International Trade & Finance life and economy of india

The flag of India has three equal horizontal bands of saffron, white, and green with a blue chakra centered in the white band. The orange in the flag represents courage and sacrifice. The white represents truth, purity, and peace. The green represents faith, fertility, and chivalry. The blue chakra emblem is the Ashoka Chakra which is the Wheel of the Law. India shares borders with Bangladesh, Bhutan, Myanmar (Burma), China, Nepal, and Pakistan. It also is bordered by the sea on the west, south, and east.

India is currently home to about 1.13 billion people, representing a full 17% of the earth’s population. India, being a vast country does not fit into any one zone and occupies a large area of South Asia. It can be divided mainly into four climatic zones namely Alpine, Subtropical, Tropical, and Arid. Though divided into different climatic zones, India seems to be unified by primarily four seasons- winter, summer, advancing monsoon, and retreating monsoon. This cycle of seasons has been disturbed due to uncontrolled industrialization and other developmental activities resulting in drastic changes in climate. This has lead to climatic disasters such as drought, landslides, floods, and global warming. The unchecked cutting down of trees indirectly leads to landslide and drought. Annual floods have become part of life in many regions of India. The diverse climate of India results in large-scale loss of life and property.

Family is important in India, and is what their life is centered around. It is common for several generations to live in the same house as an extended family. Indians respect people who value their family. They will allow family to take priority over work, whenever necessary. When a woman marries, she leaves her birth family, many times without seeing them again, and goes to her husband's village and becomes part of his family. There is significant discrimination toward girls and women. Young girls are expected to help with the women's work such as preparing the meals, cleaning, and caring for animals as well as care for their younger siblings. Boys have it much easier generally only being required to herd goats and other animals to and from the fields, but in general have it much easier than their female counterparts.

This discrimination amongst Indian women doesn't end once they reach adulthood however they are treated with respect in the work place. They feel quite safe and secure in most organizations in India. Foreign women working here will find it easy to adapt to an Indian work environment. However, they need to plan their wardrobe carefully, keeping in mind the conservative dress codes in India. Some of aspects of their workplace and culture are taken very seriously. Humor in the work place is something that some Indians are not used to. Most traditional Indians are vegetarians, so their eating habits need to be respected. Westernized Indians are more outgoing and do socialize and drink.

Aggressiveness can often be interpreted as a sign of disrespect. This may lead to a complete lack of communication and motivation on the part of the Indians. It takes time to get to know them as individuals in order to develop professional trust. Indians are very good hosts and will therefore, invite you to their homes and indulge in personal talk often. All this is very much a part of business. One is expected to accept the invitation gracefully and bring a welcoming gift such as a box of sweets, chocolates, or a simple bouquet of flowers.

Criticism about an individual's ideas or work needs to be done constructively so not to damage one’s self-esteem. Politeness and honesty go a long way in establishing the fact that your intentions are genuine. Indians use a system of hierarchy in the work-place and all senior colleagues are obeyed and respected. In a group discussion, only the senior most people might speak, but that does not mean that the others agree with him. They may maintain silence, without contradicting them out of respect for seniority.

Supervisors are expected to monitor an individual's work and shoulder the responsibility of meeting deadlines whereas here the individual’s shoulder much of the responsibility. Therefore, it is important to double-check quality and have great time management skills. Educated Indians have learned to adapt to the western methods of monitoring one’s own work and completing it on schedule. India is the birthplace for two of the world’s oldest religions – Hinduism and Buddhism. Today, 80% of Indians are Hindu, 12% are Muslims, 2.3% are Christians, 2% are Sikh, .8% is Buddhists, and .5% is Jainism. Jainism is almost exclusive to India and is one of the world’s smallest religions.

There are several languages spoken in India – 30% of population speaks Hindi. There are 16 other official languages are also spoken that include Assamese, Bengali, Gutarati, Kannada, Kashmiri, Konkani, Malayalam, Marathi, Nepali, Oriya, Punjabi, Sanskrit, Sindhi, Tamil, Telugu, and Urdu. In addition to these languages it is estimated that more than 1000 other languages and dialects exist in India. English was brought by British rulers and is still used prominently in India for business and international communication and is the official language of the legal profession.

India’s social structure provides the best example of a caste system. In the caste system, status is based on ascribed status, determined at birth, and lasts a lifetime. Strict social norms prohibit members of one caste from marrying, or even associating, with members of a different caste. The four Varna’s of the caste, in descending order of status, were then the Kshatriyas (the king and warriors), the Brahmins (priests), the Vaishyas (who, with the rise of trade and agriculture, became the farmers and merchants), and the Shudras (servants). As the system evolved, new sub-castes or jatis formed with new occupations and incoming groups of peoples were given a suitable sub-cast to fit them into the system, although this did not always prove straight forward.

India falls into the large power distance group because of the vast inequalities that exist in their caste social system. Their people are born into those classes and are not able to move between the classes based on their achievements. For this same reason they are in the large uncertainty avoidance because they have strong beliefs in their systems of rules and procedures in society.

India is a constitutional democracy with a parliamentary system of government. India is the largest democracy in the World. India does hold free elections at regular intervals as per the principles of the Constitution, Electoral Laws and System. The first election was held in 1952. These elections determine the composition of the government, the membership of the two houses of parliament, the state and union territory legislative assemblies, and the presidency and vice-presidency.

The legal system is based in part on English common law. Sources of Muslim personal law as applied in India are Hanafi fiqh along with some resort to other schools, legislation, precedent, and certain juridical texts that are considered authoritative and custom. Muslim personal law is applied by the regular court system. As the majority of Muslims are Hanafi, courts presume that litigants are Hanafi unless the contrary is established. There are four levels of courts in the judiciary. The first are civil courts with jurisdiction over arbitration, marriage and divorce, guardianship, probate, etc. The next level of courts is established in the subdivisions of each state, at the district level. Each district comes under the jurisdiction of a principal district civil court presided over by a district judge. There are State High Courts in each of the 18 states of the federation. The Supreme Court is constituted by one Chief Justice and not more than 17 judges.

India's current economic reforms began in 1985 when the government abolished some of its licensing regulations and other competition-inhibiting controls. Since 1991 more "new economic policies" or reforms have been introduced. Reforms include currency devaluations and making currency partially convertible, reduced quantitative restrictions on imports, reduced import duties on capital goods, decreases in subsidies, liberalized interest rates, abolition of licenses for most industries, the sale of shares in selected public enterprises, and tax reforms. The growing dependence of the economy on imports, greater vulnerability of its balance of payments, reliance on debt, and the consequent susceptibility to outside pressures on economic policy directions caused concern. The increase in consumerism and the display of conspicuous wealth by the elite exacerbated these fears.

The pace of liberalization increased after 1991. By the mid-1990s, the number of sectors reserved for public ownership was slashed and private-sector investment was encouraged in areas such as energy, steel, oil refining and exploration, road building, air transportation, and telecommunications. An area still closed to the private sector in the mid-1990s was defense industry. Foreign-exchange regulations were liberalized, foreign investment was encouraged, and import regulations were simplified. The average import-weighted tariff was reduced from 87% in FY 1991 to 33% in FY 1994. Despite these changes, the economy remained highly regulated by international standards.

India’s growth is credited to the 'India Economic System' reform earnest in July 1991. The new policies included opening for international trade and investment, deregulation, initiation of privatization, tax reforms, and inflation-controlling measures. The overall direction of liberalization has remained the same, irrespective of the ruling party, although no party has yet tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labor laws and reducing agricultural subsidies. This continuing liberalization has moved them toward a market-based economy.

New Delhi, India decided to invite private firms to set up cargo handling facilities at its major ports, setting up a tariff regulator became an essential prerequisite. The Major Port Trusts Act, 1963, which governed these 11 major ports, was amended in 1997 to clear the deck for a regulator, now known as the Tariff Authority for Major Ports (TAMP). Cargo-handling terminals run by government-owned ports themselves as well as private operators at major ports have been required to take clearance from the tariff regulator before fixing and revising tariffs, once in two-three years, for the services rendered at their berths and terminals.

The shipping ministry has been resisting demands from private investors to dismantle TAMP and leave tariff setting to market forces, arguing that competition for cargo handling at major ports has not reached the desired level for this. The purpose of the tariffs are to protect the interests of customers and the trade, then the best bet would be to make investments as attractive as possible at both major as well as non-major ports so that it inspires confidence among private firms to invest in port infrastructure in the world’s second fastest growing major economy. The economy of India is the twelfth largest economy in the world by market exchange rates and the fourth largest by purchasing power parity (PPP) basis.

India achieved 8.5% GDP growth in 2006, 9.0% in 2007, and 7.3% in 2008. Since independence, India has always tried to keep healthy relation with the neighboring countries, especially when trading is concerned. From the following data we can see the zeal of India government to pave the way for free trade with at least the southern countries of Asia. By 2016, India will be trading at zero duty with a dozen countries. Now India already enjoys free trade with Thailand and Srilanka. Very soon India will enjoy the same with China and Singapore. India and Sri Lanka signed a free trade agreement in December 1998 with India agreeing to a phase out of tariffs on a wide range of Sri Lankan goods within 3 years, while Sri Lanka agreed to remove tariffs on Indian goods over eight years. One of its objectives which were stated was to contribute, by the removal of barriers to bilateral trade to the harmonious development and expansion of world trade. India and Thailand signed FTA on October 09, 2003 with four other accords for enhancing cooperation in agriculture, tourism and science.
|Exports, Imports and trade balance 1990-91 to 2008-09 |
|Year to |Exports |Imports |Trade Balance |Rate of Exchange |
| |(including re-exports) | | |Export |Import |
|1990-91 |32553 |43198 |-10645 |17.7 |22.3 |
|1991-92 |44041 |47851 |-3810 |35.3 |10.8 |
|1992-93 |53688 |63375 |-9687 |21.9 |32.4 |
|1993-94 |69751 |73101 |-3350 |29.9 |15.3 |
|1994-95 |82674 |89971 |-7297 |18.5 |23.1 |
|1995-96 |106353 |122678 |-16325 |28.6 |36.4 |
|1996-97 |118817 |138920 |-20103 |11.7 |13.2 |
|1997-98 |130100 |154176 |-24076 |9.5 |11 |
|1998-99(P) |139752 |178332 |-38580 |7.4 |15.7 |
|1999-00 |159561 |215236 |-55675 |14.2 |20.7 |
|2000-01 |203571 |230873 |-27302 |27.6 |7.3 |
|2001-02 |209018 |245200 |-36182 |2.7 |6.2 |
|2002-03 |255137 |297206 |-42069 |22.1 |21.2 |
|2003-04 |293367 |359108 |-65741 |15 |20.8 |
|2004-05 |375340 |501065 |-125725 |27.9 |39.5 |
|2005-06 |456418 |660409 |-203991 |21.6 |31.8 |
|2006-07 |571779 |840506 |-268727 |25.3 |27.3 |
|2007-08 |655864 |1012312 |-356448 |14.7 |20.4 |
|2008-09(P)* |766935 |1305503 |-538568 |16.9 |29 |

India is the biggest producer of castor seed in the world and is the only country which meets majority of the industrial demand of the castor seed oil internationally. India is the biggest producer, consumer, and exporter of chili in the world. India has emerged as the world's second largest cotton producer in 2006-2007, edging past the US, which held the second rank until recently. India is the largest producer of Guar seed in the world accounting for 80% of total production. India is the largest producer, consumer, and exporter of Jeera in the world. India is the largest producer and exporter of menthe oil in the world. Mustard/Rapeseed oil is the third largest edible oil produced in the world after Soy oil and Palm oil. Vietnam dominates global pepper trade by producing nearly 34% of global pepper production. India is the largest consumer and second largest producer of sugar in the world. India is considered the largest producer, consumer, and exporter of turmeric in the world accounting for 78% of total world production. The key features of India’s BoP that emerged in the first half of fiscal 2008-09 included a widening trade deficit ($69.2 billion) led by high imports, a significant increase in invisible surplus ($46.8 billion) led by remittances from overseas Indians and software services exports, a higher current account deficit ($22.3 billion) due to high trade deficit, a volatile and relatively lower net capital inflows ($19.9 billion) than April-September 2007-08 ($50.9 billion), and a decline in reserves (excluding valuation) of $2.5 billion.

The widening trade deficit which is mainly due to higher imports has led to a higher current account balance deficit at $12.5 billion in Q2 of 2008-2009. Reflecting volatile movement of capital flows, the net capital flows were significantly lower at $8.2 billion in Q2 of 2008-09 than that of $33.2 billion in Q2 of 2007-08. Under capital flows (net), foreign direct investments (FDI) witnessed steady growth, while the portfolio investment recorded net outflows. FDI broadly comprise equity, reinvested earnings and inter-corporate loans. The net FDI flows were higher at $5.6 billion in Q2 of 2008-2009 as compared with $2.1 billion in Q2 of 2007-2008.

Mumbai is the important financial center of India followed by Dubai. The currency of India is the Rupee. The Rupee is the only legal tender accepted in the India and is also accepted as legal tender in neighboring Nepal and Bhutan. These countries’ currency value is being held to the Rupee value. India now has its own version of the dollar sign. Until now, the most common notation for the rupee was “Rs.” The problem is that a number of countries – including archrival Pakistan – also have a rupee, leading international traders to rely on the clunky “INR” to distinguish it. The creation of the new symbol represents India’s assertion of importance as a major international market, one whose currency warrants a special moniker. India will join an elite group of countries which have a distinct currency symbol.

The rupee has grown increasingly stable in value. Versus the dollar, it made strong gains until the global flight to the dollar at the height of the worldwide financial crisis. The rupee quickly recovered – it now sits at 46.5 to the dollar – reflecting the Indian economy’s quick rebound. The International Monetary Fund forecasts GDP growth of 9.5% this calendar year while Western nations remain mired in economic doldrums. In 1975, as per the Floating exchange rate system, the value of the rupee was pegged to a basket of currencies and was tightly controlled by the Reserve Bank of India. In recent years its value has depreciated with respect to most currencies with the exception of the US dollar. There is no limit on the amount of foreign currency brought into India however certain amounts will require declarations at the customs entry point. The table below illustrates the fluctuation of the exchange rate for the Rupee against the more common currencies of the world.

India’s double digit inflation: In June, that inflation reached 10.6%, piling on to double digit rates in May (10.2%) and April (11.2%). Street protests have erupted over rising food prices that have burdened some three-quarters of Indians who still live on less than $2. To get a handle on the problem, India’s central bank has raised interest rates three times since March. India uses a different set of metrics to report inflation than the rest of the world. Using metrics common in the US, inflation will come out to around 4.5%. A high inflation rate in Asia’s fastest growing major economy after China is putting pressure on India’s central bank to raise interest rates for a fourth time in five months.

The biggest area of concern for India is for them to determine how to reduce their inflation rate while continuing to grow their economy. This has proven a difficult task for them given the current economic situations facing the world. India offers foreign investors a transparent environment guaranteeing security of their long-term investments similar to that of China. Some of the factors that will deem helpful to India are their free press, a judiciary government, a sophisticated legal and accounting system, and a user-friendly intellectual infrastructure. India's dynamic and highly competitive private sector will continue to the backbone of their economic activity offering considerable possibilities for joint ventures and collaborations. India is well suited to enter into the new emerging markets with a strong and robust financial outlook considering the high inflation rate.

India’s increasing globalization will be driven by the country becoming a source for specialized products and services. There are also huge technology advances that India can put to work to make government more efficient, to make service delivery easier to monitor/track, and to make public financial flows more visible. With India’s strong human capital and cutting-edge innovation, it is clear the knowledge and technology content of India’s exports is going to continue to rise. They will further integrate themselves within global production chains by making products of new value. Expanded access to finances is another area where changes will mean a difference to millions of citizens, allowing them to share in the opportunity of India’s growth.

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