earth moving and mining

equipments.

iii. Time bound programmes will be

initiated for building strong

capacities with R&D facilities and

also to encourage growth and

development of these capacities

in the private sector while

strategically strengthening thepublic sector to complement the

private initiatives where essential.

iv. Industr ies with strategic

significance:

A strategic requirement of the

country would warrant the launch

of programmes to build national

capabilities to make India a major

force in sectors like aerospace;

shipping; IT hardware and

electronics; telecommunication

equipment; defence equipment;

and solar energy. Mission mode

projects will be conceptualised in

each of these sectors, recognizing

the fact that a mission on solar

energy has already been launched

under the National Action Plan on

Climate Change.

v. Industries where India enjoys a

competitive advantage:

Indias large domestic market

coupled with a strong engineering

base has created indigenous

expertise and cost effective

manufacturing in automobiles;

pharmaceuticals; and medical

equipment. The concerned

ministries will be formulating

special programmes to

consolidate strong industry base

to retain the global leadership

position.

vi. Small and Medium Enterprises :

The SME sector contributes about

45% to the manufacturing output,

40% of the total exports, and

offers employment opportunities

both for self-employment and

jobs, across diverse geographies.

A healthy rate of growth shall be

ensured for the overall growth of

the manufacturing sector as also

the national economy by policy

interventions in areas like

manufacturing management,

including accelerated adoption of

Information technology; skill

development; access to capital;

marketing; procedural

simplification and governance

reform.

vii. The National Manufacturing

Competitiveness Programme,

being implemented by M/o MSME

will be strengthened, and therecommendations of Task Force

on MSME for creation of a

separate fund with SIDBI,

strengthening of NSIC,

modification of lending norms and

inclusion of lending to MSMEs

under priority sector lending will

be given due regard in taking

appropriate measures.

viii . Public Sector Enterprises:

Public Sector Undertakings,

especially those in Defence and

Energy sectors, continue to play

a major role in the growth of

manufacturing as well as of the

national economy. A suitable

policy framework will be

formulated in this regard to make

PSUs competitive while ensuring

functional autonomy.

Specific policy instruments have

been conceptualized to achieve

the objectives stated above.

These instruments which are

outlined in greater detail in Part-B

of the Policy document broadly

cover the following areas:-

i. Rat iona li za ti on and

simplification of business

regulations;

ii. Simple and expeditious exit

mechanism for closure of sick

units while protecting labour

interests;

i ii. Financial and institut ional

mechanisms for technologyFOCUS


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development, including green

technologies;

iv. Industrial training and skill up

gradation measures;

v. Incentives for SMEs;

vi. Special Focus Sectors;

vii. Leveraging infrastructure

deficit and government

procurement - including

defence;

viii . Clustering and aggregation :

National Investment and

Manufacturing Zones

(NIMZs);

ix. Trade Policy.

Global experience of

manufacturing has shown the

advantages of clustering and

agglomeration as it enhances

supply chain responsiveness

provides easier access to market,

talent and substantially lowers

logistic costs. Though thegovernment has been executing

multiple schemes for promoting

industrial clusters, full benefits of

agglomeration are yet to be

realized. One of the key

instruments to catalyze the growth

of manufacturing will be

establishment of National

Investment and Manufacturing

Zones (NIMZs) which will be

developed in the nature of green

field industrial townships,

benchmarked with the best

manufacturing hubs in the world.

These will also help us to meet the

increasing demand for creating

world-class urban centres in India,

while will also absorb surplus

labour by providing them gainful

employment opportunities. These

NIMZs will seek to address the

infrastructural bottleneck which

has been cited as a constraining

factor for the growth of

manufacturing.

A comprehensive exit policy will

be put in place which will promote

productivity while providing

flexibility by removing rigidity in

the labour market and ensuring

protection of workers rights as laid

down in the statute.

The growth of manufacturing has

to come hand in hand with the

concerted thrust on skill

development programme. The

National Skil l Development

Initiative launched by the

Government of India has provided

a renewed thrust to build

productive capacities. This Policy

seeks to make skill development

integral to productive enterprise in

the country which would besupported by robust government

institutions.

The thrust with regard to labour

management will be to encourage

unions and employers to develop

better institutional arrangements

in the states, and within production

units, through dialogue and

consultation. The stress will be on

rationalisation in employment lawsand in shop floor practices.

Manufacturing management will

be given a focused attention as it

will facilitate improvement of

productivity, quality and

competitiveness of manufacturing

enterprise. Industry will be

encouraged to collaborate with

higher educational institutions to

develop curricula for grooming

graduate engineers and

supervisory managers for various

facets of manufacturing.

In the context of sustainable

development and in order to drive

the greening of manufacturing

operations and to explore the

emerging technologies in this

area, which offer opportunities to

build local and global leadership,

the government will take recourse

to both regulatory as well as

market based policy interventions.

Government would prescribe

emission and discharge

standards, excluding green house

gas emissions, and the choice of

technologies to meet the

standards would be decided by the

project promoters. The

Government will provide

continuous incentives, monetary

and otherwise, to encourage

polluting entities to reduce

releases of harmful pollutants to

ensure that the standards are

complied with.

Land has emerged as a major

constraint for industrial growth in

recent years. The Government will

take measures to make industrial

land available, which is critical for

sustained industrial growth

through creation of land banks by

States; digitization of land and

resources maps; and programmes

for utilization of lands locked

under non productive uses,

including defunct or sick

industries.

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SMEs to Benefit from National Manufacturing Policy

Two decades after launching of

reforms and liberalization in India in

1991, and when the countrys annual

GDP having clocked in an average

growth of 8.6 per cent per annum inthe last six years, the second highest

after China, the Government has

decided to draft and launch a new

manufacturing policy (NMP) which

would raise manufacturing

contribution to GDP from the present

16 per cent to 25 per cent by 2025.

The policy also aims to raise the

countrys employment potential from

the current 0.5 million to 1 million peryear.

The NMP is said to have been drafted

with industry inputs and also received

tacit approval of Finance and

Commerce Ministers. The policy is

expected to undergo further

consultations, before being presented

to the Cabinet for a final approval.

The most striking feature of the policy

is the proposal for setting up National

Manufacturing and Investment Zones

(NMIZs) equipped with world-class

infrastructure.

Key Objectives

The NMP is based on the following

four key objectives:

1. To promote investments in the

manufacturing sector and to makethe country a hub for both

domestic and international

markets

2. To increase the sectoral share of

manufacturing in GDP by 25 per

cent in 2022

3. To double the current

employment level in the sector,

and

4. To enhance the globalcompetitiveness of manufacturing.

Today manufacturing sector accounts

for hardly 16 per cent of the GDP.

However the newly-drafted

manufacturing policy suggests raising

it to 26 per cent in the next five years

and the policy hopes to generate 10

million jobs in the manufacturing

sector. Considering the recent drop in

GDP growth following debt crisis ineuro area the new manufacturing

policy deserves rapid implementation.

With manufacturing sector losing

some of its earlier sheen in China with

the latest Chinese growth plan laying

emphasis on boosting domestic

consumption than achieving growth,

time seems to be right for India to

launch a grand manufacturing plan.

It is imperative for the manufacturingsector to grow at a faster rate to

provide a boost to the economy. India

should no longer grow at 7 per cent.

It has to grow at 11-12 per cent from

20012-13 onwards. Time is opportune

for this. Already, slowly and steadily,

almost unnoticed, a transformation of

long-term significance is taking place

in the countrys economy. Indian

manufacturing is already started

diversifying sans any policy initiativebut because of conditions on the

ground that global players are already

using them to their advantage.

Overtaking Services Sector?

With a host of firms from Japanese

automakers to telecom-equipment

producers moving to India, the new

manufacturing policy could help in

speeding up overtaking of services

as the engine of growth. This is

desirable as services-led companiesare vulnerable to global financial

upheavals. The world knows what

happens to countries that decide to get

rich quickly through services-led

economic growth. Iceland is a case in

point. A traditional cod-fishing

economy with high level of stability, it

could not resist the temptation that

global finance threw its way to

become a superstar, the crowning

example of financial services

inspired prosperity, only to come to

grief when Lehman Brothers

collapsed The morality tale is yet to

conclude with Portugal becoming the

latest victim of globalization of

services.

On the other hand, countries that have

strong manufacturing base, such as

emerging economies like India and

China could, with the help of efficient

and preventive monetary and

exchange controls, contain the

contagion unleashed by Wall Street

on the world.

With the German engineering major,

Siemens, planning to make India the

global hub for manufacturing its key

steel equipment, it joins the growing

ranks of firms eyeing the country as

a launching pad for supplies to Asian

markets. India has manufacturing and

engineering expertise and its size

offers it a strategic advantage for

servicing markets from Myanmar

down to Australia and West Asia, if

necessary. The Asia-Pacific region is

the epicenter of economic expansion

at the moment.

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Anecdotal evidence suggests that

India may well be on its way to

becoming a global manufacturing hub.

The pace seems to have increased at

a time when the Western economies

have yet to witness a pick up

investments in their own economies.

Poised to overtake China?

A couple of years ago, Capegemini

Consulting Services undertook a

survey of 340 firms form among

Fortune 500 global manufacturing

companies and, in its report, observed

that India could well overtake China

as a global manufacturing hub. Most

of the respondents stressed that Indiawas large on their radar screen for

outsourcing manufacturing over the

next three to four years.

On India overtaking China, The

Economist recently commented:

Autocrats in Beijing are contemptuous

of India for its messy, indecisive

democracy. But they must see it as a

long-term rival - especially if it

continues to tilt towards America. Asrecently as the early 1990s India was

as rich, in terms of national income

per head. China then hurtled so fast

and so far ahead. it seemed that India

could never catch up. But Indias long-

term prospects now look stronger.

While China is about to see its working

age population shrink, India is enjoying

the bulge of in manpower which

brought sustained booms elsewhere in

Asia. It is no longer inconceivable thatits growth could outpace Chinas for a

considerabl e time. It has the

advantage of democracy at least as

a pressure valve for discontent. And

because India does not threaten the

West, it has powerful friends both on

its own merits and as a counterweight

to China.

License - Quota Raj is over

Since the last two decades of reforms

and liberalization (1991-2011) India

has come a long way in reorganizing

of its manufacturing sector in the

economy and the NMP bearstestimony to this. The pre-reform era

industrial policy was deeply

entrenched in license-quota-permit raj

through its all-embraci ng and

exasperating system of industrial and

import licensing, monopoly controls,

pricing and distribution controls, high

tariff structure, burdensome and

cascading indirect taxes and

dominance of public sector

investments. These have since beenprogressively dismantled and

rationalized. In the second decade of

liberalization 2001-2011, the concept

of public-private sector participation

(PPP) was introduced and this has

given a fillip to the infrastructure

development.

However, Indias current

manufacturing growth pales into

insignificance compared to Chinas,especially in infrastructure. While India

was talking about maintaining 9 per

cent GDP growth, China was already

achieving 15 per cent factory growth.

While Indias manufacturing was 14-

15 per cent in GDP, its south-eastern

neighbours like China, Thailand,

Malaysia and South Korea are reaping

factory growth between 26 per cent

and 40 per cent.

With an aim to secure global

dominance in trade, no doubt Chinas

strategy was bold and aggressive.

Initially it kept wages low and put a

squeeze on domestic consumption. It

deliberately kept its currency

undervalued to ensure price edge in

global trade.

NMIZs Islands of Excellence

Now, coming back to NMP, the most

important feature the proposal for

setting up National Manufacturing and

Investment Zones (NMIZs) equipped

with world-class infrastructure. NMIZsare supposed to create islands of

excellence which will promote

manufacturing activities by reducing

constraints imposed by inadequate

infrastructure, rigid labour laws and

procedural bottlenecks.

A recent World Bank study clubs India

with countries that have very rigid

labour laws and hire and-f ire

regulations. The industry circumventsthese constrains by outsourcing its

activit ies which leads to

informalization of labour force. The

countrys labour laws, therefore,

restrict the potential of formal

manufacturing facilities. Also the

industry has become more reliant on

capital-intensive means of production

as it does not have enough flexibility

to hire and fire. This is clearly an

undesirable development in a labour-surplus country. The inability of

manufacturers to cut workforce during

a recession worsens their financial

stress and hampers their ability to

come out of downturn.

Another stumbling block for the growth

of manufacture is lack of clear-cut land

acquisition policy. According to an

industry report, projects worth US$ 500

billion were held up because assignedland for the project was delayed on

environmental and other issues. Now

that the UPA government had

promised to come out with a

transparent labour laws and land

acquisition policy major hurdles in the

growth of manufacturing may be over

soon.

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Entrepreneurial Spirit

India is known for its entrepreneurship

and there are millions of entrepreneurs

largely in the small-scale

sector.However Indias manufacturing

growth pales into insignificance.Any manufacturing policy is not worth

its salt if it does not care for taking

advantage of this entrepreneurial

spirit. It is heartening to know that the

government plans to exempt the sales

of a house or any other asset from

capital gains tax if the proceeds are

used to set up a business. Such a

concession in the proposed

manufacturing policy would only help

to swell the number of entrepreneurs.

NMP is likely to prove a dream-cum-

true for the small and medium-scale

entrepreneurs (SMEs). It is all set to

make their life a little easy. If NMP

sets out to do what it has stated, SMEs

will see a reduced burden of regularity

compliances, will have better access

to technology and finance and would

enjoy select incentives.

SME Sector to Benefit Most

The SME sector, which accounts for

45 per cent of the countrys output and

40 per cent of exports, appears all set

to benefit. Incentives for the sector

include mandatory procurement

policy for SMEs and the draft FDI

Retail Policys insistence on 30 per

cent procurement from small

industries may cumulatively improve

the prospects of small entrepreneurs.

NMP will also help to improve the

credit channels available for SMEs. It

will explore the option of including

manufacturing SMEs in the priority

sector lending category of banks.

How this will help SMEs? Granting

the priority sector status will require

banks to mandatorily allocate a certain

proportion of their priority lending to

this segment thus improving borrowing

prospects of SMEs.

The policy will also give a boost to

SMEs in using improved technology.

SMEs will have access to patent pool

created by the government through

Technology Acquisition &

Development Fund. SMEs may also

choose to get reimbursement for

technologies that they acquire up to

Rs 20 lakh.

Land which is a crucial resource for

SMEs to carry out their manufacturing

business is too expensive especially

in areas which have infrastructure

access. The proposed clusters of

special manufacturing zones may if

the state concerned desires so allot a

certain percentage of land in the zones

to SMEs. Such space whether leased

out of sold can be expected to be fairlypriced compared to the existing

market rates. The pooled

infrastructure facilit ies already

available in such zones will also

reduce fixed costs for small players.

The policy also sets out to reduce the

burden of SMEs in complying with

regulations by setting up organizations

that will look into compliance of routine

issues such as provident fund,

employees state insurance pension

schemes and so on for a small fee.

While the above are some of the direct

benefits that manufacturing policy

expects to provide, budding

entrepreneurs will also do well to look

out the business opportunities arising

from this policy.

Industries that make LED, solar energy

equipment, fuel- efficient transport

system, IT hardware, IT-based security

system and hybrid electric

automobiles will stand to gain from the

governments procurement policy,

provided there is local value additions/

use of technology by the companies.

An uptick in demand arising from

government procurement may provide

room for more players.

The policy will also provide incentives

for production of certain equipmentand devices. This will include

equipment to reduce energy

consumption such as energy-

conservative lighting technologies,

smart-grid solutions equipment to

produce renewable energy, from solar,

wind, hydro or geo-thermal sources.

Production of energy-storages for use

with electric or hybrid motor vehicles

and those used for water conservationwill also be encouraged.

Besides an incentive of 10 per cent

subsidy on capital cost and five per

cent interest reimbursement on

nominal rates charged by lenders will

be given. While these are not

necessarily targeted at SMEs some of

the businesses may well be compact

enough to and fit in SME bill. Together

with thrust of on increased financing

options, these technology-intensive

industries may become more

penetrable segments of SMEs.

Since National Manufacturing Policy

wants each of State Government to

have their state manufacturing

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policies, NMP is poised to create more

jobs and help to de-risk

unemployment. Incremental job

security could be coupled with a

degree of differentiation between old

and new workers.

Recent Research Publications

1. Growth Drivers for Indian MSMEs : Policies, Competitiveness and Opportunities(2011)

2. Indian Food Processing Industry : Changing Contours (2011)

3. Strategic Approach for Green Energy Development in India (2010)

4. WTO in the New Millennium -- An Update of Doha Round (2010)

5. Enhanced Soft Power and Indias Cultural Exports (2010)

6. India and Innovation : The Present and Future (2009)

7. Maximizing Gains from Higher Education Exports (2009)

8. Floriculture Exports from India-Current Status and Prospects (2009)

9. Geographical Indications-Its Evolving Contours (2009)

10.Export Competitiveness of Maharashtra (2008)

11.Prospects for the Indian Food Processing Industry (2008)

12.Prospects for Animation and Gaming Industry in India (2008)

13.Containerization, Multimodal Transport & Infrastructure Development in India (2007)

14.Export Marketing Strategy for Herbal Products & Ayurvedic Drugs (2007)

15.Export Potential for Indian Casting & Forging Industry (2007)

The manufacturing policy, when

approved for implementation should

also have provisions for rationalization

and simplif ication of business

negotiations, simple and expeditious

exit mechanism for closure of sick

units, financial and institutional

For Placing your Order : E-mail : [email protected]

FOCUS

WORLD TRADE CENTRE

MUMBAI

mechanisms for technology

development and skill up gradation,

incentives for small industries,

government procurement including

defence and trade policy.


11/40



Current Research

New areas have been brought under

industrialization after independence of

our country as per the policy of the

Govt of India (GOI) for balanced

regional development. The

establishment of industries at locations

has no doubt, brought about material

wealth. Besides, these units have

provided direct employment

opportunities, modern amenities,

better health and education facilities

to the local population. However, the

industrialization has led to the

degradation of environment due to

industrial pollution. With the operating

industries, a cent per cent pollution

free environment is a myth. It is neither

possible nor necessary. It is

imperative, to ensure, that each of

these industrial units does cause, the

least possible pollution. A number ofindustries in the public sector and

corporate sector have adopted

effective pollution control measures

while a significant number of industries

especially small and tiny sectors have

yet to adopt adequate pollution control

devices.

Utilization of Waste

The problems of accumulation ofindustrial waste have assumed

significant proportions while their

utilization aspects had been neglected

for quite long. Some headway in this

regard has since been reported.

Scientists have been researching

worldwide towards development of

Industrial Development and Environmental Issues

Dr S.C.Lahiry*

innovative recycling techniques.

Products like flyash cement, fly ash

block, recycled tiles, recycled

aluminium, recycled steel,

environment friendly paints, bamboo

based products,etc are available in

India.It is, therefore, of paramount

importance to step up commercial

utilization of industrial waste which

could be accomplished by involving

the industries, users, concerned State

and Central Govt. Departments.

Industries have to be made

responsible to do recycling of their

waste, on a regular basis, through

legislation and strict enforcement.

Hazardous industrial waste presents

immediate or long-term risks to

humans, animals, plants, or the

environment. It requires special

handling for detoxification or safedisposal.

Green Technology

Time has come to preserve our

environment and replenish those

which have been destroyed. People

are more conscious about the

environment now and are aware of the

different kinds of environmental

hazards that could affect our future.The rising sense of green among

people has led to cost savings and

creating sustainable living. According

to the Indian Green Building Council:

A green building is one which uses

and provides healthier spaces for

occupants as compared to

conventional building. The concept of

Green Building is pacing up, some

projects go Green to get a cutting edge

in the market over others, while some

go green for tax incentives offered by

the Govt, and some largely for a

growing environmental concern.

Adoption of Clean Technology

Indias Twelfth Five Year Plan, to belaunched on 1st April, 2012 will have,

as one of its key pillars, a low carbon

inclusive growth. This shows Indias

resolve to ensure that its growth

process is sustainable and based on

low carbon principles. This goal will

require necessary sector specific

actions to reduce emissions intensities

in 12th Five Year Plan

onwards.(Report of Expert Group on

Strategies for Low Carbon Inclusive

Growth, Planning Commission, May

2011). The Report indicates that in

2007 the largest chunk of emissions

was from electricity generation

amounting to 719.31 million tons of

CO2-eq which represented 65 percent

of the total CO2 equivalent emissions

from the energy sector. The energy

sector emitted 58 percent of CO2

equivalent in the year. CO2 reductionon long term and sustainable basis

through adoption of advanced

technologies of utilization of coal for

power generation like Super Critical

Technology (SCT), Integrated

Gasif ication Combustion Cycle

(IGCC), Fludized Bed Combustion


12/40



(FBC) / gasification and so on have

been underway. The GOI has

launched supercritical power

programme on the lines of the USA,

Japan, Germany, Korea and Russia.

Currently SCT is under installation at

Sipat (Bilaspur) and Barh (Bihar)

thermal power plants of National

Thermal Power Corporation (NTPC).

NTPC and State Power Utilities in

addition, have proposed to set up a

no of 600/800 MW power stations

based on SCT. Its advantage is higher

efficiency and saving fuel resources.

The Kyoto Protocol on Climate

Change

The Kyoto Protocol is an international

agreement seeking to stabilize Green

House Gas (GHG) concentrations in

the atmosphere at a level that would

minimize interference with the climate

system. The major feature of the Kyoto

Protocol is that it sets binding targets

for 37 industrialized countries and the

European community for reducing

GHG emissions .These amount to an

average of five per cent against 1990

levels over the five-year period 2008-

2012. India is not required to reduce

emission of GHG under the Protocol.

However, India is vulnerable to climate

change and is striving for having a fair

and equitable global agreement for

minimizing the risk of climate change.

It may be noted that formerEnvironment Minister of India

Mr.Jairam Ramesh had announced

that India would reduce the emissions

intensity of its GDP by 20-25 percent

over the 2005 levels by the year 2020,

through pursuit of proactive policies.

However Indias more flexible

approach has not worked in pursuing

developed countries undertaking

emission mitigation commitments. In

the ensuing Durban Summit( to be

held in Dec2011) on Climate Change,

let developed countries pledge strong

emission reduction targets given in

Kyoto Protocol agreements before

ourselves taking on greater

responsibility of a legally binding

nature.

*Dr S.C.Lahiry was former Chief

Executive in Haryana Environmental

Management Society.

CURRENTRESEARCH

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13/40



Malta - Gateway to Europe, North Africa and Middle East

Prepared by

Mr. Pankaj Muthe

Regional Leader (India), Malta Enterprise India Office

1. Economy

The Maltese economy has

weathered the global recession

relatively well, as recognized by

the International Monetary Fund

in its latest Article IV Consultation

Report. The brief recession

experienced in Malta in 2009 was

mainly due to the exogenous

shocks that affected negatively

domestic developments in light of

the openness of the local

economy. The developments in

the Maltese financial sector have

been underpinned by

conservative funding models and

modest leverage ratios,

consequently the Central Bank of

Malta did not have to intervene in

any financial institutions. The

Government was very prompt to

set up a task force to assist the

companies that were experiencing

difficulties due to the recession to

invest in new lines of operations

and retrain their workers to ensure

their sustainability. Through such

action, the effects of the crisis

were largely contained and Malta

managed to keep its

unemployment levels at one of the

lowest rates in the EU whilst itreturned to economic growth

almost immediately.

As part of its strategy, the

Government identified a number

of key pillars of the economy

such as tourism, high value added

manufacturing including

electronics and pharmaceuticals,

ICT, financial services, education

and training, aviation, creative arts

and gaming, as well as healthcare

and provides tailor-made

assistance to ensure the sectors

in question maintain their positive

performance. The assistance

provided includes a myriad of

incentives and schemes to

facilitate investment, as well as

capacity building not only in termsof infrastructure but also in terms

of education and training to ensure

a highly-skil led workforce is

always available.

During the second quarter of 2011,

the Maltese economy in real terms

expanded by 2.8 per cent, on an

annual basis. This rate of

economic growth was slightly

higher than that recorded in the

first quarter of 2011, which stood

at 2.3 per cent. The real growth

rate recorded by the Maltese

economy for the second quarter

was 1.1 percentage points higher

than the average real growth rate

recorded in the EU27, which

amounted to 1.7%.

2. Trade with the WorldIn 2010, the exports generated by

the Maltese economy recovered

considerably when compared to

the recessionary period of 2008

and 2009. Indeed, exports from

Malta increased to 2.2 billion in

2010 from 1.7 billion in the

previous year. Nevertheless,

Malta remains with a trade

balance deficit in view of the fact

that it has limited natural

resources and thus most of the

required goods or materials have

to be imported.

The value of imports to Malta in

2010 stood at 3.7 billion, up from

3.1 billion in the previous year.

Maltas main trading partners are

found within the European region,

particularly within the EU of which

Malta is also a member state.

Other important markets are

located in Asia, but also in North

Africa and the Middle East.

The services industry is by far the

major contributor to the economy

in Malta. Indeed, the various

sectors within the servicesindustry collectively generated

78.8 per cent of the countrys

Gross Value Added in 2010. On

the other hand, the manufacturing

industry contributed 15.8 per cent

of the Gross Value Added

generated in Malta in the past

year.

Malta will seek to strengthen and

promote relations with existing

and emerging major economies,

with the aim of increasing the

presence of Maltas goods and

services in these markets and

attracting inward investment to

Malta. Efforts will focus on

consolidating Maltas economic

C U R R E N T R E S E A R C H


14/40



and political relationships with

existing major economies such as

the EU and the US, but also

targeting new and emerging

economies such as India, China,

Brazil and South Africa.

Besides opening the way for a

Single Home European Market of

over 500 million consumers, upon

EU membership Malta also

subscribed to the EUs

Commercial Policy and became

party to all of the EUs preferential

third country trade agreements. Of

particular importance to Malta are

the Free Trade Agreements that

the EU has negotiated with the

Euro-Med region - Algeria,

Morocco, Tunisia, Egypt, Israel,

Lebanon, Palestinian Authority,

Jordan, Syria, and Turkey, the

latter via-a-vis Customs Union

arrangement. Other free Trade

Agreements include those withthe

Western Balkans, Norway and

Switzerland, South Africa, Mexico

and South Korea.

In addition, the EU is negotiating

Free Trade Agreements with

MERCOSUR and has also

resumed talks with the aim of

concluding Free Trade

Agreements with the Gulf

Cooperation Council. Talks are

also underway for the EU to

negotiate Free Trade Agreements

with various other countries

including Ukraine, India, Malaysia

and other ASEAN countries. As

an EU member, Malta also grants

preferences to imports originating

in developing countries including

India and in least developed

countries through the Generalised

System of Preferences.

Maltas major exports were

electrical machinery and

equipment, which exceeded 1

bill ion in 2010. Other major

sectors for exports included

pharmaceutical products, mineral

fuels and oils or products thereof,

printed books and newspapers, as

well as toys, games and sports

requisites.

In view of the fact that most goods

exported by Malta are

characterized by a high level of

import content, the main sectors

for imports are rather similar and

comprise either raw materials orelse the base product which is

then used in the value adding

processes applied in Malta.

Indeed, during the past year most

imports were within sectors such

as electr ical machinery and

equipment, mineral fuels and oils

or products thereof, aircraft and

parts thereof, machinery and

mechanical appliances, as well as

plastics.

3. Relations between Malta and

India

Malta and India established

diplomatic relations in 1965. Since

then, a fr iendly relat ionship

continued to grow as the two

countries explored avenues for

collaboration in the political,

economic, cultural and

educational fields. To further

strengthen its relations with India,

Malta opened a High Commission

in New Delhi in 2007. Malta also

has Honorary Consulates in

Chennai and Kolkata. India is

represented in Malta through its

embassy in Tripoli, Libya. It also

has an Honorary Consulate in

Valletta.

Despite the considerable

geographical and demographic

differences, Malta and India sharea parallel in history and both have

English as an official language. In

addition, the two democracies

share common values and sit

together in several multilateral

fora, such as Commonwealth, the

United Nations and other agencies

for the promotion of international

peace and stability.

Over the years, there has been

substantial interaction between

Malta and India, which has helped

in identifying common objectives

and aspirations. The two countries

are appreciative of the multitude

of opportunities that arise through

greater co-operation. This

interaction includes regular

political and trade visits between

the two countries.

Malta and India enjoy a number

of similarities in the economic

dimension. As India excels in

technological areas such as ICT,

pharmaceuticals and health care,

Malta is also a prominent

European hub in such fields. In

fact, avenues for co-operation

such as business and research

exchanges stimulate both sides.

Throughout the years relations

between Malta and India have led

to growing converging interests

which helped in laying down solid

foundations for the build-up of a

strong continuous and friendly

relationship.

CURRENTRESEARCH


15/40



4. Trade with India

Trade between Malta and India

increased considerably in 2010

when compared to the previous

two years. Indeed, exports from

Malta increased by 200 per centfrom 3.3 million in 2009 to 9.9

million in 2010, of which the

greater share was made up of

organic chemicals, wood or

paperboard, as well as machinery

and mechanical appliances.

Likewise, imports to Malta from

India registered a significant

increase and doubled up over the

previous year to reach 70 million

in 2010, with most goods being

organic chemicals and

pharmaceutical products.

5. Important Policies

Maltas foreign policy sets out the

aim of contributing in a world that

has shrunk into a global village

through creative participation in a

way that brings long-term

prosperity and welfare to all

countries, particularly those

bordering the Mediterranean Sea.

With its strategic location in close

proximity to Europe, North Africa

and the Middle East, Malta is

seeking to exploit other new

opportunities which have arisen

from the context of EU

membership and the increased

visibility it has given Malta by

harnessing its geo-political

relevance and position itself as a

dual gateway to its neighbouring

markets.

New emerging major economies

such as India and China are

amongst those that can most

benefit from this factor by taking

advantage of Maltas high

propensity to trade, which has

throughout the years enabled it to

develop excellent facil it ies

including extensive transhipment,

maritime and aviation services, as

well as enacting legislat ion

facilitating increased exchanges.

Indeed, despite its small size

Malta has a dynamic economy

based on international trade and

international business, with a well-

diversified offering based on

export trade, a vast servicesindustry including ICT, financial

services and a well-developed

tourist industry, as well as an

advanced manufacturing base

that amongst others comprises a

sound pharmaceutical industry

and bio-medical technologies.

More than 200 international

companies have established

manufacturing operations inMalta, with their continued

investment providing enough

proof to the quality and

productivity levels that can be

achieved and to the countrys

capability to adapt to demands of

high technology production

methods.

Malta has also devised economic

plans which are designed to

provoke greater economic activity

by incentivising work and

stimulating demand, placing the

flexibility, innovation capabilities

and adaptability of its workforce

at the core of its strategy. Amongst

others, Maltas targets are to

achieve higher productivity and

greater competitiveness; cut

down on bureaucracy and

improve efficiency to further

enhance the business-friendly

environment; improve existing

levels of education and training;

as well as move up the value

chain with greater focus on

higher-value-added goods and

services.

The Government is also

committed to place the

environment at the centre of its

policies, working with both the

private sector and civil society toinstil a sustained national

environmental conscience.

The fact that many international

companies have chosen Malta as

their relocation base signifies that

Malta has its cards in order to

attract high value added yielding

operations to its shores. One

good testimony to describing

Malta as a reliable investmentlocation is to highlight the

success stories operating in

Malta the track record of some

high profile companies, like the

German companies Playmobil

and Lufthansa Technik,

consolidates the argument that

Malta is truly the place to do

business.

6. Investment Opportunities

While the corporate tax rate in

Malta stands at 35% - which is

also the maximum rate for

individuals - Malta has a single

imputation system through which,

upon distribution of dividends,

shareholders may benefit from a



16/40



refund that effectively reduces

their tax rate to 5%.

Tax liability can be further reduced

through a mechanism of tax

credits that Malta Enterprise

grants to enterprises in selectedsectors. Such companies may

claim tax credits equivalent to

30% or 50% (depending on its

size) of either the cost of capital

investment including plant,

machine and equipment or of

employees wages.

Additionally, Malta has signed

double taxation agreements with

almost 60 other countries,

including India. The Business

Promotion Act and the Malta

Enterprise Act are also noteworthy

as they provide for the wide range

of assistance, schemes and

incentives available for investors

who wish to set up and who

operate in Malta, while the Small

Business Act which is currently

being drafted will seek to improve

even further the business-friendly

environment for SMEs.

Malta Enterprise the

Governments Corporation

responsible for the promotion of

trade and investment as well as

economic development in Malta

administers a wide range of

schemes and incentives aimed at

enhancing even further the

business-friendly environment

and encourage investment,

increased application of R&D and

innovation processes, assist in the

internationalisation efforts and

sustain competitiveness.

Additionally, the Corporation also

assists enterprises operating in the

country through European

programmes or networks it

represents Malta. Among others,

it also manages European funds

which Malta obtains for the local

enterprises. For a full list of

schemes and incentives, visit

http://support.maltaenterprise.com

There are no limitations on the

repatriation of profits from Malta.

Moreover, repatriation of profits is

tax free as Malta does not charge

any withholding taxes on payment

of dividends to non-residents. Inaddition, interest and royalties

paid to non-residents are also free

of tax, increasing the potential for

efficient tax planning. The

absence of transfer-pricing rules,

thin capitalization regulations,

CFC regulations or annual wealth

taxes is an added bonus to

investors.

7. Maltas key benefits

Maltas strategic geographic

location within the Mediterranean

Sea together with its sophisticated

business environment and cultural

links with North African markets

and the Middle East make it an

ideal hub for trading, distribution

and marketing operations between

the three continents.

Amongst others, many foreign

companies are now looking at

Malta as their first choice location

to invest in view of its economic,

political and social stability,

excellent language skills and a

highly esteemed work force, an

efficient tax system, competitive

cost structures with low social

costs and competitive labour

costs, as well as an attractive

incentives package all within a

country renowned for its excellent

quality of life and safe

environment.

8. Important Contacts

1. Malta Enterprise Head Office

W : www.maltaenterprise.com

T : +356 25420000

E : [email protected]

2. Malta Enterprise India Office

13, Business Centre, 1st Floor,

Centre One Building,

World Trade Centre, Cuffe

Parade, Mumbai-400005

T : +91 2266387350


3. Malta High Commission in India

N60, Panchsheel Park, New Delhi

110 017, India

T : +91 1147674900E : [email protected]

4. Indian High Commiss ion

accredited to Malta

Nafleen Area, Near Fashloom

Roundabout,

PO Box 3150, Tripoli, Libya

T : +218 (21) 340 9288/89


5. Hon. Consulate of India in Malta67, Canon Road, Santa Venera,

SVR 9037

T : +356 21222346


CURRENTRESEARCH


17/40



Introduction

Indias economic engagement with the

European Union (EU), the 27-nation

bloc., is time-tested and based on

shared complementarities. The EU is

Indias foremost trading partner and

together India and the EU constitute a

huge 1.7 billion market. India EU

economic co-operation spans in

diverse areas and continues to expand

with considerable gains for both sides.

Both India and the EU have now

decided to formalize a Free Trade

Agreement with a view to steer our

bilateral co-operation to the next

higher level.

EU India FTA

India is hopeful of concluding a

comprehensive free trade agreement

with the European Union in the near

future, perhaps early 2012, as thenegotiations are in advanced stage

with the 27-nation bloc. India is in talks

with the EU since June 2007 for

liberalizing trade in goods, services

and investments through a

Broadbased Trade and Investment

Agreement (BTIA). The FTA would

involve slashing of duties on over 90

per cent of the trade and opening up

of the mutual markets for services andinvestment.

The FTA is a potential game-changer

and a key tool for enhancing two-way

trade and investment and bringing the

bilateral relationship to a new level.

Undoubtedly, over time India will gain

from better access to European

Emerging Prospects in India - EU Economic Co-operation

byDebjani Chowdhury

Joint Director-Research, World Trade Centre Mumbai

markets and by the stimulus the

agreement will give to the transfer oftechnology and know-how and to

inward investment in agriculture,

manufacturing, services and

infrastructure. The Agreement will

support Indias own agenda for export

growth, inclusive development,

modernization and closer integration

into global markets.

Bilateral Trade

Bilateral trade between the European

Union and India continues to rise

steadily. Total two way trade in goods

and services in 2010 reached 86

billion. Some 80% of bilateral trade is

in goods; it increased by 28% in 2010

to reach a value of 68 billion. The

rest is trade in services, which

increased less quickly in 2010- but still

at a double digit rate of 12% - to reach

18 billion. 2010 therefore marked a

strong recovery in bilateral trade flows

from the slow-down seen in 2009,

which was largely triggered by the

global economic crisis. Moreover, the

positive trend has been maintained in

the first half of the current year with

two- way trade in goods reaching 41

billion, an increase of no less than 23%

over the first half of 2010. Indian

exporters are also benefiting from this

trend-so it would seem that for now

the slower rate of recovery in Europe

from the global crisis is not negatively

impacting demand for Indian goods.

FDI

The EU is one of the largest sources

of FDI for India. However, the FDI

inflows from the EU to India declinedfrom Euro 4 billion in 2007 to euro 3

billion in 2010. India has also emerged

as a major investor in the EU countries

with total investment from India

increasing from euro 1 billion in the

year 2007 to Euro 3.69 billion in 2008.

However, Indian inward investment to

EU in 2010 declined to 0.6 bill ion. It is

hoped that the FTA would strengthen

FDI inflows between India and the EUin the coming years.

Science & Technology

Science & Technology is one of the

key pillars for bolstering India & EU

co-operation. India and EU have

signed bilateral agreements which

include cooperation in the field of

Science & Technology in 2001 which

was renewed in 2007.

India has a long tradition in supporting

S&T development and the country has

centres of academic excellence with

a worldwide reputation. India has a

large and growing number of English

speaking skilled scientists and

engineers as well as technicians and

managers, whose actual and potential

contribution to S&T Development has

been recognized around the world.Further, both the public and private

sectors are engaged in raising R&D

expenditures. The goal is to more than

double the countrys R&D intensity

from 0.8% during the last 5 years to

2% by 2012.



18/40



Under the framework of New INDIGO,

a project sponsored by the Ministry of

Science & Technology, Government of

India and several EU partner countries

both India and EU will work together

to create coherent synergy in Europes

partnership with India in Science,

Research & Technology. Regarding

Indias rising importance not only in

economical and political terms , but

also from a scientific point of view,

India has been identified a strategic

target country by the European

Commission. Long standing co-

operation between India and certain

European countries, especially

France, Germany and the UK is

vigorous and fruitful. Despite these

facts relationships with India in R&D

have not been harmonized so far at a

European level. There is l it t le

multilateral Science & Technology co-

operation between the European

Union and India and there is no

dedicated programme of cooperation

between these two scientific poles.

The aim of New INDIGO is to helpbridge these gaps and ultimately

provide the most relevant framework

to allow the scientific community and

institutions of India to access the

European Research and Science &

Technology area.

Infrastructure

There is enormous scope for India, EU

cooperation in the infrastructure

sector. Indias economic growth in the

future will be propelled by

infrastructure. The government of

India has undertaken an ambitious

programme to develop Indias

infrastructure, namely roads, railways,

ports, airports, telecom and urban

infrastructure with mammoth

investment of $500 billion in the next

few years. This opens up excellent

opportunities for joint India-EU

partnerships in various infrastructure

projects in India.

Eurozone Crisis

Eurozone is in the grip of acute

sovereign debt crisis. The crisis, with

its epicentre Greece, is gradually

spilling over to other nations in theEurozone. Greece remains the most

contentious issue. The sovereign

CURRENTRESEARCH

stress has moved from smaller

economies in the 17-nation eurozone

to some of the larger countries and

shaken world markets.

Eurozone is frantically attempting

Greeces bail out and a strategy torecapitalize the regions banks. At a

recent meeting, the Group of G-20

finance ministers called upon the

Eurozone to arrange a credible plan

for the recapitalization of Europes

banks and install a mechanism to

protect other countries from Greeces

woes. While global economy is

beginning to feel the impact of the

crisis, there is little doubt Eurozonecrisis will hurt Indias trade and

economic co-operation for some time

to come. Indian policy-makers need

to carefully watch the developments

in Europe and strategise to minimize

the damages to Indian businesses.

While this may be so in the short

run, Europe remains an important hub

for India to look at for greater

engagement in trade, investments,

services and transfer of technology.

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World Trade Institute


19/40



Euro Crisis Solution still Elusive

Europe stood divided on December 9

in a historic rift over building a fiscal

union to preserve the euro, with a large

majority of countries led by German

and France agreeing to move ahead

with a separate treaty, leaving Britain

isolated.

Twenty-three of the 27 leaders agreed

to pursue higher integration with

stricter budget rules for the single

currency area, but Britain said it could

not accept proposed amendments in

the EU treaty after failing to secure

concession for itself.

After 10 hours of talk, all 17 members

of the euro zone and six countries that

aspire to join resolved to negotiate a

new agreement, alongside the EU

treaty, with a tougher deficit and debt

regime to insulate euro zone against

the debt crisisEuropean Central Bank (ECB) feels

the decision a step forward for stricter

budget rules, which is necessary if the

17-nation euro zone is to emerge

stronger from two years of market

turmoil. Its going to be the basis for a

good fiscal compact and more

discipline in economic policy in the

euro area members.

Manufacturing Blues from

Europe to Asia

Manufacturing weakened from China

to Europe in November as the euro

regions debt crisis darkened the

outlook for the global economy.

Chinas manufacturing contracted in

World Economy

November for the first time since

February 2009 as the property market

cooled and Europes turmoil cut exportdemand. In Britain and the 17-nation

euro area, manufacturing shrank at the

fastest face in about two-and-half

month as the region edged towards

recession.

There is more evidence that the

global economic recovery is running

out of steam. It is clear that

manufacturing across a range of

countries is being effected by a

renewed slowdown in global trade.

Manufacturers are suffering as the

global economy cools. The

Organization for Economic and

Development (OECD) said that trade

in merchandise stalled in most major

economies in the third quarter. The

OECD cut growth forecasts for its 34

member-states during December to

reflect doubts that European monetary

union will survive the crisis.

While production slows in Asia and

Europe, it probably grew in November

in the U.S. at the fastest rate in five

months showing factories will keep

supporting expansion through the end

of the year.

The ISMs factory index rose to 51.8

in November from 50.8 in October.Fifty is the dividing line between

growth and contraction. Manufacturing

declined across Europe, according to

December 1st reports. In the U.K., a

gauge of factory output based on a

survey by Market Economies and the

Chartered Institute of Purchasing and

Supply fell to 47.6 from 47.8 in

October. New orders fell for a fifth

month.

A manufacturing gauge based on

survey of purchasing managers in the

euro region fell to 46.4, the lowest

since July 2009.

European companies are under

increasing pressure to cut across to

protect earnings as faltering global

demand erodes exports jut as euro

region governments toughen spendingcuts. Unemployment rose to 10.3 per

cent in October, the highest in more

than 13 years and the manufacturers

were most pessimistic in almost two

years in November.

Norways manufacturing contracted for

the first time in almost two years, while

Sweden slumped for a fourth

consecutive month as the export-

dependent Nordic countries sufferfrom falling demand for their products.

In Asia, the Purchasing Managers

Index for China fell to 49.0 in

November from 50.4 in October,

according to the Federation of

Logistics and Purchasing.

Chinas central bank on the night of

November 30 announced the first cut

in banks reserves requirements since

2008, moving two hours before the US

Federal Reserve led a global effort s

to ease Europes debt crisis. The

move will add about 370 billion yuan

(US$ 58 billion) to the financial system

and more reductions may follow as the

government seeks to boost growth.


20/40



Big Economies Headed for a

Slowdown, says OECD

Highlighting increasing signs that

growth momentum is dwindling across

the board, Organization for Economic

Co-operation and Development(OECD) said that none of the worlds

major economies will escape a

slowdown.

The OECDs composite leading

indicator (CLI) for its members fell for

the seventh straight month to 100.4 in

September, down from 100.9 in August

and hitting the lowest reading since

December 2009.

Readings for individual countries and

big developing world economies were

broadly lower at levels indicating

slowdowns, and were in many cases

below their long-term averages.

The OECD CLIs are designed to

anticipate turning points in economic

activity relative to trend a turnaround

in an indicator tends to precede turning

points in economic activity by around

six months. The Group of Sevens CLI

fell to 100.6 in September from 101.1

in August while the reading for the euro

area dropped to 99.1 from 99.9, well

below its long-term average of 100.

Japans CLI remained above its long-

term average of 100 with a reading of

101.6, but it was still down from 102.0,

suggesting an economic recovery

after its March earthquake andtsunami disaster is losing steam.

Economic momentum in the United

States eased only slightly, according

to the OECDs indicator, which fell to

101.2 from 101.5.

The Chinese economy also showed

only marginally weaker activity with a

reading of 99.8, down from 99.9.

Among other emerging market

economies, Brazils CLI fell to 94.0

from 95.1 while Indias reading

decreased to 93.8 from 94.4. In a

report last month, the OECD slashed

its 2012 growth estimate for the US to

1.8%.

Japan Returns to Growth on

Export Rebound

Japans economy expanded for the

first time in four quarters as exports

recovered after the devastating

earthquake. Expansion is already

slowing because of weakening

overseas demand.

Gross domestic product (GDP) grew

at an annualised 6% in the three

months ended September 30, the

fastest pace in 18 months. At 543

trillion yen ($7 trillion), economic

output was back to levels seen before

the March 11 earthquake.

Japans return to growth after three

quarters of contraction was driven by

companies including Toyota Motor

making up for lost output from the

disaster. A sustained rebound will

depend on how much reconstruction

demand can offset a slowdown in

global growth as Europes debt crisis

damps global confidence and an

appreciating yen erodes profits.

Personal consumption rose 1% from

the previous three months in the thirdquarter, led by an increase in durable

goods purchases and exceeding

forecasts, and overseas shipments

advanced 6.2%. Japans rebound is

likely to slow to 2.1% this quarter,

according to the average forecast of

42 analysts surveyed by the Economic

Planning Association, a government

WORLDECONOMY

affiliated body. Expansions in Asian

nations from China to South Korea

to the Philippines are already

showing signs of cooling.

International Monetary Fund said that

Japan needed to swiftly implementreconstruction spending. It is

predicted that the pace of growth will

dip below 2% in the first half of 2012.

Japans economic growth will remain

elevated, mainly on domestic

demand. Companies plan to cut

machinery orders in the quarter

ending December 31, a government

survey showed, a sign growth may

slow even as government spendingfor reconstruction takes effect.

U.S. Manufacturing Activity

Remains Resilient.

In contrast to the contraction in

manufacturing activity in Europe,

manufacturing activity in the US

gathered pace in November. In a

release this morning, the Institute

of Supply Managements Manufac-

turing Purchasing Managers Index

rose to 52.7 in November from 50.8

in October the 28th successive

month of growth in manufacturing

activity. With stocks at relatively low

levels and US consumer and busi-

ness spending remaining resilient

amidst financial turmoil elsewhere,

manufacturing output is likely to

continue increasing in the months

ahead. Indeed, the new orders sub-index jumped to 56.7 in November

from 52.4, indicating that new manu-

facturing orders grew at a faster rate

in November compared to the pre-

vious month.


21/40



India-Nepal Trade Increases by

36 %

The bilateral trade between India and

Nepal has increased from US$ 1985

mn in 2009-10 to around US$ 2700 in

2010-11 registering an increase of

around 36%. Exports from Nepal to

India have also grown from US$

452mn in 2009-10 to US$ 476mn in

2010-11 (an increase of around 5.3%).

Nepals hydro power sector is the key

factor for increased cooperation

between the two countries. It isestimated that sale of electricity from

the 40,000 MW hydropower potential

of Nepal can generate revenues of

more than 10 billion US$ per annum.

In the recent past, several Indian

private companies/Joint ventures

have been able to secure survey

licences for development of about

8,200 MW hydro power projects in

Nepal at an estimated cost of

Rs.82000 crores. The Government of

India has accepted the Nepalese

request for use of Vishakhapatnam

port and rail route through Singhabad

(India) Rohanpur (Bangladesh).

Nepals request for further facilitation

of Nepal- Bangladesh trade through

Kakarbhitta-Phulbari-Banglabandha

route had also been agreed.

India is considering providing Buyers

Credit to Nepalese Government

agencies for large project exports,

especially in the infrastructure sector

such as roads, bridges, railways,

power lines, sewerage plants, water

treatment plants and housing from

India. The credit can be provided

under National Export Insurance

Account (NEIA) through EXIM Bank

for a maximum period of 5 -8 years.

Indian firms are the biggest investors

in Nepal accounting for about 47.5%

of total approved foreign direct

investments. There are about 150

operating Indian ventures in Nepal

engaged in manufacturing, services

(banking, insurance, dry port,

education and telecom), power sector

and tourism industries. Indian joint

ventures in Nepal have contributed

significantly to increase in Nepals

exports to India. They also provide

direct employment to around 30,000

Nepali citizens and indirect

employment to more than twice that

number. Both Governments have

finalized the text of bilateral

investment protection and promotion

agreement. Mutually convenient dates

are being finalized for signing of the

same. Other agreements in the

advance stage of finalization aremotor vehicle agreement which

governs movement of vehicles and

direct buses on designated routes and

Double Taxation Avoidance

Agreement between the two countries.

India-China to Achieve Trade of

US$ 100 Billion by 2015

India and China are on course to

achieve the bilateral trade target ofUS$ 100 billion by 2015. Trade

between India and China has seen

exponential growth in the last few

years. As per the trade statistics of

DGCI&S the total trade volume has

gone up from US $ 2.3 billion in 2000-

01 to US $ 59.62 billion in 2010-11

(April-March).

But the trade deficit for the Indian side

has increased from US $ 9.1 billion in

2006-07 to US $ 20.8 billion in 2010-11. A balanced trade is needed for long

term, sustainable and harmonious

development of economic co-

operation between the two countries.

The area of drugs and

pharmaceuticals is an important

segment to diversify the bilateral trade

basket. Both sides need to work

aggressively towards removing

administrative bottlenecks and overly

restrictive regulatory measures, in

order to boost development of all

round co-operation in this area. The

renewable energy where Chinese

Government has fixed a target of 100

GW by 2020 is another area with great

potential for export from Indian side.

India- South Africa to Co-operate

in MSME Sector

In a recent bilateral meeting India and

South Africa, agreed to strengthen

bilateral co-operation in the MSME

sector. India offered to co-operate with

South Africa with respect to the

structural issues and the dovetailing

of IT into the handicrafts / handloom

sector, exchange of vocational

training, IT skills etc. South Africa

appreciated the development of this

sector in India, especially of ruralartisans, as well as the cluster model

adopted in many sectors.

The total trade between the two

countries in the F.Y. 2010-11 was US$

11.12 billion, much higher than

bilateral trade target of US $ 10 billion

by the year 2012, set during the visit

India & World Markets


22/40



finance, electronics and software,

chemicals and fertilizers, renewable

energy and biotechnology.

Regarding investment India pointed

out the opportunities in Infrastructure

that cover the whole gamut ofinfrastructure including highways,

power plants, railways, airports, ports,

waterways, industrial facilities etc. The

government is committed to

developing infrastructure on a big

scale with active involvement of the

private sector working under a

predictable and stable regulatory

environment.

India too is an important investor in

Flanders (northern part of Belgium that

contains Brussels, Bruges, Ghent and

Antwerp). India has invested about

(1.2 billion euros) and has over 50

Indian companies. Indian investment

includes greenfield investments,

acquisitions and joint ventures. Year

2010 saw 8 new investment projects.

Indian investment is seen across

sector like ICT, pharma, transport &

machinery and equipment.

MFN Status for India by

December 2012

Taking the first step towards granting

the most favoured nation (MFN) status

to India, Pakistan has agreed to allow

import of all items, barring a few

hundred on the negative list that will

be ready by February 2012. This list,

too, will be phased out by the end of

year, resulting in grant of MFN status.

However, the joint statement issued

at the end of two-day trade secretary-

level talks did not say so in as many

words.

The negative list will be finalised and

ratified by February 2012. Thereafter,

all items other than those on the

of South African President Mr. Jacob

Zuma to India in June, 2010. A revised

bilateral trade target of US $ 15 billion

has been set for the year 2014 during

the meeting of Minister of Commerce

and Industry, Govt. of India and the

Minister of Trade and Industry, Govt.

of South Africa held on 10th January,

2011. The bilateral trade has shown a

growth of 21 % in the first four months

of the current Financial Year 2011-12,

viz. April to July, 2011. Bilateral Trade

during this period has reached US $

4.77 bn, with Indias exports to South

Africa as US $ 1,703 mn and imports

from South Africa as US $ 3,069 mn.

The trade balance was at presentheavily in favour of South Africa, and

there is need for reducing the same

while making all efforts towards

achieving the bilateral trade target.

The proposed finalization of the India-

SACU Preferential Trade Agreement

(PTA), will give a considerable boost

to the bilateral trade, and with the

Southern African region as a whole.

There is also substantial and healthy

growth in two way investment flows.

As regards South Africa, the

cumulative value of FDI stock (Indian

Investment in South Africa) would be

over US$ 6.7 billion. The South African

investments in India are also rising

steadily and are around US$ 2 billion.

There is need the two countries to

focus on specific sectors like auto

engineering, pharmaceuticals, IT,

diamond and mining sectors in orderto further enhance the growth in the

bilateral trade and investment.

India-Belgium Trade Registered

a Growth of 68%

Belgium is an important trading partner

for India and it is Indias 2nd largest

trading partner in the European Union.

There exists growing trade and

investment between the two countries

in the face of the global financial

slowdown (except in the year 2009-

10). Indo-Belgium trade in 2010-11

was US$ 14.90 billion which saw a

growth 52.44% over 2009-10. Exports

to Belgium in 2010-11 have registered

a growth of 67.49% at US $

WTC Article 2012

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