India’s institutional, business environment poor

July 11th, 2008 - 5:51 pm ICT by IANS  

New Delhi, July 11 (IANS) India’s institutional and business environment is “poor”, according to the World Trade Indicators (WTI) 2008 released here Friday. “While India has achieved substantial reductions in tariffs since the 1990s, its agriculture exports face high barriers and its share of trade with preferential partners is low,” Gianni Zanini, the World Bank Institute’s lead economist and trade programme, said at a seminar on world trade here.

WTI 2008 notes that India’s deficient infrastructure - severe power shortages, congested roads, and poor-quality railways and ports - is a major constraint to trade activity in the country.

Its strongest logistics indicator was timeliness of shipments, while its weakest were efficiency of customs and other border procedures, as well as the quality of transport and information technology (IT) infrastructure.

Despite this, India jumped to the 79th slot in the Doing Business-Trading Across Borders rankings, a dramatic improvement over its previous year’s rank of 142.

India’s per capita rate for telephones and mobile phones was 19 percent in 2006, thrice its average in 2000, while Internet usage was 10.8 percent, more than seven times at the beginning of the decade.

The report states that in the matter of trade policy, India has been moving towards a market-oriented trade regime since the early 1990s and its tariff protection has been substantially reduced.

At the same time, the country’s trade regime is much more restrictive than in other emerging economies such as Brazil, China, Mexico, and Russia.

In agriculture, the country’s average tariff of 42 percent is about seven times that for non-agricultural products (6.4 percent), one of the highest in the world.

Duty-free imports from most favoured nations (MFN) were only 7.8 percent of total imports in 2005.

With respect to services, reforms have been pursued recently in such sectors as banking, telecommunications, electricity, insurance, retail, and higher education, albeit at a slow pace and with varying degrees of success.

The very low overall GATS (General Agreement of Trade Services) commitments index suggests ample room for far greater multilateral commitments to services liberalisation.

Real growth of trade was 11.5 percent in 2007, with imports growing faster than exports in recent years, reflecting the growing demand of India’s booming economy, especially in energy and infrastructure.

The country’s 2007 share of trade in GDP is 45.2 percent, a substantial increase over its late 1990s average (24.9 percent) and comparable to other large emerging economies like China, Russia, and Mexico.

The services sector’s share in total exports is a high 36.7 percent, as the country has become a major exporter of professional services.

India’s 2007 foreign direct investment (FDI) inflows are still low at 1.8 percent of GDP. It’s still the world’s largest recipient of remittances, receiving $25.4 billion in 2006 or 12.8 percent of the value of total exports of goods and services.

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