WORLD TRADE  
ORGANIZATION  RESTRICTED 
WT/TPR/G/249 
10 August 2011  
 
(11-3949) 
Trade Policy Review Body Original:  English 
   
 
  
 
TRADE POLICY REVIEW 
 
Report by 
 
INDIA 
 
  
 
Pursuant to the Agreement Establishi ng the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), the policy statement by India is attached. 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on India. India WT/TPR/G/249 
 Page 3 
 
 
CONTENTS 
    P a g e  
I.  INTRODUCTION 5 
II.  ECONOMIC ENVIRONMENT 5  
 (1)   GROWTH  5 
 (2)   SAVINGS AND INVESTMENT  7  
 (3)   EXPORTS , IMPORTS , AND TRADE BALANCE  7  
(i)  Merchandise exports 8  
(ii)  Merchandise imports 8  
(iii)  Trade balance 9  
(iv)  Direction of merchandise trade 10  
(v)  Services trade 10  
(4)  FOREIGN INVESTMENT  11  
(i)  Foreign direct investment (FDI) and foreign institutional investment (FII) 11  
 (ii)   Outward investment by India 12  
 (5)   OPPORTUNITIES FOR GROWTH  12  
(i)  A promising rural economy 12  
(ii)  India's demographic dividend 13  
(iii)  Skill development 13  
(iv)  Innovation 13  
(6)  CHALLENGES  14  
(i)  Inflation 14  
(ii)  Fiscal deficit 14  
(iii)  Infrastructure 15  
(iv)  Agricultural growth and food security 16  
III.  MOVING AHEAD ON REFORMS 17  
(1)  FISCAL REFORMS  17  
(2)  FINANCIAL SECTOR REFORMS  18  
(3)  REFORMS IN FOREIGN INVESTMENT POLICY  19  
 (4) I NDUSTRIAL REFORMS  19  
IV.  TRADE POLICY  20 
(1)  FOREIGN TRADE POLICY  20  
(2)  CONTINUOUS TARIFF LIBERALIZATION  21  
(3)  TRADE FACILITATION MEASURES  21  
(4)  TRADE POLICY CHALLENGES FACING INDIA  22  
V.  INDIA AND THE WTO 22  
(1)  WTO  NEGOTIATIONS  22  
(2)  DUTY FREE QUOTA FREE (DFQF)  ACCESS  23  WT/TPR/G/249 Trade Policy Review 
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    P a g e  
VI.  REGIONAL AND BILATERAL ARRANGEMENTS 23  
 (1)   S
OUTH ASIA REGION  23  
(2)  SOUTH EAST AND EAST ASIA 23  
(3)  AUSTRALIA AND NEW ZEALAND  24  
(4)  AMERICAS  24  
(5)  EUROPE   24 
(6)  MIDDLE EAST AND AFRICA  24  
(7)  OTHER AGREEMENTS AND NEGOTIATIONS  24  
VII.  CONCLUSION  24 
CHARTS 
Chart 1 GDP and sectoral growth rates 6 
Chart 2 Import and export growth rates 9 Chart 3 Merchandise trade:  exports, imports, and trade balance 9 
Chart 4 FDI inflows and net FII 11 
TABLES 
Table 1 GDP and sectoral growth rates 6 
Table 2 Share of different sectors in GDP 7 
Table 3 Merchandise trade:  exports, imports, trade balance, and trade openness 8 
Table 4 Trade in services  10 
Table 5 FDI inflows and net FII 11 Table 6 Fiscal deficit and revenue deficit of the Central Government 15 
Table 7 Sources of tax revenue 17 
 
 
 India WT/TPR/G/249 
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I. INTRODUCTION 
1. This is the Fifth Trade Policy Review of Indi a.  The period since the previous Review in 
May 2007 largely fell under the shadow of the globa l economic crisis.  Most parts of the world are 
still struggling to recover from the recession.  Wh ile India did not escape unscathed, the pragmatic 
economic policies and calibrated reforms pursued dur ing the past two decades minimised the impact 
of the global meltdown and enabled a return to a near normal growth rate in 2009-10. 
2. While all the major macroeconomic variables,  namely, GDP, exports and imports showed a 
decline in 2009-10, the impact on India was relativ ely muted when compared with most other major 
economies.  The resilience of the Indian economy and its ability to cope with the global downturn 
despite greater openness, was the result of a range of reforms, including financial sector reforms, 
pragmatic banking regulations and s upervision, a cautious approach  towards the liberalization of 
capital flows, especially short-term debt, building up of ample foreign exchange reserves, coupled 
with strong domestic demand and underl ying strong macroeconomic fundamentals.  
3. The focus of the Government has been on sustainable and inclusive development.  
Significant attention is being given to rural deve lopment, skill development, innovation and financial 
inclusion.  India faces enormous challenges in several areas, namely, physical and social 
infrastructure, inflation, energy security, agricultu ral growth and food security.  The Government has 
taken various policy initiatives to tackle these challeng es and is determined in its efforts to overcome 
them to ensure a smooth road to growth and development. 
4. On the trade front, during the four year period under review, exports grew at a compound 
annual growth rate of 18.1%, while imports grew by 17.2%.  India's share in global exports registered 
a small increase from 0.9% in 2006 to 1.3% in 2009.   Her share in world imports also increased from 
1.3% in 2006 to 2% in 2009. 
5. Despite the global meltdown and its effect on the economy, India's engagement with the 
world continued to widen and deepen.  India's ong oing transparency and trade facilitation efforts, 
including autonomous reduction of tariffs, stayed on course.  India remained an active participant in 
efforts to further liberalize trade, especially in the multilateral trade negotiations in the WTO.  In 
order to re-energise the Doha Round  of trade negotiations, India took the initiative to host an informal 
mini-Ministerial meeting in New Delhi in Se ptember 2009, which had a positive impact on the 
process of negotiations.  During this period, Indi a negotiated and conclude d WTO-consistent trade 
agreements with ASEAN, the Republic  of Korea, Malaysia and Japan. 
II. ECONOMIC ENVIRONMENT 
(1) GROWTH  
6. India is one of the fastest growing economies among the large economies of the world.1  In 
terms of purchasing power parity (PPP), the Indi an economy is the fourth largest after the 
United States, China and Japan.2  India's share in world GDP (PPP) has increased from 4.3% in 1991 
to 5.3% in 2009. 
                                                      
1 According to the IMF's World Economic Outlook, April 2011, India had the highest growth rate of 
10.4% in 2010, followed by China at 10.3%, while world output grew at 5%.  For 2011, the IMF has estimated 
India's growth at 8.2%, while global growth is projected at 4.4%. 
2 World Bank:  World Development Indicators Database;  April 2011. WT/TPR/G/249 Trade Policy Review 
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7. Strong macroeconomic fundamentals and a pos itive global environment led to a robust 
growth rate of over 9% during the period 2005-06 to 2007-08 (see Table 1).  However, the growth 
momentum could not be maintained during the global economic crisis and the gr owth rate fell sharply 
to 6.8% in 2008-09.  Proactive and timely policy support by the Government helped the economy to 
quickly recover to near normal.  The Indian economy grew at close to 8% in 2009-10 and at 8.5% in 
2010-11.  However, with global r ecovery still far from complete, th e outlook for the Indian economy 
in 2011-12 would depend, to an extent, on the pace of global recovery.  Domestic factors, particularly 
inflation, have also led to a degree of moderati on in the outlook for the current financial year. 
Table 1 
GDP and sectoral growth rates 
(%) 
Year Agriculture, forestry, and 
fishing Industrya Servicesb Overall GDP at factor cost 
2005-06 5.1 9.7 11.0 9.5 
2006-07 4.2 12.2 10.1 9.6 
2007-08 5.8 9.7 10.3 9.3 
2008-09 -0.1 4.4 10.1 6.8 
2009-10 (QE) 0.4 8.0 10.1 8.0 
2010-11 (RE) 6.6 7.9 9.4 8.5 
a Industry includes mining and quarrying;  manufacturing;  electricity, gas and water s upply;  and construction. 
b Services include trade, hotels and restaura nts;  transport, storage and communication;  financing, insurance, real estate and  
 business services;  community, social and personal services. 
Note: QE:  quick estimates.  RE:  revised estimates. 
Source:   Central Statistical Organization. 
-202468101214
2005-06 2006-07 2007-08 2008-09 2009-10 (QE) 2010-11 (RE)Agriculture, forestry, and fishing Industry
Services Overall GDP at factor cost
Source:     Central Statistical Organization data.Chart 1
GDP and sectoral growth rates
Per cent
 India WT/TPR/G/249 
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8. The sectoral growth rates may be seen in Table 1 above.  While the growth rates of 
agriculture and industry have fluctuated, the servi ces sector has been the engine of India's economic 
growth.  With a share of more than 55% of the GDP and an annual growth rate of over 10%, this sector contributes about a quarter of the total employment.
3  It accounts for a high share in foreign 
direct investment inflows, and over one-third of to tal exports.  The growth of the services sector has 
been consistently above the overall GDP growth si nce 1997-98 and has contributed to India sustaining 
a reasonable growth rate even during the crisis.  Wh ile the rate of growth of agriculture and industry 
declined to (-) 0.1% and 4.4% respectively, in 2008-09, the services sector grew by more than 10%, resulting in an overall GDP growth rate of 6.8%. 
9. While the services sector has performed well, ag riculture and allied activities remain critical 
for a broad-based, inclusive and sustained growth.  The performance of the agri culture sector has been 
less than satisfactory, particularly as about 58% of the population is still de pendent on agriculture.  
Within the industrial sector, the share of manufactu ring in GDP has also stagnated over the years and 
is currently just over 15%, which does not compare well internationally and is a source of concern. 
Table 2 
Share of different sectors in GDP 
(%) 
Year Agriculture, forestry, and fishing Industrya Servicesb 
2004-05 19.0 27.9 53.0 
2005-06 18.3 28.0 53.8 
2006-07 17.4 28.6 54.0 
2007-08 16.8 28.7 54.5 
2008-09 15.7 28.1 56.2 
2009-10 (QE) 14.6 28.1 57.3 
2010-11 (RE) 14.4 27.9 57.7 
a Industry includes mining and quarrying;  manufacturing;  electricity, gas and water s upply;  and construction. 
b Services include trade, hotels and restaura nts;  transport, storage and communication;  financing, insurance, real estate and  
 business services;  community, social and personal services. 
Source:  Computed from Central Statistical Organization data. 
(2) SAVINGS AND INVESTMENT  
10. Gross domestic savings as a proportion of GDP (at market prices) increased from 32.4% in 
2004-05 to 33.7% in 2009-10.4  Gross capital formation (GCF), as a proportion of GDP, rose from 
32.8% in 2004-05 to 38.1% in 2007-08.  After a minor dip in 2008-09, to 34.5%, the GCF picked up 
again to reach 36.5% of GDP in 2009-10.  Growing trends of savings and investment augur well for 
future growth. 
(3) EXPORTS , IMPORTS , AND TRADE BALANCE  
11. The Indian economy in 2011 is far more open to the external sector than it was in 2006-07.  
India's total trade in goods (exports plus imports) as a percentage of GDP increased from 32.9% in 
2006-07 to 39.7% in 2008-09, though it came down to 33.7% the next year as a fallout of the global 
economic crisis (see Table 3).  This incr eased openness has enhanced productivity and 
competitiveness, as reflected in India' s export performance in recent years. 
                                                      
3 India:  Economic Survey 2010-11;  Chapter 10:  Services Sector. 
4 Economic Survey 2010-11;  Chapter 1:  State of the Economy and Prospects. WT/TPR/G/249 Trade Policy Review 
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Table 3 
Merchandise trade:  exports, import s, trade balance, and trade openness 
(US$ billion, unless otherwise specified) 
Year Exports Imports Trade balance Trade 
openness 
Exports as % of 
GDP % growth Imports as % of 
GDP % growth Trade 
balance as % of 
GDP Trade as a 
% of GDP 
2004-05 83.5 11.6 30.8 111.5 15.5 42.7 (-) 28.0 3.9 27.1 
2005-06 103.1 12.4 23.4 149.2 17.9 33.8 (-) 46.1 5.5 30.2 
2006-07 126.4 13.3 22.6 185.7 19.6 24.5 (-) 59.3 6.3 32.9 
2007-08 163.1 13.1 29.0 251.6 20.3 35.5 (-) 88.5 7.2 33.4 
2008-09 185.3 15.1 13.6 303.7 24.6 20.7 (-) 118.4 9.5 39.7 
2009-10 178.8 12.9 -3.5 288.4 20.8 -5.0 (-) 109.6 7.9 33.7 
2010-11 245.9 14.2 37.5 350.7 20.3 21.6 (-) 104.8 6.1 34.5 
Source:   India's Trade at a Glance, De partment of Commerce, May 2011. 
(i) Merchandise exports 
12. The growth of India's exports has been robust at over 20% since 2002-03.  The global 
recession only slightly moderated this growth, to 13.6% in 2008-09.  The compound annual growth 
rate (CAGR) of India's merchandise exports during the five year period 2004-05 to 2008-09 was 22% 
as against 14% during the preceding five year pe riod.  However in 2009- 10, export growth was 
negative at (-) 3.5%, reflecting the effect of the global recession.  The Government announced 
remedial measures in the Union Budget 2009-10 and in  the Foreign Trade Policy (2009-14) to address 
the adverse effects of global developments.  These measures, coupled with th e recovery of the global 
economy, enabled exports to grow at 37.5% during 2010-11. 
13. In 2009-10, the major commodity groups in India's export basket in terms of percentage 
shares were manufactured goods (63.6%);  crud e and petroleum products and coal (17.8%);  
agriculture and allied products (9.9%);  a nd ores and minerals, excluding coal (5.5%).5 
(ii) Merchandise imports 
14. The CAGR of India's merchandise imports durin g the five year period 2004-05 to 2008-09 
was 31.2% as compared to 13% during the precedi ng five year period.  Imports witnessed negative 
growth in 2009-10, but picked up in the following y ear to 21.6%.  A revival of demand, coupled with 
reduction in import tariffs and controls, has resulted in strong import growth. 
15. In 2009-10, chemicals, iron and steel, non-ferr ous metals, professional instruments, optical 
goods and electronic goods, pearls, precious and se mi-precious stones, gold and silver accounted for 
42.6% of India's import basket.  Fuel (33.2%);  capital goods (15%);  fuel and allied products (3.7%);  
fertilizers (2.3%), paperboard manufactures and newsprint (0.5%) were the other major commodity groups. 
 
                                                      
5 India:  Economic Survey 2010-11;  Statistical Appendix, Table 7.3 (B). India WT/TPR/G/249 
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-1001020304050
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11Imports Exports
Source:     India's Trade at a Glance, Annual Trade, Department of Commerce, May 2011.Chart 2
Import and export growth rates
Growth in per cent
 
(iii) Trade balance 
16. In spite of the robust growth of exports, India's trade deficit continues to be large as the 
growth of imports has consistently outpaced the grow th of exports.  The trade deficit as a ratio of 
GDP increased from 5.5% in 2005-06 to 9.5% in 2008-09.  In absolute terms, it remained more than 
US$100 billion during the past three financial years, 2008-09 to 2010-11. 
-200-1000100200300400
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Source:     India's Trade at a Glance, Annual Trade, Department of Commerce, May 2011.Chart 3
Merchandise trade:  exports, imports, and trade balance
US$ billion
Exports
Imports
Trade balance
 WT/TPR/G/249 Trade Policy Review 
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(iv) Direction of merchandise trade 
17. The directional pattern of India's trade has not changed much since 2007-08, and the 
top 15 trading partners6 continue to hold a share of around 60%  of the trade.  Country-wise, the 
United Arab Emirates (UAE) is India's largest tr ading partner since 2008-09, followed by China and 
the United States.  The UAE has also  displaced the United States as the topmost destination of India's 
exports since 2008-09 with an export share of arou nd 13%.  However, China remained the largest 
source of imports with a 12% share in India's total imports followed by the UAE, the Kingdom of 
Saudi Arabia, and the United States.  Region-wise, during the period 2010-11 (April-September), Asia 
was India's largest trading partner, followed by Europe and the Americas.7 
(v) Services trade 
18. India's services exports continued on their successf ul growth path in the last four years.  
During the period 2004-05 to 2009-10, the CAGR of services exports was 16.7%, marginally higher 
than the 16.4% for merchandise exports during the same period.8  Services exports reached 
US$106 billion in 2008-09 with a growth of 17.3% over the previous year.  As a result of the global 
recession, services exports declined to US$95.8 billion  in 2009-10 with a negative growth of (-) 9.6% 
but recovered in 2010-11 (April-Sept ember) with a growth rate of 27.4%.  The major categories of 
services exports in 2009-10 included software serv ices, travel, business services and transportation. 
19. Imports of services increased from US$27.8 b illion in 2004-05 to US$60 billion in 2009-10.  
While services imports in 2008-09 grew at a rate of 1.1%, the growth rate increased sharply to 15.3% 
in 2009-10 and to 46.9% in 2010-11 (April-September).9  The major categories of services imports in 
2009-10 included business services, transportation, travel and financial services. 
20. During the period under review, the balance of trade in services has remained positive (see 
Table 4).  However, this surplus has not been  sufficient to bridge India's trade deficit. 
Table 4 
Trade in services 
(US$ billion) 
Year Exports Imports Net 
2005-06 57.7 34.5 23.2 
2006-07 73.8 44.3 29.5 
2007-08 90.3 51.5 38.9 
2008-09 106 52 53.9 
2009-10a 95.8 60 35.7 
2010-11 (April to September)b 55.7 36.2 19.5 
a Partially revised. 
b Preliminary. 
Source:   RBI's Balance of Payments Statistics ;  RBI Monthly Bulletin, February 2011. 
                                                      
6 United Arab Emirates, China, United States, Ki ngdom of Saudi Arabia, Germany, Switzerland, 
Singapore, Australia, Iran, Hong Kong, China, Republic of Korea, Indonesia, United Kingdom, Japan, and Belgium. 
7 India:  Economic Survey 2010-11;  Chapter 7:  International Trade. 
8 Ibid. 
9 Ibid. India WT/TPR/G/249 
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(4) FOREIGN INVESTMENT  
(i) Foreign direct investment (FDI) and foreign institutional investment (FII) 
21. Strong macroeconomic fundamentals and a liberal  foreign investment regime have made 
India an attractive destination for foreign investment .  This is evident from the fact that India has 
witnessed a significant rise in foreign investment inflows since 2003-04.  However, during 2008-09 
there was a slowdown in foreign investment primar ily due to a net outflow of foreign institutional 
investment (FII).  During 2009-10, stronger recovery in India ahead of the global recovery, coupled 
with positive sentiments of global investors on India's prospects, induced a revival in capital inflows.  
This was driven mainly by foreign institutional i nvestment, with net FII inflows of US$29.0 billion in 
2009-10, representing a major reversal from the outflow of US$15.0 billion recorded during the 
previous year. 
Table 5 
FDI inflows and net FII 
(US$ billion) 
Year Total FDI inflows Net FII 
2000-01 4.0 1.8 
2001-02 6.1 1.5 
2002-03 5.0 0.4 
2003-04 4.3 10.9 
2004-05 6.0 8.7 
2005-06 9.0 9.9 
2006-07 22.8 3.2 
2007-08 34.8 20.3 
2008-09 37.8 (-) 15.0 
2009-10 37.8 29.0 
2010-11 27.0 29.4 
Source:   Department of Industrial Policy and Promotion (http:/ /dipp.nic.in/fdi_statistic s/india_FDI_March2011.pdf). 
-20-1001020304050
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Source:     Department of Industrial Policy and Promotion (http://dipp.nic.in/fdi_statistics/india_FDI_March2011.pdf).Chart 4
FDI inflows and net FII
US$ billion
Total FDI inflows
Net FII
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22. Foreign direct investment (FDI), a more st able source of finance, outpaced FII inflows 
during 2006-07 to 2009-10, and compensated for the FII outflow during the crisis.  FDI was channelled mainly into the services, telecomm unications, computer software and hardware, 
construction, housing and real estate sectors.
10 
(ii) Outward investment by India 
23. Though still a developing country, India is also  emerging as a source of investments, which 
increased from US$19.1 billion in 2008-09 to US$ 19.7 billion in 2009-10 and US$18 billion in 
2010-11 (April to December).11  Mauritius received the largest share of gross outward FDI during 
2010-11 (April-December), followed by Singapore, the United States, the Netherlands and the 
United Kingdom.  The manufacturing sector (US$4.7 billion) accounted for the largest share of 
outward FDI during 2009-10 followed by the services sector (US$4.1 billion).  However, the services 
sector has taken the lead in 2010. 
24. The blossoming of Indian entrepreneurship co mbined with a calibrated relaxation of the 
foreign exchange regime has resulted in the curre nt increase in outbound FDI from India.  A number 
of Indian enterprises are now substantially in creasing their overseas operations, which has also 
benefitted the host countries. 
(5) OPPORTUNITIES FOR GROWTH  
(i) A promising rural economy 
25. The 2001 Census12 reported that 72.2% of the Indian population resides in rural areas, and 
depends on agriculture for their livelihood.  The Government has accordingly scaled up the 
commitment of resources to rural areas significantly to catalyse an inclusive development process, so 
that the benefits of India's growth reach every section of the society. 
26. For the upliftment of the rural economy, the hi ghest priority has been  accorded to building 
rural infrastructure in order to facilitate better connectivity with urban areas and to provide basic 
amenities in rural areas.  Recent initiatives of the Government include schemes such as the Mahatma 
Gandhi National Rural Employment Guarantee Scheme, Pradhan Mantri  Gram Sadak Yojana  (Prime 
Minister's Rural Roads Scheme), Bharat Nirman  (for creating basic rural infrastructure), Total 
Sanitation Campaign, Rural Infrastructure Developm ent Fund, National Rural Health Mission, etc.  
These initiatives will create new employment opportun ities, boost demand, raise standards of living 
and accelerate the overall growth of the economy. 
27. A vibrant rural economy is now seen as a driver of rapid growth and a potential profit centre 
by entrepreneurs.  A focus on the rural economy is increasingly becoming central to the marketing 
strategies of enterprises, trying to widen the dema nd base for their goods and services.  For instance, 
the number of rural telephones (as a percentage of the total number available in India) has steadily 
increased from around 16% in 2004 to 33% in 2010.  During 2009-10, the growth rate of rural 
telephones was 62.6% as against 37.3% for urban te lephones.  The private sector has contributed 
                                                      
10 India:  Economic Survey 2010-11;  Chapter 9:  Industry. 
11 RBI:  Monthly Bulletin, May 2011.  According to RBI estimates total outbound investment from 
India is expected to cross US$43 billion duri ng the financial year (April 2010–March 2011). 
12 2011 Census results were not fina lized, when this report was written. India WT/TPR/G/249 
 Page 13 
 
 
crucially to the growth of rural telephones by providing about 84.5% of telephones as in 
November 2010.13 
(ii) India's demographic dividend 
28. India has a young population profile.  The population in the working age group of 
15-64 years is projected to increase steadily from 62. 9% in 2006 to 68.4% by  2026, leading to a 
decline in the dependency ratio.14  This demographic dividend is expected to give India an edge in the 
increasingly competitive global environment.  I ndia's policies focus on empowering its young 
population.  Accordingly, government policies empha sise ensuring proper healthcare, education, skill 
development, and encouraging labour-intensive  industry that provides employment in the 
manufacturing sector.  Reforms have been introduced at  all levels of education, including higher and 
technical education.  The Right of Children to Free and Compulsory Education Act 2009, which came 
into force on 1 April 2010, provides for free and co mpulsory education to all children between the 
ages of 6 to 14.  In the areas of higher and techni cal education, policy initiatives aim to make the 
population group between 18-24 years (about 12% of the total) employable and competitive.  This is sought to be achieved through curriculum reforms, vocational training, information technology (IT) 
and distance education.
15 
(iii) Skill development 
29. A National Skill Development Policy was initiate d in 2010, which sets an ambitious target 
of equipping nearly 500 million persons with im proved skills by 2022 for enabling access to decent 
employment and ensuring India's competitiveness in  a dynamic global labour market.  In addition, 
India has set up a three tier structure of coordinated action on skill development through:  (i) the 
Prime Minister's National Council on Skill Deve lopment;  (ii) National Skill Development 
Coordination Board;  and (iii) National Skill De velopment Corporation.  The Prime Minister's 
National Council on Skill Development was set up to outline the core operating principles with an 
emphasis on making skills bankable for all sections of society, including the poorest of the poor. 
(iv) Innovation 
30. Innovation holds the key to sustainable grow th, inclusiveness and competitiveness.  The 
decade 2010-20 was declared as the "Decade of Innovation".  A Nationa l Innovation Council was 
constituted in 2010 with a mandate to formulate a Roadmap for Innovation for the decade 2010-20.  
The aim of the Council is to bring about a change in the mindset and create a congenial environment 
at the grassroots level to encourage a greater ro le for those engaged in innovative activities in 
education, business, government, NGOs, urban and rural development, in shaping a national level 
innovation strategy, going beyond formal R&D. 
31. India has the potential to emerge as a leading hub of innovation in low-cost technology and 
process reinvention.  The Mid-Term Appraisal of the 11th Five Year Plan (2007-12) has emphasised 
low-cost technology based innovati on, also known as "frugal innovation"16, e.g. low-cost eye and 
heart surgeries, low-cost phone services, small cars, etc.  Besides generating high quality, low cost 
affordable products, such innovations also crea te employment opportunities.  Innovations in 
                                                      
13 India:  Economic Survey 2010-11;  Chapter 11:  Energy, Infrastructure and Communications. 
14 India:  Economic Survey 2007-08 , Chapter 10:  Social Sectors. 
15 India:  Economic Survey 2010-11;  Chapter 12:  Human Development, Equity and Environment. 
16 "Frugal innovation" produces more "frugal cost" products and services that are affordable by people 
at low levels of income without compromising the safety, efficiency, and utility of the products (Mid-Term Appraisal of 11
th Five Year Plan 2007-12, Planning Commission, Government of India). WT/TPR/G/249 Trade Policy Review 
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e-governance, e.g. the e-Sewa (e-service) project of Andhra Pradesh and the Bhoomi project (for 
computerisation of land records) of Karnataka, have improved public service delivery in these states. 
32. The implementation of the Unique Identificati on (UID) Project will bring in transparency, 
accountability and efficiency in governance and public service delivery.  This Project would provide a 
unique identification to each resident across the c ountry and would be used primarily as the basis for 
efficient delivery of welfare services.  It would also  act as a tool for effective monitoring of various 
welfare programs and schemes of the Government.  The Unique Identification Authority of India 
(UIDAI) was constituted in January 2009 to implement the UID Project. 
(6) CHALLENGES  
(i) Inflation 
33. As the world economy has begun to stabilize in the aftermath of the global crisis, inflation 
has re-emerged as a major concern particularly in the fast-recovering developing economies.  The rise 
in global prices of commodities, such as oil, food, industrial inputs and metals has been compounded by domestic factors that include both demand side  pressures, a corollary to  the recovery in the 
domestic economy, and supply side constraints. 
34. The ten-year average headline WPI
17 inflation was around 5.3% from 2000-01 to 2009-10.  
During 2010-11, the average inflation of 9.5% wa s much higher than the decadal rate.  While no 
sector remained unaffected, the primary articles and fu el group witnessed very high levels of inflation.  
Persistent food inflation is a major challenge.  It  first surfaced in 2009-10, partly due to failed 
monsoons and partly due to dema nd-supply gaps, and was accentuated in 2010-11.  Two successive 
years of food inflation have led to serious supply side concerns.  The risk of higher than average 
inflation continues in 2011-12 due to an uncertain  outlook on international commodity prices and the 
possibility of the prices of food, fuel, minerals and metals staying firm.18 
35. During 2010 and 2011, the Reserve Bank of India has, steadily and regularly, increased the 
repo and reverse repo rates to moderate demand si de pressures.  The Government has also taken 
measures to contain inflationary pressure.  As a l ong-term remedy, structural concerns have to be 
addressed by reducing supply-side bo ttlenecks.  Thus, maintaining the growth momentum in the 
economy with price stability is one of the biggest  policy challenges that India is facing in recent 
times. 
36. Measures have also been taken on the trade po licy front to moderate inflation by reducing 
the import duty on rice, wheat, pulses, edible oils (cr ude), butter and ghee, and edible oils.  Import of 
raw sugar is now allowed at zero duty.  Full exem ption from basic customs duty has been provided to 
onions and shallots with effect from 21 December 2010. 
(ii) Fiscal deficit 
37. The enactment of the Fiscal Responsibilit y and Budget Management Act (FRBMA) 2003 
facilitated the fiscal consolidation process.  The fiscal deficit and revenue deficit of the Central 
Government declined consistently from 2003-04 to 2 007-08.  Due to the extraordinary circumstances 
posed by the global crisis, the Government initiated an expansionary policy in 2008-09 combining an 
increase in expenditure with tax cuts in order to  boost domestic demand.  The decline in private 
                                                      
17 Wholesale price index. 
18 Reserve Bank of India:  Macro and Monetary Developments in 2010-11;  May 2011;  Chapter VI:  
Price Situation. India WT/TPR/G/249 
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consumption expenditure was supplem ented by an increase in Govern ment expenditure.  The greater 
fiscal space created during 2003-04 to 2007-08 also he lped to counteract the impact of the global 
economic crisis.  As the economy returned on a path to recovery, the Union Budget for 2010-11 
outlined the steps towards a re turn to the pre-crisis zone of fiscal c onsolidation.  The fiscal stimuli that 
had been put in place to mitigate the impact of the global financial crisis, were rolled back in large 
part in the Budgets of 2010-11 and 2011-12.  As ag ainst a target revenue deficit of 4%, the actual 
revenue deficit was 3.1% during 20 10-11.The fiscal deficit was brought down from an initial estimate 
of 5.5% to 4.7% of GDP in 2010-11, and is targeted to be 4.6% in 2011-12. 
Table 6 
Fiscal deficit and revenue deficit of the Central Government 
(Percentage of GDP) 
Year Fiscal deficit (FD) Revenue deficit (RD) 
2003-04 4.5 3.6 
2004-05 3.9 2.4 
2005-06 4.0 2.5 
2006-07 3.3 1.9 
2007-08 2.5 1.1 
2008-09 6.0 4.5 
2009-10a 6.4 5.2 
2010-11(P)b 4.7 3.1 
2011-12 (BE)a 4.6 3.4 
a Union Budget 2011-12. 
b Provisional accounts for 2010-11 by the Controller General of Accounts. 
Source:   Economic Survey, 2010-11. 
(iii) Infrastructure 
38. The infrastructure deficit remains one of the ma jor constraints to India's growth.  Economic 
growth has outpaced the growth of infrastructure, thereby placing strains on physical infrastructure 
and accentuating the infrastructure deficit.  The performance of other sectors like agriculture and 
industry is also dependent on the quality of infrastructure. 
39. Infrastructure is a major focus of the 11th Five Year Plan (2007-12).  Investment in 
infrastructure, which was 7.2% of the GDP in 2008- 09, is expected to increase to 8.4% in 2011-12, 
the final year of the 11th Five Year Plan.19 
40. The infrastructure gap in the power sector h as been particularly high.  Larger capacity 
addition on a sustained basis would be required to meet the growing demand.  A deficit in power 
supply in terms of peak availability and total en ergy availability can limit the performance of the 
industrial as well as the agriculture sector.  Capacity creation in the power sector, till December 2010, was only 40% of the 11
th Five Year Plan target.  The 12th Plan (2012-17) is likely to adopt a target of 
100,000 MW as against an expected achievement of 50,000 MW under the 11th Five Year Plan. 
41. During 2007-08 to 2009-10, capacity addition has been lower than the target in the road 
sector.  The 11th Plan envisaged the construction of 55,448 km of roads  under NHDP (National 
Highway Development Project).  However, the work is currently behind schedule.  Steps are being 
taken to expedite the progress of the NHDP through re gular monitoring and progress reviews.  India is 
also implementing a National Highways Inte rconnectivity Improvement Programme for the 
improvement of the entire national highways network. 
                                                      
19 Mid-Term Appraisal of the 11th Five Year Plan (2007-12). WT/TPR/G/249 Trade Policy Review 
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42. The capacity constraint in the crude oil sector is being addressed through the New 
Exploration Licensing Policy (NELP) initiative of th e Government.  Some external acquisitions, 
particularly in oil, gas and coal too could supp ort the domestic capacity gaps in the energy sector.20 
43. While public investment remains dominant in infrastructure development, increasing 
participation of the private sector is being encourag ed to bridge the infrastructure gap.  Government 
has allowed 100% FDI (under the automatic route) in  all infrastructure sectors including roads, power, 
ports and airport sectors;  74% in telecom services;   100% in telephone equipment;  and 49% to 100% 
for various services in the aviation sector.  Accordin g to a preliminary assessment, the requirement of 
investment for infrastructure during the 12th Five Year Plan period (2012–17) would be about US$1 
trillion.  It is projected that at least 50% of this investment would come from the private sector.21 
(iv) Agricultural growth and food security 
44. The growth of the agriculture sector, which accounts for about 58% of the employment in 
the country, is crucial for food and livelihood security.22  From the supply-side perspective, increasing 
agricultural production and productivity remains a challenge.  From the demand side, increasing the 
purchasing power of the producers – farmers and rural labourers – is crucial to broad base 
consumption and to provide a fillip to growth. 
45. During 2004-05 to 2010-11, overall GDP grew by an average of 8.6%, while the agricultural 
sector lagged behind at 3.5%, resulting in a fall in the share of agricu lture to 12.3% of GDP 
(2009-10).23  Growth in agricultural production and productivity has been constrained, inter alia , by 
the small size of landholdings, dependence on rain-fed irrigation, and a low level of capital investment 
in the agriculture sector.24 
46. In order to increase farm productivity in a sustained way and for creating adequate 
infrastructure for transport, storage and distributio n of agricultural produce, investment – both by the 
public and the private sector – has to increase.  The Government has launched several schemes to 
increase the production and productivity of agri culture.  The National Food Security Mission 
(NFSM), Rashtriya Krishi Vikas Yojana (Nati onal Agriculture Development Scheme) and the 
National Horticulture Mission are some of the initiatives in this direction. 
47. These initiatives have to be supplemented by efforts in agricultural research and 
development, dissemination of technology, provis ion of agricultural inputs (such as quality seed, 
fertilizers, pesticides, and irrigation) and diversif ication of agriculture.  Animal Husbandry, Dairy 
Development, Fisheries and Horticulture play a si gnificant role in supplementing family incomes of 
farmers and generating gainful empl oyment in the rural sector, par ticularly among landless labourers, 
small and marginal farmers and women.  The food processing sector is also receiving attention as a 
means of value addition and employment generation. 
48. A critical planning and policy parameter in Indi a is food security – in terms of availability, 
accessibility and affordability of food to all persons at  all times.  Persistently high food inflation has 
further aggravated the problem of attaining food security.  The challenge is exacerbated by episodes 
of drought and volatility in international prices of food.  A Public Distribution System, and various 
                                                      
20 Reserve Bank of India:  Annual Report, 2009-10;  Chapter II:  Economic Review. 
21 Economic Survey 2010-11. 
22 India:  Economic Survey, 2010-11;  Chap ter 8:  Agriculture and Food Management. 
23 Ibid. 
24 Gross capital formation in the agriculture sector  has remained low:  2.2 to 3% of GDP during 
2004-05 to 2009-10. India WT/TPR/G/249 
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nutrition-based welfare schemes with an inherent component of food security are in place.  To 
increase the availability of food grains, the Nationa l Food Security Mission was launched in 2007-08 
with a target of increasing the production of rice by 10 million tonnes, wheat by 8 million tonnes and 
pulses by 2 million tonnes by the end of the 11th Plan (2011-12).  The Union Budget for 2011-12 
announced the tabling of the National Food Security  Bill in 2011, which proposes to provide certain 
minimum quantities of food grains per month at affo rdable prices to familie s living below the poverty 
line. 
III. MOVING AHEAD ON REFORMS 
(1) FISCAL REFORMS  
49. Over the last few years, tax reforms in India have aimed at enhancing the efficiency and 
equity of the tax system by rationalizing and simp lifying the tax structure, maintaining moderate 
levels of taxation, improving administrative comp liance and expanding the tax base.  These reforms 
have been implemented through a gradual and seque nced reduction in the rates of both customs and 
excise duties.  As a result of successful tax reforms a nd increase in the levels of income in India, there 
has been a gradual shift in the composition with an increase in the share of direct taxes in total tax 
revenue from 36.2% in 2000-01 to 58.6% in 2009-10.25 
Table 7 
Sources of tax revenue  
(US$ billion) 
 2000-01 2005-06 2006-07 2007-08 2008-09 2009-10a 
Direct tax (a) 15.0 35.6 48.5 73.5 69.5 77.4 
Personal income tax 7.0 12.6 16.6 25.5 23.1 25.8 
Corporate tax 7.8 22.9 31.9 47.9 46.4 51.6 
Indirect tax (b) 26.0 45.0 53.3 69.3 58.6 52.1 
Customs 10.4 14.7 19.1 25.9 21.7 17.8 
Excise 15.0 25.1 26.0 30.7 23.6 22.1 
Service tax 0.6 5.2 8.3 12.7 13.2 12.3 
Gross tax revenue 41.3 82.7 104.6 147.4 131.6 132.1 
Direct tax as a % of gross tax revenue 36.2 43.0 46.4 49.9 52.8 58.6 
a Provisional actual. 
Note: Gross tax revenue includes taxes referred to in (a) and (b) and taxes of union territories a nd "other" taxes.  Direct tax es also 
 include taxes pertaining to expenditure, interest, wealth, gift, and estate duty. 
Source:    Union Budget documents. 
50. Some of the important steps taken to expand th e direct tax base and maintain a moderate 
level of taxation are:  a gradual revision of tax sl abs for personal income tax to provide relief to low 
income earners and senior citizens;  and reduction of the surcharge on corporate income tax.  The 
Government is set to introduce systemic structural  changes in direct taxes through the Direct Taxes 
Code (DTC) Bill 2010.  This seeks to simplify, cons olidate and integrate all direct tax laws, namely, 
income tax, dividend distribution tax and wealth tax, so as to establish an  economically efficient, 
effective, and equitable direct tax system that will facilitate voluntary compliance and help increase 
the tax to GDP ratio.  It also envisages stability in direct tax rates and strengthens taxation provisions 
for international transactions. 
51. The emphasis of the indirect tax reforms has been on simplification and rationalisation of 
the tax structure, as well as removal of the tax casc ading effect.  The proposed Goods and Service Tax 
                                                      
25 India:  Economic Survey, 2010-11;  Chapter 3:  Fiscal Developments and Public Finance.  Also 
available at http://indiabudget.nic.in/. WT/TPR/G/249 Trade Policy Review 
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(GST), likely to be introduced in 2012, would replace a number of indirect taxes levied by the Centre 
and State governments on goods and services.26  It intends to remove the cascading effect of taxes and 
provide a common national market for goods and serv ices.  Considerable pr ogress has already been 
made to facilitate movement towards a unified GST.   The implementation of the GST is contingent on 
a Constitutional Amendment Bill, which has been tabled in Parliament in 2011. 
(2) FINANCIAL SECTOR REFORMS  
52. The financial sector reforms, begun in 1991, ha ve been gradual and calibrated, with the 
objective of making the financial system efficient and competitive by providing operational flexibility 
and functional autonomy to financia l institutions and enabling them to  diversify.  As a result, the 
financial sector gained strength and remained resilie nt during the global financial crisis, despite some 
volatility.27  There was no material stress on the ba lance sheets of banks and non-banking finance 
companies on account of toxic financial instruments or any solvency problems.  The prudential policy framework for institutions and markets evolved ove r the years and the unconventional measures taken 
in response to emerging risks are now widely ackno wledged to have played a significant role in 
protecting the Indian financial system from key vulne rabilities.  Some of the major elements of this 
approach were a prudential framework for banks addressing, inter alia, leverage, liquidity and 
counter-party risk concentration;  recognition of large non-banking finance companies as systemically 
important;  an active capital account  management framework, particular ly in regard to the debt flows 
into the economy;  and explicit regulati on of over-the-counter derivative markets. 
53. A very large segment of the Indian population is not part of the formal financial system.  
Meeting the small credit needs of the people, giving them access to the payments system and 
providing remittance facilities is high on the policy agenda of the Reserve Bank of India and the 
Government.  To this end, various initiatives have  been taken, for example, opening up of "no frills" 
accounts for low income groups with low or minimum balances and minimum charges;  easier credit 
facilities;  credit counselling centre facilities;  form ation of self-help groups (SHGs);  smart credit 
card facilities;  mobile banking facilities and introduc tion of a business correspondent model to ensure 
a closer relationship between the poor and the organised sector.
28 
54. The focus of financial reforms is now on fina ncial inclusion, deepening of domestic capital 
markets, updating the legislation relating to fi nancial markets and im proving macro-prudential 
safeguards.  Some of the major initiatives taken to carry forward the financial reforms in recent years 
include, the introduction of equity finance for sm all and medium enterprises (SMEs) through setting 
up of a stock exchange/trading platform for SMEs by recognised stock exchanges;  the setting up of 
the Financial Sector Legislative Reforms Commis sion for re-writing and cl eaning up of financial 
sector laws to bring them in tune with current requirements and to evolve a common set of principles for governance of financial sector regulatory instit utions;  setting up of the Financial Stability and 
Development Council – an apex-level body – to strengthen and institutionalize a mechanism for 
maintaining financial stability and development. 
                                                      
26 GST will subsume many taxes levied at the Centre , including excise duty, additional excise duties, 
excise duty levied under the Medicinal and Toilet Prepara tions (Excise Duties) Act 1955, service tax, additional 
customs duty, special additional duty, central surcharges and cesses (excluding those applicable to income tax).  
At the state level, it will subsume state value added tax/sales tax, entertainment tax (unless levied by local bodies), luxury tax, taxes on lottery, betting and gambli ng, taxes on advertisements, state cesses and surcharges 
and entry tax, not levied by local bodies. 
27 Reserve Bank of India:  Financial Stability Report, March 2010. 
28 Economic Survey, 2010-11, Chapter 5:  Financial Intermediation and Markets. India WT/TPR/G/249 
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55. Banking sector reforms in India are based on, inter alia,  strengthening of prudential norms 
and market discipline, adoption of appropriate  international benchm arks, management of 
organisational change and cons olidation, technological upgradation, and human resource 
development.  All commercial banks in India, ex cluding regional rural ba nks and local area banks, 
became Basel II compliant as on 31 March 2009. 
(3) REFORMS IN FOREIGN INVESTMENT POLICY  
56. An objective of the Government is to a ttract foreign investment for growth and 
development.  India has evolved a liberal and transp arent policy on foreign direct investment (FDI).  
The liberal investment regime is complemented by a moderate and stable tax regime.  Tax holidays 
and other such special incentives are available fo r investment in certain sectors (for example, 
infrastructure projects).  A single-window facility in the form of a Foreign Investment Promotion Board (FIPB) has been made available to fore ign investors for seeking approval of investment 
proposals.  India already has in place a stable inv estment policy with a long term perspective, which 
has increased the confidence of foreign i nvestors in India's investment policy. 
57. India's FDI policy has been progressively li beralized and rationalized since 1991 through 
raising of sectoral investment caps, bringing more  industries under the automatic route and allowing 
FDI in more sectors.  In 2000, Government allo wed FDI up to 100% under the automatic route for 
most activities, except for a small negative list, where either the automatic route was not made 
available or limits were placed on FDI.  Further liberalization took place in 2008, when the Government allowed FDI in most sectors of the economy, either through the Government approval 
route or the automatic route of RBI.
29  This included allowing the raising of FDI caps in the civil 
aviation sector;  and rationalisation of the FDI policy in the petroleum and natural gas sector. 
58. Since 31 March 2010, the Department of Industr ial Policy and Promotion has been bringing 
out bi-annually, a consolidated FDI policy circul ar, integrating all regula tions pertaining to FDI 
policy.30 
(4) INDUSTRIAL REFORMS  
59. The industrial policy since 1991 has focused on deregulation, discontinuation of licensing 
requirements, removal of conditions for expansio n of large scale industries, de-reservation of 
industrial sectors for SMEs (small and medium en terprises), encouragement to competition, removal 
of restrictions on import of foreign technology and en couragement to foreign investment in industries.  
These policies have been pursued and deepened.  Some  initiatives have been taken in recent years to 
further simplify the policy.  For example, in 2009,  in the policy for import of foreign technology, the 
limits on payments for royalty, lump sum fee for transfer of technolog y, use of trademark/brand name, 
etc., were done away with and such payments we re brought under the automatic route, without any 
requirement of Government approval.  To further encourage technology inflows into the country, the 
condition for prior approval in case of existing join t ventures/technical collaborations in the same 
"field" has been removed with effect from 1 Apr il 2011.  India has also prepared a discussion paper 
on National Manufacturing Policy and inv ited suggestions from stakeholders. 
60. The Micro, Small and Medium Enterpri se Development (MSMED) Act 2006 redefined 
micro, small and medium enterprises on the basis of  the level of investment.  The Act provides for 
                                                      
29 Except in sectors like retail trading (except single brand product retailing), atomic energy, lottery 
business, gambling and betting, business chit fund, Nidhi co mpanies, trading in transferable development rights 
(TDR) and activities/sectors not opened to private sector investment. 
30 The consolidated circular on FDI Policy is av ailable at DIPP's website http://dipp.nic.in/. WT/TPR/G/249 Trade Policy Review 
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facilitating the promotion and development of micr o, small and medium enterprises and enhancing 
their competitiveness.  The th rust of reforms is to make  MSMEs globally competitive through 
technological upgradation, skill development, a cl uster development approach, etc.  The MSME 
sector now contributes significantly to ma nufacturing output, employment and exports.31 
61. The disinvestment policy of the Government is aimed at improving corporate governance, 
and bringing about greater transparency, accountability and market discipline within the central public 
sector enterprises (CPSEs).  The current policy was adopted in November 2009 which has the 
following approach to disinvestment:  (i) already listed profitable CPSEs (not meeting the mandatory 
shareholding of 10%) are to be made compliant by "Offer for Sale" by Government or by the CPSEs 
through issues of fresh shares or a combination of  both;  (ii) unlisted CPSEs with no accumulated 
losses and having earned net profit in the three proceeding consecutive years to be listed;  
(iii) follow-on public offer would be considered in  respect of profitable CPSEs having 10% or higher 
public ownership, taking into consideration the need  for capital investment of CPSE, on a case to case 
basis.  The Government could simultaneously or  independently offer a portion of its equity 
shareholding in conjunction;  and (iv) disinvestment  to be considered on merits and on case-to-case 
basis since each CPSE has a different equity structur e, financial strength, fund requirement, sector of 
operation and factors that do not permit a uniform pattern of disinvestment. 
62. India is continuing efforts towards simplif ying and streamlining IPR regulations.  The 
Trademark Amendment Bill 2010 was passed by the Par liament to align the Indian Trademark statute 
with the provisions of the Madrid Protocol.  In addition, the Office of the Controller General of 
Patents, Designs and Trade Marks has now made the trademarks database freely accessible.  The 
Traditional Knowledge Digital Library (TKDL) MOU have been signed with the European Patent 
Office (EPO) and the USPTO in 2009, with the UKIPO, Canadian Intellectual Property Office 
(CIPO), Intellectual Property Australia and Japan Patent Office in 2011. 
IV. TRADE POLICY 
(1) FOREIGN TRADE POLICY  
63. India believes that trade can contribute signi ficantly to economic growth and employment 
generation.  The Foreign Trade Policy (FTP) 20 04-09 set out the objective of doubling India's 
percentage share in total global merchandise trade w ithin a time-frame of five years and to use trade 
as an effective instrument of economic  growth and employment generation.32  India's exports 
increased from US$63 billion in 2003-04 to US$185 billion in 2008-09.  India's share in global 
merchandise trade increased from 0.8% in 2003 to 1. 4% in 2008, as per WTO estimates.  India's share 
in total global goods and services trade was 0.9% in  2003, which increased to 1.6% in 2008.  The 
increase in exports in the period 2004-09 created nearly 14 million jobs directly or indirectly. 
64. The Foreign Trade Policy 2009-14 was announced in 2009 in challenging times, when there 
was a slowdown in exports all ove r the world due to the global economic crisis.  The immediate 
objective of FTP 2009-14, therefore, was to arrest and reverse the declining trend of exports.  The 
Policy aimed for an annual export growth of 15% with an annual export target of US$200 billion by 
March 2011.  It also envisaged returning to a high  export growth path of around 25% per annum in 
the remaining three years of the FTP i.e. up to 2014.   The long-term policy objective of the FTP is to 
                                                      
31 Annual Report 2010-11, Ministry of Micro, Small and Medium Enterprises, Government of India.  It 
is estimated that in terms of value, the MSME sector accounts for about 45% of the manufacturing output and 
around 40% of the total exports of the country. 
32 Foreign Trade Policy 2009-2014, Department of Commerce, Government of India, available at 
http://www.doc.nic.in/. India WT/TPR/G/249 
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double India's share in global trade by 2020.  Special emphasis has been given to employment 
intensive sectors such as textiles, leather, handicrafts , etc., to arrest the job losses in these sectors in 
the wake of the global recession. 
65. India's export performance exceeded the target of US$200 billion in 2010-11 by 
US$46 billion.  India now aims to achieve exports  of US$500 billion by 2013-14, with a compound 
annual growth rate of 26.7%, through  quality upgradation of export pr oducts;  export of high 
technology products;  diversification of markets;  e xpansion of the export basket;  and moving up the 
value chain.33 
66. India has put in place a policy for developing sp ecial economic zones (SEZs), with the main 
objectives of development of infrastructure fac ilities, generation of additional economic activity, 
promotion of exports of goods and services, prom otion of investment from domestic and foreign 
sources and creation of employment opportunities. 
(2) CONTINUOUS TARIFF LIBERALIZATION  
67. By March 2001, India had removed all quan titative restrictions maintained earlier on 
account of balance of payment reasons.  Further, following the opening up of the economy in 1991, 
India has progressively simplified and autonomously lowered its import duties.  To bring about a 
moderate and simplified tariff structure and to a lign it to ASEAN levels, the peak rate of basic 
customs duty on non-agricultural products was brought  down progressively from 150% in 1991-92 to 
40% in 1999-00 and to 10% in 2007-08.  Free trad e agreements have further reduced tariffs. 
68. As a result of progressive reduction of customs duty rates and exemptions on various counts, 
customs duty realization as a percentage of the valu e of imports has been declining quite rapidly, 
which is an indicator of liberalization.  It declined from 21.9% in 1999-00 to 7.4% in 2008-09. 
(3) TRADE FACILITATION MEASURES  
69. In order to reduce transaction time and costs, a number of initiatives have been taken in the 
recent past.  A provision of "self-assessment",  both for imported goods and export goods, was 
introduced, by amending the Customs Act 1962 in th e Budget of 2011-12.  After the implementation 
of the electronic data interchange system and risk management system, the practice in most customs 
formations has been to carry out assessment on selected  bills of entry based on risk parameters and to 
allow the balance to be facilitated.  While aligning  the legal provisions with current practices, the 
proposed amendments would move the Customs admi nistration further along the path of trust-based 
compliance management.  These amendments would provide a basis for progressive reduction in the 
levels of Customs intervention in clearance of im port/export cargo leading to significant enhancement 
in facilitation for compliant trade.  This would re lease resources for more incisive verification and 
audit of consignments that involve a high degree of  risk, enabling the Customs to strike an optimal 
balance between the concerns of trade facilitati on on the one hand and enforcement on the other. 
70. A Task Force on Transaction Costs in Exports was set up in 2009 to identify the elements of 
transaction costs that could be addressed in the sh ort-term with the objective of providing immediate 
benefits to traders.  It was also mandated to sugg est measures to reduce transaction costs and the time 
involved in foreign trade transactions.  The Task Force has identified 44 issues for reduction of transaction costs out of which 21 issues have already been addressed. 
                                                      
33 India:  Department of Commerce:  Press Release "Salient Points of Strategy for Doubling Exports in 
Next Three Years 2011-12 to 2013-14", dated 3.05.2011. WT/TPR/G/249 Trade Policy Review 
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(4) TRADE POLICY CHALLENGES FACING INDIA  
71. India's share of world trade continues to be a small, with only around 1.3% of global 
merchandise exports (2009).  However, it has been  subjected to a disproportionate number of trade 
defense actions.  The large scale initiation of anti-du mping action has led to considerable disruption 
and loss of trade.  Out of the 90 anti-dumping measures taken against India during the period 
January 1995 to June 2010, 22 relate to chemical s, 19 to plastics, 11 to textiles and 26 to metal 
products (mainly iron and steel) – areas in which I ndia has gained a degree of comparative advantage 
globally in recent times. 
72. The rising incidence of non-tariff barriers, in the form of sanitary and phytosanitary (SPS) 
measures and technical barriers to trade (TBT), has emerged as a major trade concern.  New SPS and 
TBT–related measures, very often have market access implications and it is, therefore, important that 
these are imposed without causing unjustifiable social and economic cost on exporting countries. 
V. INDIA AND THE WTO 
(1) WTO  NEGOTIATIONS  
73. India has always stood for an open, equitable, predictable, non-discriminatory and 
rules-based multilateral trade regime.  India is a founding member of the GATT and the WTO and 
believes that such a regime best serves the needs of developing countries.  The Doha Round of trade 
negotiations in the WTO provides a historic opportunity to correct distortions in global trade and to improve and strengthen the rules to enable developing  countries to play a greater role in world trade. 
74. With development at the heart of the Doha De velopment Agenda, it is important to ensure 
that the demands on developing Members are co mmensurate with their economic capacities, 
development levels and needs.  The requirements of developing countries in terms of financial and 
technical assistance for capacity building have to be  addressed on priority, in order to achieve truly 
meaningful results from further trade liberalization efforts. 
75. Agriculture continues to be a means of live lihood for large sections of the population in 
many developing countries.  With about 58% of the population still de pendent on agriculture for their 
livelihood, India has a substantial stake in the Ag riculture negotiations.  India's priority in the 
Agriculture negotiations has been to safeguard the interests of low income and resource poor 
agricultural producers, in terms of their food and liv elihood security and rural development needs.  A 
substantial and effective reduction in trade-distorti ng domestic support, the elimination of all forms of 
agricultural export subsidies and improvements in th e transparency and predictability of agricultural 
trade would be important benchmarks  of this Round.  This  would level the playing field for farmers in 
the developing world and enable them to access global markets. 
76. In this Round it is important for India and othe r developing countries to be able to protect 
the interests of their nascent and vulnerable indus tries.  These include the micro, small and medium 
enterprises, employment intensive sectors, industries employing socially and economically vulnerable 
sections such as women, traditional artisans and fish ermen, as well as industri es in the rural, semi 
urban, economically disadvantaged  and geographically inaccessible regions of the country.  The 
development interests of industries cannot be  sacrificed for mercantilist considerations. 
77. Notwithstanding the status of the Doha Round talk s, India is of the view that the credibility 
of the WTO should not be allowed to be eroded.  The WTO provides a solid a nd stable framework for 
global trade relations and this multila teral rules-based system is critical to the vitality of the world 
economy. India WT/TPR/G/249 
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(2) DUTY FREE QUOTA FREE (DFQF)  ACCESS  
78. India became the first developing country to extend duty free quota free (DFQF) access to 
all least developed countries (LDCs) in line with  the WTO's Hong Kong Ministerial mandate.  India's 
Duty Free Tariff Preference (DFTP) Scheme for LDCs  came into effect in April 2008 with tariff 
reductions spread over five years.  This Scheme c overs about 92.5% of global exports of all LDCs and 
provides duty free and preferential tariff access on 94% of India's tariff lines;  27 countries (19 of 
which are from Africa) are already availing of the market access and the rest are in the process of 
completing their documentation for joining the scheme. 
VI. REGIONAL AND BILATERAL ARRANGEMENTS 
79. Free trade agreements (FTAs), in India's point of view, should be "building blocks" towards 
achieving the overall objective of trade liberalization and complement the multilateral trading system.  
India's initial regional trade engagements were th e Bangkok Agreement (1975), the Global System of 
Trade Preferences (GSTP , 1988), and the SAARC PTA (SAPTA, 1993).  India has built on these 
initiatives to engage all major continents and trading blocs.  So far India has concluded 10 free trade 
agreements, 5 limited scope preferential trade agreements and is in the process of 
negotiating/expanding 17 more agreements.  India's important trade engagements are briefly listed in 
this section. 
(1) SOUTH ASIA REGION  
80. The seven member countries of SAARC (India,  Pakistan, Nepal, Sri Lanka, Bangladesh, 
Bhutan and Maldives) signed the Agreement on S outh Asian Free Trade Area (SAFTA) in the year 
2004 which was joined by Afghanistan as the eighth member in 2007.  The signing of the SAARC 
Agreement on Trade in Services (SATIS, 2010) has d eepened the engagement.  In addition, India has 
bilateral trade agreements providing preferential ma rket access to Bhutan and Nepal, a preferential 
trade agreement (PTA) with Afghanistan (2003), and a free trade agreement with Sri Lanka (1998) 
which is being expanded into a Comprehensive Economic Partnership Agre ement (CEPA) covering 
trade in services and investment. 
(2) SOUTH EAST AND EAST ASIA 
81. The India ASEAN Trade in Goods Agreemen t became operational in January 2010 and 
further negotiations on Services and Investments are ongoing.  Besides this India has signed a bilateral agreement with Thailand (2004) whic h is being expanded, a Comprehensive Economic 
Cooperation Agreement (CECA) with Singapore ( 2005), a CECA with Malaysia (2011) and has 
launched negotiations for a similar comprehensive ag reement with Indonesia.  An India-Republic of 
Korea Comprehensive Economic Partnership Agreemen t (CEPA) came into force in 2010.  A CEPA 
with Japan was signed in February 2011. 
(3) A
USTRALIA AND NEW ZEALAND  
82. India has launched negotiations with New Ze aland (2010) and Australia (2011) for a 
comprehensive agreement, coveri ng economic cooperation, trade in goods, services and investments. 
(4) AMERICAS  
83. Limited scope preferential trade agreemen ts (PTA) were signed with MERCOSUR and 
Chile in 2004 and 2006, respectively.  India is  in the process of expanding these Agreements by 
widening the product coverage and deepening preferences. WT/TPR/G/249 Trade Policy Review 
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84. India and Canada have launc hed negotiations in 2010 for a comprehensive agreement, 
covering economic cooperation, trade in goods, services and investments. 
(5) EUROPE  
85. India is currently negotiating a Broad Based Tr ade and Investment Agreement (BTIA) with 
the European Union (27 countries) and the EFTA countries (Iceland, Norway, Liechtenstein and 
Switzerland).  The negotiations cover goods, ser vices, investment, sanitary and phytosanitary 
measures and technical barriers to trade, trad e facilitation and customs co-operation, etc. 
(6) MIDDLE EAST AND AFRICA  
86. India is negotiating a preferential agreement with the Southern African Customs Union 
(SACU).  Negotiations are also underway for FTAs with the Gulf Cooperation Council (GCC) and 
Mauritius. 
(7) OTHER AGREEMENTS AND NEGOTIATIONS  
87. As an active member of the Global System of Trade Preferences (GSTP) promoting 
South-South trade, India participated in the third round of negotiations which were concluded in 2010. 
88. The Asia Pacific Trade Agreement (APTA , 2005), operational among five countries, 
namely, Bangladesh, China, India, the Republic  of Korea, and Sri Lanka was the result of 
re-negotiations on the text of the Bangkok Agreement (1975).  India is currently participating in the 
Fourth Round of Negotiations, which include the areas of goods, services, trade facilitation and 
investment. 
89. India, as a member of a regional group consisting of Bangladesh, India, Myanmar, 
Sri Lanka, Thailand (BIMSTEC, 1997)  is negotiating an FTA in goods, services and investment 
amongst the members. 
VII. CONCLUSION 
90. The period under review has been a tumultuous on e, with the global economic crisis shaping 
events and consequently, public policy, over much of this period.  The Indian economy weathered the 
storm with remarkable resilience due, in large part, to the steady and calibrated con tinuation of the 
reform process that was set in motion two decades ago. 
91. There are, undoubtedly, many challenges, am ongst which the high rate of inflation, 
particularly in food items, is a major one.  The un certainty of the global economic outlook also casts a 
shadow on prospects for economic growth.  To sustai n the tempo of growth, the Government is taking 
various policy measures to address the major challe nges, namely, improving physical and social 
infrastructure, enhancing agricultural growth and en suring food security.  India's development strategy 
will be firmly focussed on making the growth pro cess socially inclusive and regionally balanced. 
92. As part of the reform process, India embraced  globalisation without losing sight of the need 
to contain and deal with some of its destabilising e ffects.  The country's economic policies in general, 
and trade policies in particular, have been tailored to ensure inclusive growth.  The emphasis on skill 
development, education and health  and financial inclusion will help in harnessing the tremendous 
opportunities opened up by globalisatio n and the greater integration of the Indian economy with the 
rest of the world. India WT/TPR/G/249 
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93. During the period under review, India's engageme nt with the world continued to expand, 
slowly but steadily.  India's commitm ent to trade openness did not falter even at the peak of the global 
crisis.  Many export restrictions were rolled b ack and several safeguard investigations were 
terminated without imposing duty.  Similar re straint was shown in respect of anti-dumping 
investigations. 
94. India took these steps in a global environment in  which, regrettably, numerous trade barriers 
were being erected.  Moreover, unlike the more tr ansparent tariff measures that developing countries 
tend to use, these were mostly non-tariff barriers, fo r example, administrative regulations, unjustified 
applications of sanitary and phytosanitary measures  and technical barriers to trade, slower customs 
procedures and additional requirements in the ad ministration of import licensing measures.  In 
addition, this period witnessed a slew of non-WTO co mpatible measures such as explicit subsidies for 
industries and preferences for national products over imports. 
95. Not only did India unilaterally roll back its trad e defence measures, but it in fact increased 
its engagement with the world during this peri od through regional, preferential and free trade 
agreements.  Moreover, India kept its market open for the LDCs through its Duty Free Tariff 
Preference Scheme. 
96. In a large and complex economy like India, th e diversities and inequalities in income and 
levels of development present e normous challenges to policy make rs.  Economic policy, including 
trade policy, has to balance the requirements posed  by increasing globalisation, with the need to 
ensure that the benefits of economic growth, deve lopment and global integration reach the poorest and 
most economically backward sections of the population.   In any reform process, regardless of whether 
it is a developed or a developing country, there w ill be various pulls and pressures along the way.  
Despite tremendous social and economic challenges, India has made considerable progress, managing 
all kinds of conflicting pressures along the way, to re ach the position it is in today – one of the fastest 
growing economies in the world.  India is comm itted to continuing along this path of reform, 
openness and greater integration with the global economy. 
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