MCO – 15
India’s Foreign Trade and Investment
MCO 15 Solved Free Assignment 2023
MCO 15 Solved Free Assignment January 2023
Q 1. (a) Explain in brief the government policy towards foreign capital.
Ans. Foreign capital refers to the funds or assets invested in a country by individuals, organizations, or governments from other nations.
The government’s policy towards foreign capital depends on several factors such as economic development, political stability, and the government’s ideology.
Governments may welcome foreign capital as it can bring in much-needed investments, technology, and expertise.
Foreign capital can also create employment opportunities, increase productivity, and improve the standard of living in a country.
However, governments may also be cautious about allowing foreign capital, as it may lead to the exploitation of natural resources, the loss of local jobs, and dependence on foreign investors.
The policy towards foreign capital can be broadly divided into two categories – liberal and restrictive. MCO 15 Solved Free Assignment 2023
A liberal policy towards foreign capital encourages foreign investments and allows foreign investors to enter the domestic market with ease.
In contrast, a restrictive policy aims to limit the entry of foreign investors or restrict their activities in the domestic market.
Liberal Policy towards Foreign Capital :
Many governments follow a liberal policy towards foreign capital, as they see it as an opportunity to attract investments, create employment, and enhance the competitiveness of the domestic market. The policy towards foreign capital includes the following measures:
Openness to foreign investment: The government may allow foreign investors to invest in various sectors of the economy, such as manufacturing, services, and infrastructure. MCO 15 Solved Free Assignment 2023
The government may also allow foreign investors to hold shares in domestic companies or establish joint ventures with local companies.
Simplification of investment procedures: Governments may simplify the procedures for foreign investors to obtain licenses, permits, and approvals to invest in the domestic market.
This helps to reduce the time and cost involved in starting a business and encourages more foreign investments.
Protection of foreign investors’ rights: Governments may provide legal protection for foreign investors’ rights, such as the right to repatriate profits, the right to transfer funds, and the right to settle disputes through arbitration.
Provision of incentives: The government may provide incentives, such as tax exemptions, subsidies, and low-interest loans, to attract foreign investments.
These incentives can help to offset the risks and costs associated with investing in a foreign country.MCO 15 Solved Free Assignment 2023
Restrictive Policy towards Foreign Capital :
Governments may adopt a restrictive policy towards foreign capital to protect domestic industries, preserve natural resources, and maintain political sovereignty. The policy towards foreign capital includes the following measures:
Limitation of foreign ownership: The government may limit the percentage of foreign ownership in domestic companies or restrict foreign investors from owning certain types of assets, such as land or natural resources.
Imposition of regulations: Governments may impose regulations on foreign investors to control their activities in the domestic market.
For example, the government may require foreign investors to hire a certain percentage of local workers, use domestic suppliers, or produce goods that meet certain quality standards.MCO 15 Solved Free Assignment 2023
Screening of foreign investments: Governments may screen foreign investments to ensure that they are consistent with national interests.
The government may require foreign investors to obtain approval from regulatory agencies or conduct background checks on foreign investors.
Nationalization of assets: In some cases, the government may nationalize foreign-owned assets to protect national interests.
Nationalization involves the transfer of ownership of private assets to the government, which can lead to compensation for the affected parties.
Factors influencing the Policy towards Foreign Capital :
Several factors influence the policy towards foreign capital, including economic development, political stability, and the government’s ideology.
For example, developing countries may adopt a liberal policy towards foreign capital to attract investments and enhance their economic development.
In contrast, developed countries may adopt a restrictive policy towards foreign capital to protect domestic industries and maintain political sovereignty.
Political stability is also a crucial factor in determining the policy towards foreign capital. MCO 15 Solved Free Assignment 2023
Countries with stable political environments are more likely to adopt a liberal policy towards foreign capital as they are less concerned about the risks associated with foreign investments.
In contrast, countries with political instability may be more cautious about allowing foreign capital, as they may fear that foreign investors could exacerbate political tensions or interfere in domestic affairs.
The government’s ideology also plays a role in shaping the policy towards foreign capital. Governments that prioritize economic growth and free markets are more likely to adopt a liberal policy towards foreign capital.
In contrast, governments that prioritize social welfare or national sovereignty may be more inclined to adopt a restrictive policy towards foreign capital.
Benefits of Foreign Capital :
Foreign capital can bring several benefits to a country, including the following:
Increased investment: Foreign capital can bring in much-needed investments, which can help to finance infrastructure development, boost productivity, and create employment opportunities.MCO 15 Solved Free Assignment 2023
Transfer of technology and expertise: Foreign investors often bring with them advanced technology and expertise, which can help to improve the quality of goods and services produced in the country.
Access to global markets: Foreign investors can provide access to global markets, which can help domestic companies to expand their business and compete internationally.
Diversification of the economy: Foreign capital can help to diversify the economy by introducing new sectors or industries, which can reduce dependence on traditional sectors and improve resilience to economic shocks.
Challenges of Foreign Capital :
Foreign capital can also pose several challenges to a country, including the following:
Dependency on foreign investors: Over-reliance on foreign investors can create a situation of dependency, where the domestic economy becomes vulnerable to external shocks such as changes in foreign investor sentiment.
Loss of control over natural resources: Foreign investors may exploit natural resources without regard for environmental or social concerns, which can lead to depletion of natural resources or negative social impacts.
Competition with local businesses: Foreign investors may compete with local businesses, which can lead to the loss of local jobs and the displacement of local businesses.MCO 15 Solved Free Assignment 2023
Social and cultural impacts: Foreign investors may introduce new cultural values and practices that are not compatible with local traditions or social norms, which can lead to social tensions or conflicts.
Aspects of government policy towards foreign capital:
Types of foreign capital: Governments may differentiate between different types of foreign capital based on the nature and source of the investment.
For example, they may distinguish between portfolio investment, which involves buying stocks or bonds in domestic companies, and foreign direct investment (FDI), which involves setting up a subsidiary or acquiring a stake in a domestic company.
Governments may also differentiate between investments from developed countries and investments from developing countries, as they may have different implications for the domestic economy.MCO 15 Solved Free Assignment 2023
Investment screening and approval process: Governments may establish a screening and approval process for foreign investments to assess their potential impact on national security, competition, and other strategic concerns.
Some countries have established a formal foreign investment review mechanism, such as the Committee on Foreign Investment in the United States (CFIUS), which reviews certain foreign investments to ensure that they do not pose a threat to national security.
Investment promotion and incentives: Governments may also adopt measures to promote foreign investment, such as tax incentives, streamlined regulatory procedures, and investment promotion agencies.
These measures aim to attract foreign investors and signal the government’s commitment to creating a favorable investment climate.
However, they may also lead to a race to the bottom, where countries compete to offer the most attractive incentives at the expense of tax revenues and regulatory standards.MCO 15 Solved Free Assignment 2023
Corporate social responsibility: Governments may encourage or require foreign investors to adopt corporate social responsibility (CSR) practices that respect environmental, social, and human rights standards.
This can help to mitigate the negative social and environmental impacts of foreign investment and ensure that foreign investors contribute to sustainable development.
However, CSR practices may be difficult to enforce and may not address underlying power imbalances between foreign investors and local communities.
Capital controls: Governments may impose capital controls to regulate the flow of foreign capital in and out of the country.
Capital controls can help to prevent excessive inflows or outflows of foreign capital, which can destabilize the domestic economy or create speculative bubbles.
However, capital controls can also limit the ability of domestic companies to access foreign capital and reduce the efficiency of the financial system.
Bilateral and multilateral investment treaties: Governments may negotiate bilateral or multilateral investment treaties with other countries to protect foreign investors and encourage investment flows.
These treaties may include provisions on investment protection, dispute resolution, and market access. MCO 15 Solved Free Assignment 2023
However, they may also limit the ability of governments to regulate foreign investment in the public interest and expose governments to costly investor-state disputes.
Political and public opinion: Finally, government policy towards foreign capital may also be influenced by political and public opinion.
Foreign investment may be perceived as a threat to national sovereignty, cultural identity, or labor standards, leading to public protests and political opposition.
Governments may need to balance the economic benefits of foreign investment with the political and social costs, and engage in transparent and inclusive policy-making processes to address public concerns.
(b) Discuss the factors influencing the growth of the world trade.
Ans. (B) The growth of world trade is influenced by several factors, including changes in technology, shifts in economic power, changes in trade policies, and global economic integration.
Technological Changes MCO 15 Solved Free Assignment 2023
Technological changes have been one of the most significant drivers of the growth of world trade.
Innovations in transportation, communication, and information technology have made it easier and cheaper to move goods, services, and capital across borders.
The development of containerization, for example, has reduced the cost and time required to transport goods, making it possible to ship products from one part of the world to another at a lower cost.
Similarly, advances in communication technology have made it easier to coordinate production and distribution across different countries, enabling companies to operate global supply chains more efficiently.
Another significant technological change that has contributed to the growth of world trade is the rise of e-commerce.
The growth of the internet and digital platforms has enabled companies to sell goods and services to customers around the world, breaking down geographical barriers and expanding their customer base.
Online marketplaces such as Amazon, Alibaba, and eBay have made it easier for small businesses to access global markets and compete with larger companies.
Shifts in Economic Power MCO 15 Solved Free Assignment 2023
Shifts in economic power have also influenced the growth of world trade. The rise of emerging economies such as China, India, and Brazil has increased demand for goods and services from developed countries, while also creating new markets for exports from these countries.
Emerging economies have become important players in world trade, with China becoming the world’s largest exporter and importer of goods.
The growth of emerging economies has also led to changes in the composition of world trade.
Emerging economies have become major exporters of manufactured goods, while developed countries have shifted towards services and high-tech products.
This has created new opportunities for specialization and trade, as countries can specialize in producing the goods and services in which they have a comparative advantage and trade with other countries.
Changes in Trade Policies MCO 15 Solved Free Assignment 2023
Changes in trade policies have also influenced the growth of world trade. Governments can use trade policies to promote or restrict trade, depending on their goals and interests.
Trade policies can include tariffs, subsidies, import quotas, and other measures that affect the flow of goods and services across borders.
The growth of world trade has been facilitated by a shift towards more liberal trade policies. Since the end of World War II, there has been a trend towards reducing trade barriers and promoting free trade.
This has been driven by a belief in the benefits of open trade, such as increased efficiency, innovation, and economic growth.
The establishment of the World Trade Organization (WTO) in 1995 and the signing of numerous bilateral and multilateral trade agreements have further facilitated the growth of world trade. MCO 15 Solved Free Assignment 2023
However, there has also been a backlash against liberal trade policies in recent years. Some countries have become more protectionist, imposing tariffs and other barriers to protect domestic industries and jobs.
The Trump administration, for example, pursued a policy of “America First,” which involved imposing tariffs on imports and renegotiating trade agreements.
The COVID-19 pandemic has also led to restrictions on trade in some countries, as governments seek to protect their citizens and secure essential goods.
Global Economic Integration
Global economic integration has also influenced the growth of world trade. As countries become more interconnected through trade, investment, and other forms of economic cooperation, the barriers to trade are reduced, and the benefits of trade are amplified. MCO 15 Solved Free Assignment 2023
Global economic integration has enabled companies to access larger markets, benefit from economies of scale, and diversify their production and sourcing.
One of the most significant forms of global economic integration has been the growth of regional economic blocs, such as the European Union (EU) and the North American Free Trade Agreement (NAFTA).
These blocs have created a framework for closer economic integration among member countries, reducing barriers to trade, and promoting cross-border investment.
The EU, for example, has eliminated tariffs and non-tariff barriers among its member countries, creating a single market with over 500 million consumers.
Another form of global economic integration is foreign direct investment (FDI). FDI occurs when a company invests in a foreign country by establishing a subsidiary or acquiring a local company. MCO 15 Solved Free Assignment 2023
FDI can bring new technology, know-how, and managerial skills to the host country, creating new jobs and stimulating economic growth.
FDI can also provide a source of capital for companies in developing countries, enabling them to expand their operations and access new markets.
In addition to FDI, cross-border mergers and acquisitions (M&A) have also contributed to the growth of world trade. M&A involves the acquisition of a company in one country by a company in another country.
M&A can facilitate the transfer of technology and know-how between countries, as well as enable companies to access new markets and diversify their operations.
Global economic integration has also been facilitated by the growth of global value chains (GVCs). GVCs refer to the international fragmentation of production, where different stages of production are carried out in different countries.
GVCs have enabled companies to access lower-cost inputs, such as labor and raw materials, from different countries, reducing production costs and increasing efficiency. MCO 15 Solved Free Assignment 2023
GVCs have also created new opportunities for trade, as different stages of production are carried out in different countries, and final products are traded across borders.
Q 2. (a) Briefly explain the reforms undertaken by government for the growth of textile and garment industry in India.
Ans. The textile and garment industry is a crucial sector of the Indian economy, contributing significantly to the country’s exports and employment generation.
Over the years, the Indian government has taken several steps to promote the growth of the industry through various policy and regulatory reforms.
Technology Upgradation Fund Scheme (TUFS)
The Technology Upgradation Fund Scheme (TUFS) was launched by the Indian government in 1999 to facilitate technology upgradation and modernization of the textile and garment industry. MCO 15 Solved Free Assignment 2023
Under this scheme, the government provides interest subsidies on loans taken by textile and garment manufacturers for the acquisition of new machinery, equipment, and technology.
The scheme has been instrumental in upgrading the technology and increasing the competitiveness of the industry.
Integrated Skill Development Scheme (ISDS)
The Integrated Skill Development Scheme (ISDS) was launched by the government in 2010 to address the issue of skill shortage in the textile and garment industry.
The scheme provides training to workers and technicians in various aspects of the industry, including spinning, weaving, processing, designing, and garment making.
The objective of the scheme is to create a skilled workforce that can meet the industry’s evolving demands and enhance its productivity.
National Textile Policy (NTP) MCO 15 Solved Free Assignment 2023
The National Textile Policy (NTP) was launched by the government in 2000 to provide a comprehensive framework for the development of the textile and garment industry.
The policy aimed to enhance the competitiveness of the industry by promoting investment, technology upgradation, skill development, and exports.
The policy also focused on the development of the handloom and handicrafts sector and the promotion of eco-friendly textiles.
Goods and Services Tax (GST)
The Goods and Services Tax (GST) was implemented by the Indian government in 2017 to simplify the taxation system and promote ease of doing business.
The GST replaced various indirect taxes, such as excise duty, service tax, and value-added tax, with a single tax regime.
The implementation of GST has reduced the tax burden on textile and garment manufacturers and improved the industry’s supply chain efficiency.
National Handloom Development Program (NHDP)
The National Handloom Development Program (NHDP) was launched by the government in 2007 to promote the development of the handloom sector.
The program aimed to provide financial assistance and support to handloom weavers and artisans and enhance their competitiveness in the domestic and international markets. MCO 15 Solved Free Assignment 2023
The program also focused on the development of handloom clusters, marketing support, and skill development.
The government has established textile parks in various parts of the country to promote the development of the textile and garment industry.
These parks provide infrastructure facilities, such as power, water, and road connectivity, to textile and garment manufacturers.
The parks also provide a platform for manufacturers to share resources and collaborate on research and development.
The government has also provided financial assistance to manufacturers for setting up units in these parks.MCO 15 Solved Free Assignment 2023
Production Linked Incentive (PLI) Scheme
The Production Linked Incentive (PLI) scheme was launched by the government in 2020 to promote the domestic production of certain goods, including textiles and garments.
Under the scheme, textile and garment manufacturers will be provided financial incentives for increasing their production and exports.
The scheme aims to enhance the competitiveness of the industry and reduce the country’s dependence on imports.
The National Handicrafts Development Program (NHDP)
The National Handicrafts Development Program (NHDP) was launched by the Indian government to promote the growth and development of the handicrafts industry in the country. MCO 15 Solved Free Assignment 2023
The program aims to preserve and promote traditional Indian handicrafts while ensuring the economic empowerment of artisans and weavers.
It provides financial assistance, training, and marketing support to artisans and weavers.
Textile Upgradation Fund Scheme (TUFS)
The Textile Upgradation Fund Scheme (TUFS) was launched in 1999 to encourage technological upgradation and modernization of the textile industry.
The scheme provides financial support to textile units to upgrade their machinery, equipment, and technology.
The scheme has been instrumental in enhancing the competitiveness of the industry and improving its quality standards. MCO 15 Solved Free Assignment 2023
The Technology Mission on Cotton (TMC)
The Technology Mission on Cotton (TMC) was launched by the Indian government to promote research and development in the cotton sector.
The mission aimed to enhance cotton productivity, improve the quality of cotton, and increase the income of cotton farmers.
The TMC focused on technology upgradation, the use of hybrid seeds, crop diversification, and improved farming practices.
The Scheme for Integrated Textile Parks (SITP)
The Scheme for Integrated Textile Parks (SITP) was launched by the Indian government to provide infrastructure facilities to textile manufacturers.
Under the scheme, the government provides financial assistance to set up textile parks with integrated infrastructure facilities, such as power, water, and road connectivity. MCO 15 Solved Free Assignment 2023
The scheme has been instrumental in promoting the development of textile clusters and enhancing the competitiveness of the industry.
National Jute Policy
The National Jute Policy was launched by the Indian government to promote the growth of the jute industry.
The policy aims to increase the use of jute in various sectors, such as packaging, textiles, and handicrafts, and promote the development of jute-based industries.
The policy also aims to enhance the income of jute farmers and promote the use of eco-friendly jute products.
The Handloom Reservation Act MCO 15 Solved Free Assignment 2023
The Handloom Reservation Act was enacted by the Indian government to promote the development of the handloom industry.
The act provides for the reservation of certain items of clothing for handloom production, thereby promoting the use of handloom products.
The act has been instrumental in protecting the interests of handloom weavers and promoting the development of the handloom sector.
(b) Discuss the major challenges and opportunities of India’s trade prospects with USA.
Ans. (b) India and the United States of America have been strategic trading partners for many years. However, the trade relationship between the two nations has faced several challenges in recent times.
Protectionist Policies: The USA has adopted several protectionist policies, including tariff hikes and imposing trade barriers, which have negatively impacted Indian exports to the USA. MCO 15 Solved Free Assignment 2023
This has led to a trade deficit for India and has been a major challenge for India’s trade prospects with the USA.
Intellectual Property Rights (IPR) issues: India’s intellectual property rights policies have been a major issue for the USA.
The USA has criticized India’s IP laws, which they claim violate international standards and discourage investment in the country. This has been a major obstacle for India’s trade prospects with the USA.
Visa Issues: The USA has tightened visa norms for Indian professionals, which has led to a decline in the number of Indians going to the USA for work.
This has been a major challenge for Indian IT companies that have a significant presence in the USA. MCO 15 Solved Free Assignment 2023
Non-tariff barriers: Non-tariff barriers such as stringent quality standards, labelling requirements, and technical regulations have posed significant challenges for Indian exports to the USA.
Growing Market: The USA is a large and growing market for Indian goods and services. With a GDP of over $21 trillion, the USA presents a significant opportunity for Indian businesses to expand their reach and increase exports.
Strategic Partnership: India and the USA have a strategic partnership, which presents significant opportunities for trade and investment.
The two countries have been working towards strengthening their trade relationship and have signed several agreements to promote trade and investment.
Rising Demand for Indian Products: There is a rising demand for Indian products in the USA, particularly in the areas of textiles, pharmaceuticals, and automotive components.
This presents significant opportunities for Indian businesses to increase exports to the USA. MCO 15 Solved Free Assignment 2023
Digital India: The Indian government’s Digital India initiative presents significant opportunities for Indian IT companies to expand their reach in the USA.
The USA is a major market for IT services, and Indian companies have a significant presence in the country.
Renewable Energy: The USA is a major market for renewable energy, and India has emerged as a global leader in the renewable energy sector.
This presents significant opportunities for Indian businesses to expand their presence in the USA and increase exports.
Make in India: The Indian government’s Make in India initiative presents significant opportunities for Indian businesses to increase exports to the USA.
The initiative aims to promote manufacturing in India and has been successful in attracting investment from several countries, including the USA.
Bilateral Investment Treaty: The USA and India have been negotiating a bilateral investment treaty (BIT) for several years. If the treaty is finalized, it would provide significant opportunities for investment and trade between the two countries.
To overcome these challenges and take advantage of the opportunities presented by the trade relationship, India needs to focus on improving its infrastructure, increasing the ease of doing business, and promoting innovation and entrepreneurship. MCO 15 Solved Free Assignment 2023
The government should also work towards resolving the IPR issues and non-tariff barriers that have been a major obstacle to trade with the USA.
Indian businesses should focus on developing high-quality products and services that meet the requirements of the US market.
They should also invest in digital technologies and renewable energy to increase their competitiveness in the USA.
Finally, the USA and India should work towards finalizing the bilateral investment treaty, which would provide significant opportunities for investment and trade between the two countries.
This treaty would also help to address some of the challenges faced by Indian businesses in the USA, including visa norms and non-tariff barriers.
Overall, the USA and India have a lot to gain from a strong and mutually beneficial trade relationship.
While there are challenges to be addressed, the opportunities presented by the relationship are significant, and both countries should work towards realizing the full potential of their trade prospects. MCO 15 Solved Free Assignment 2023
Q 3. Comment on the following statements:
(a) An open foreign trade policy and an open external sector have created more problems for domestic economy than it has solved.
Ans. (a) The statement that an open foreign trade policy and an open external sector have created more problems for domestic economy than it has solved is a complex and controversial topic.
While there are certainly challenges associated with open trade policies, it is also true that such policies have brought significant benefits to many countries around the world.
One argument against open trade policies is that they can lead to job losses and lower wages in certain sectors of the economy.
When a country opens up its markets to foreign competition, domestic industries that are unable to compete on price or quality may be forced to downsize or even shut down altogether. MCO 15 Solved Free Assignment 2023
This can lead to unemployment and lower wages for workers in those industries. Furthermore, some argue that open trade policies can lead to the hollowing out of certain sectors of the economy, as firms move their production to countries where labor is cheaper.
Another argument against open trade policies is that they can exacerbate income inequality within countries. Some sectors of the economy benefit from open trade policies, while others suffer.
The sectors that benefit tend to be those that are able to compete effectively in the global market, while the sectors that suffer tend to be those that are unable to do so.
This can lead to a widening gap between rich and poor within countries, as those who work in the sectors that benefit from open trade policies see their incomes rise, while those who work in the sectors that suffer see their incomes fall.
On the other hand, there are several arguments in favor of open trade policies. One of the most important benefits of open trade policies is that they allow countries to specialize in the production of goods and services that they are most efficient at producing.
This can lead to higher productivity and economic growth, as countries are able to focus on what they do best. MCO 15 Solved Free Assignment 2023
Furthermore, open trade policies can lead to increased competition, which can help to drive innovation and reduce costs for consumers.
Another argument in favor of open trade policies is that they can help to reduce poverty and raise living standards in developing countries.
By allowing developing countries to export their goods and services to richer countries, open trade policies can provide a pathway for economic development and growth.
This can lead to higher incomes and improved living standards for people in developing countries.
In conclusion, while there are certainly challenges associated with open trade policies, it is difficult to argue that they have created more problems than they have solved.
The benefits of open trade policies, including increased productivity, economic growth, and reduced poverty, are significant and well-documented.
While it is important to be mindful of the potential downsides of open trade policies, it is clear that they have played a crucial role in the economic development of many countries around the world. MCO 15 Solved Free Assignment 2023
As such, it is important for countries to continue to pursue open trade policies, while also taking steps to address the challenges that they present.
(b) Service sector do not have any importance in India’s exports.
Ans. The statement that the service sector does not have any importance in India’s exports is not entirely accurate.
While it is true that the service sector has historically played a smaller role in India’s exports compared to the goods sector, the service sector has been growing rapidly in recent years and has become an increasingly important part of India’s export portfolio.
In the past, India’s exports were dominated by traditional goods such as textiles, leather, and agriculture products.
However, over the past few decades, there has been a shift towards more high-value-added goods such as pharmaceuticals, engineering goods, and chemicals.
In addition to this, the service sector has also emerged as an important contributor to India’s export earnings. MCO 15 Solved Free Assignment 2023
According to data from the Reserve Bank of India, services exports from India have grown from $8.8 billion in 2001-02 to $206.6 billion in 2019-20, a more than twenty-fold increase.
Services exports now account for approximately 40% of India’s total exports, up from just 17% in 2001-02.
The growth of the service sector has been driven by a variety of factors, including India’s highly educated and skilled workforce, the growth of the IT and software industries, and increasing demand for services such as healthcare and education.
One of the key advantages of the service sector is that it is less reliant on natural resources than the goods sector, which can be subject to fluctuations in commodity prices.
This means that the service sector is more resilient to global economic shocks and can help to diversify India’s export base.
Furthermore, the service sector is often characterized by higher-value-added activities such as research and development, which can lead to greater innovation and competitiveness. MCO 15 Solved Free Assignment 2023
However, there are also challenges associated with the service sector. For example, many service industries such as healthcare and education are highly regulated and may face barriers to entry in foreign markets.
In addition, some services such as tourism are vulnerable to external shocks such as political instability or natural disasters.
while it is true that the service sector has historically played a smaller role in India’s exports compared to the goods sector, the service sector has become an increasingly important part of India’s export portfolio in recent years.
The growth of the service sector has helped to diversify India’s export base and make it more resilient to global economic shocks.
However, there are also challenges associated with the service sector that need to be addressed, such as regulatory barriers and vulnerabilities to external shocks.
As such, it is important for India to continue to promote the growth of the service sector while also addressing these challenges.
(c) The Government of India is not committed towards promoting exports and has declared the gems & jewellery sector as a less important area for export promotion.
Ans. The statement that the Government of India is not committed towards promoting exports and has declared the gems & jewellery sector as a less important area for export promotion is not entirely accurate.
Firstly, the Government of India has been actively promoting exports through various initiatives and policies. MCO 15 Solved Free Assignment 2023
The ‘Make in India’ initiative launched in 2014 is aimed at promoting India as a global manufacturing hub and increasing exports from the country.
In addition, the Foreign Trade Policy (FTP) announced by the Government of India provides various incentives to exporters, such as the Merchandise Exports from India Scheme (MEIS) and the Export Promotion Capital Goods (EPCG) scheme.
Furthermore, the gems and jewellery sector has traditionally been one of India’s top export sectors, and the Government of India has recognized its importance for the country’s economy.
According to data from the Gems and Jewellery Export Promotion Council (GJEPC), the gems and jewellery sector accounted for around 13% of India’s total merchandise exports in 2020-21, with exports totaling USD 22.42 billion.
The Government of India has also taken various steps to promote the gems and jewellery sector, such as the establishment of the Special Notified Zone (SNZ) for diamonds and gems, and the introduction of the Gold Monetisation Scheme to encourage the recycling of gold and reduce the country’s reliance on imports.
However, it is true that the gems and jewellery sector has faced certain challenges in recent years, such as declining demand in key markets such as the US and Europe, and increasing competition from other countries such as China and Thailand.
In addition, the sector has also been impacted by regulatory issues such as the Goods and Services Tax (GST) introduced in 2017.
Despite these challenges, the Government of India has continued to support the gems and jewellery sector and has taken steps to address some of the issues facing the industry. MCO 15 Solved Free Assignment 2023
For example, the GST rate on cut and polished diamonds and precious stones was reduced from 3% to 0.25% in 2019, which has helped to reduce the compliance burden on the sector.
(d) India- SAARC trade relations are same as India-ASEAN trade relation.
Ans. India’s trade relations with SAARC (South Asian Association for Regional Cooperation) countries and ASEAN (Association of Southeast Asian Nations) countries are not the same.
There are several differences between the two regional groupings that influence their trade relations with India.
SAARC is a regional intergovernmental organization consisting of eight South Asian countries – Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.
The primary objective of SAARC is to promote regional economic integration, cooperation, and development among its member countries.
India has historically played a leading role in SAARC and has close cultural, economic, and political ties with the other member countries.
On the other hand, ASEAN is a regional intergovernmental organization consisting of ten Southeast Asian countries – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
The primary objective of ASEAN is to promote economic integration and cooperation among its member countries, with the ultimate goal of creating a single market and production base in the region. MCO 15 Solved Free Assignment 2023
India has also been actively engaging with ASEAN in recent years, with a focus on increasing trade and investment ties.
While India has trade relations with both SAARC and ASEAN countries, there are several differences in terms of the nature and scope of these relations.
For example, India has a large trade deficit with most SAARC countries, which means that it imports more from these countries than it exports to them.
In contrast, India has a trade surplus with most ASEAN countries, which means that it exports more to these countries than it imports from them.
In addition, the composition of trade is also different between the two regions. For example, India’s exports to SAARC countries are dominated by primary products such as minerals, whereas its exports to ASEAN countries are more diversified, including manufactured goods and services.
Furthermore, there are also differences in the level of regional economic integration between SAARC and ASEAN. MCO 15 Solved Free Assignment 2023
While ASEAN has made significant progress towards creating a single market and production base, SAARC has been relatively less successful in promoting economic integration among its member countries.
Q 4. Difference between the following:
(a) Current account and Capital account of Balance of Payments
Ans. (a) The balance of payments (BoP) is a record of all economic transactions between a country and the rest of the world over a given period.
It is divided into two main categories: the current account and the capital account.
The current account of the balance of payments includes all transactions related to the exchange of goods and services between a country and the rest of the world, as well as income flows such as wages, salaries, and profits. It includes the following components:
Trade in goods: This includes exports and imports of physical goods such as raw materials, finished products, and commodities.
Trade in services: This includes exports and imports of intangible services such as transportation, tourism, financial services, and business services.
Income: This includes receipts and payments related to investment income, such as interest, dividends, and profits.MCO 15 Solved Free Assignment 2023
Current transfers: This includes receipts and payments of non-investment-related transfers, such as remittances, foreign aid, and grants.
The capital account of the balance of payments includes all transactions related to capital flows between a country and the rest of the world. It includes the following components:
Foreign direct investment: This refers to the ownership of assets in a foreign country, such as a subsidiary or branch of a foreign company.
Portfolio investment: This refers to the purchase of securities such as stocks and bonds issued by foreign companies or governments.
Other investment: This includes loans, deposits, and other forms of investment in foreign countries, including short-term trade credits and currency swaps.
Reserve assets: This includes official foreign exchange reserves held by the central bank of a country, which can be used to stabilize the exchange rate and pay for international transactions.MCO 15 Solved Free Assignment 2023
The main difference between the current account and the capital account of the balance of payments is that the current account records transactions related to the exchange of goods and services, while the capital account records transactions related to capital flows.
The current account reflects the overall trade balance of a country, including its exports, imports, and income flows, while the capital account reflects the net investment position of a country, including its foreign direct investment, portfolio investment, and other forms of investment.
(b) WTO and GATT
Ans. The World Trade Organization (WTO) and the General Agreement on Tariffs and Trade (GATT) are two international organizations that are focused on promoting international trade and economic cooperation between countries.
The GATT was established in 1947 as an international agreement among member countries to reduce tariffs and other trade barriers.
The primary objective of GATT was to promote free trade and to eliminate trade restrictions and barriers, in order to boost international trade and economic growth.
GATT provided a framework for trade negotiations and dispute resolution mechanisms among its member countries.
The WTO was established in 1995 to replace GATT as the international organization responsible for promoting and regulating international trade.
The WTO is a more comprehensive organization than GATT, with a broader mandate and a more robust set of rules governing international trade.
The WTO is responsible for negotiating new trade agreements, implementing existing trade agreements, and providing a forum for member countries to resolve disputes related to international trade.
One of the key differences between GATT and WTO is the scope of their activities. While GATT was focused on reducing tariffs on trade in goods, the WTO covers trade in services and intellectual property rights as well.
The WTO also places a greater emphasis on ensuring that trade is conducted in a fair and transparent manner, with rules designed to prevent discriminatory trade practices and to ensure that trade disputes are resolved through a fair and impartial process.MCO 15 Solved Free Assignment 2023
Another key difference between GATT and WTO is the membership. GATT had a smaller membership compared to WTO, with fewer developing countries and countries in transition among its member states.
The WTO has a more diverse membership, with a larger number of developing countries and countries in transition.
This has helped to ensure that the WTO’s rules and policies are more representative of the interests of all its member countries.
GATT and WTO are two international organizations that have played a crucial role in promoting and regulating international trade.
While GATT focused on reducing tariffs and other trade barriers, WTO has a broader mandate and a more comprehensive set of rules governing international trade.
The WTO has a more diverse membership and places a greater emphasis on ensuring that trade is conducted in a fair and transparent manner, making it a more comprehensive and effective organization for promoting and regulating international trade.MCO 15 Solved Free Assignment 2023
(c) Balance of Trade and Balance of Payments
Ans. Balance of Trade (BoT) and Balance of Payments (BoP) are two important concepts in international trade and economics.
Balance of Trade (BoT) refers to the difference between the value of a country’s exports and the value of its imports during a specific period of time.
If the value of a country’s exports is greater than the value of its imports, then it is said to have a trade surplus, while if the value of a country’s imports is greater than the value of its exports, then it is said to have a trade deficit.
The balance of payments, on the other hand, is a broader concept that includes all transactions between a country and the rest of the world over a specific period of time. MCO 15 Solved Free Assignment 2023
It includes not only the trade of goods and services, but also transactions related to investments, loans, and transfers.
The balance of payments is divided into two accounts: the current account and the capital account.
The current account of the balance of payments includes all transactions related to trade in goods and services, as well as income received from investments and transfers such as remittances.
It reflects the net income or outflow of funds from a country in the short term. If a country’s current account is in surplus, it means that it is earning more from its exports and investments than it is spending on imports and transfers, and vice versa.
The capital account of the balance of payments includes all financial transactions such as investments, loans, and transfers of capital between a country and the rest of the world.
It reflects the net flow of funds from a country in the long term. If a country is receiving more foreign investment and loans than it is investing abroad, it will have a capital account surplus, while if it is investing more abroad than it is receiving, it will have a capital account deficit.
(d) Saving gap and Technological & Management gap
Ans. Saving gap and technological & management gap are two important concepts in international trade and economics.
Saving gap refers to the difference between a country’s savings and investment. If a country’s savings are lower than its investment, it will have to borrow from the rest of the world to finance its investment. MCO 15 Solved Free Assignment 2023
This borrowing may result in a current account deficit, as the country imports more than it exports in order to finance its investment.
Conversely, if a country’s savings are higher than its investment, it may have a current account surplus, as it exports more than it imports in order to invest its excess savings.
Technological and management gap, on the other hand, refers to the difference in technology and management practices between developed and developing countries.
Developed countries have advanced technologies and management practices that allow them to produce goods and services more efficiently and at lower costs than developing countries.
This gap makes it difficult for developing countries to compete in the global market, as they are unable to produce goods and services at the same efficiency and cost as developed countries.MCO 15 Solved Free Assignment 2023
Technological and management gap can be overcome through technology transfer, foreign direct investment, and education and training.
Developing countries can attract foreign direct investment by offering incentives such as tax breaks and reduced regulations, and can also seek technology transfer through partnerships with developed countries.
Education and training programs can also be implemented to improve the skills of workers and managers in developing countries.
Saving gap can be addressed by increasing savings through policies such as promoting a culture of savings, implementing tax incentives for saving, and encouraging domestic investment.
Developing countries can also attract foreign investment by offering a stable investment environment, reducing trade barriers, and implementing policies to protect intellectual property rights.
Final, saving gap and technological and management gap are two important factors that affect a country’s ability to compete in the global market.
By addressing these gaps through policies such as technology transfer, foreign investment, and education and training, developing countries can improve their competitiveness and increase their participation in the global economy.
Q 5. Write short notes on the following:
(a) Start Up India
Ans. Start Up India is an initiative launched by the Government of India in January 2016 with the aim of promoting entrepreneurship and innovation in the country.
The initiative aims to create a conducive environment for the growth of start-ups in India by providing them with access to funding, mentorship, and other support services.MCO 15 Solved Free Assignment 2023
The initiative consists of various measures to help start-ups, such as tax benefits, ease of compliance, and access to funding.
The government has launched a Start-up India Action Plan that outlines the various measures and initiatives taken to support the start-up ecosystem in India. Some of the key features of the action plan include:
Tax Benefits: Start-ups are eligible for a tax holiday for a period of three years. They are also exempted from paying income tax on the profits earned for the first three years.
Simplified Compliance: The government has introduced various measures to simplify compliance procedures for start-ups.
For example, start-ups are allowed to self-certify compliance with certain labour and environmental laws for a period of three years.
Funding Support: The government has set up a Rs. 10,000 crore fund to provide funding support to start-ups. MCO 15 Solved Free Assignment 2023
This fund is managed by the Small Industries Development Bank of India (SIDBI) and invests in venture capital funds.
Innovation and Research Support: The government has set up 7 research parks and 31 incubators to provide research and development support to start-ups.
Skill Development: The government has launched various initiatives to promote skill development in the start-up ecosystem.
For example, the National Entrepreneurship Network (NEN) provides training and mentorship to aspiring entrepreneurs.
The Start Up India initiative has received positive response from the start-up community in India.
The number of start-ups in India has increased significantly in the past few years, and India has emerged as one of the fastest-growing start-up ecosystems in the world. MCO 15 Solved Free Assignment 2023
The initiative has also helped to create a culture of entrepreneurship in the country, with more and more young people aspiring to become entrepreneurs.
However, there are also some challenges that need to be addressed to ensure the success of the Start Up India initiative.
One of the key challenges is access to funding. While the government has set up a fund to provide funding support to start-ups, many start-ups still face difficulties in accessing funding from other sources.
Another challenge is the need to promote innovation and entrepreneurship in non-metro cities and rural areas.
the Start Up India initiative has been successful in promoting entrepreneurship and innovation in India. MCO 15 Solved Free Assignment 2023
The government’s efforts to provide funding support, simplify compliance procedures, and promote skill development have helped to create a conducive environment for the growth of start-ups in the country.
However, more needs to be done to address the challenges facing the start-up ecosystem and ensure the continued success of the initiative.
Ans. SAARC stands for South Asian Association for Regional Cooperation. It is a regional intergovernmental organization comprising of eight member countries located in South Asia.
The member countries are India, Pakistan, Nepal, Bhutan, Bangladesh, Sri Lanka, Afghanistan, and Maldives.
The objective of SAARC is to promote economic and cultural cooperation among member countries. It was established in December 1985 through the signing of the SAARC Charter in Dhaka, Bangladesh. MCO 15 Solved Free Assignment 2023
Since then, SAARC has been working towards promoting regional cooperation in various fields such as trade, agriculture, tourism, and energy.
One of the key objectives of SAARC is to promote intra-regional trade and economic cooperation among member countries.
The SAARC Preferential Trading Agreement (SAPTA) was signed in 1993, which aimed to reduce tariffs and other trade barriers among member countries.
However, SAPTA did not yield significant results due to various political and economic factors.
In 2004, SAARC member countries signed the South Asia Free Trade Area (SAFTA) agreement, which aimed to promote free trade among member countries by reducing tariff and non-tariff barriers.
Apart from economic cooperation, SAARC also promotes cultural and people-to-people exchanges among member countries.
It has set up various institutions to promote regional cooperation, such as the SAARC Cultural Centre in Sri Lanka, SAARC Disaster Management Centre in India, and SAARC Development Fund in Bhutan.MCO 15 Solved Free Assignment 2023
Despite its potential, SAARC has faced several challenges in promoting regional cooperation among member countries.
Political and security issues, such as the India-Pakistan conflict, have often overshadowed the efforts towards economic and cultural cooperation.
The lack of adequate transport and communication infrastructure among member countries has also hindered the growth of intra-regional trade.
SAARC has the potential to become a strong regional organization for promoting economic and cultural cooperation among member countries.
The signing of the SAFTA agreement was a significant step towards promoting free trade among member countries.
However, to fully realize the potential of SAARC, member countries need to address the political and security issues and improve transport and communication infrastructure among member countries.
(c) Special Economic Zones (SEZs)
Ans. Special Economic Zones (SEZs) are designated areas within a country that are intended to attract foreign investment and promote economic growth.
In India, SEZs were introduced in 2005 as a part of the government’s strategy to promote exports and create employment opportunities.
SEZs provide various incentives to companies that set up their operations within their boundaries. These incentives include tax holidays, duty-free import of capital goods, and exemptions from various local taxes and levies.
SEZs are also equipped with infrastructure such as roads, electricity, water supply, and communication facilities, which make them attractive for companies to set up their operations.MCO 15 Solved Free Assignment 2023
The primary objective of SEZs is to promote exports and increase foreign exchange earnings. Companies that set up operations in SEZs are required to export at least 75% of their production to foreign markets.
The exports from SEZs are exempted from various duties and taxes, which makes them competitive in the global market.
SEZs also provide employment opportunities to the local population. The companies that set up operations in SEZs are required to provide employment to a certain percentage of the local population.
This not only provides employment opportunities but also enhances the skills and capabilities of the local workforce.
However, SEZs have also faced criticism from various quarters. One of the main criticisms is that SEZs are only beneficial to large corporations and do not provide any benefits to small and medium enterprises.
Another criticism is that the land acquisition process for SEZs often involves displacement of farmers and other local communities, which has led to social unrest in some cases.MCO 15 Solved Free Assignment 2023
Despite the criticism, SEZs have contributed significantly to India’s export growth and have attracted foreign investment in various sectors such as manufacturing, IT and IT-enabled services, and pharmaceuticals.
As of September 2021, there are 385 operational SEZs in India, employing over 19 lakh people and contributing around 30% to the country’s total exports.
(d) National Policy on Electronics 2019
Ans. The National Policy on Electronics (NPE) 2019 is a policy framework introduced by the Government of India with the aim of promoting domestic manufacturing and reducing the country’s dependence on imported electronics goods.
The policy was formulated by the Ministry of Electronics and Information Technology (MeitY) and was approved by the Union Cabinet in February 2019.
The NPE 2019 aims to position India as a global hub for electronics system design and manufacturing (ESDM) by creating an enabling ecosystem for the industry.
The policy focuses on promoting the growth of the electronics manufacturing industry, increasing exports of electronics goods, and creating employment opportunities in the sector.MCO 15 Solved Free Assignment 2023
The policy has several key objectives, including increasing the domestic value addition in the electronics manufacturing sector, reducing the country’s dependence on imported electronics goods, and attracting foreign investment in the sector.
The policy also aims to promote innovation and research and development in the electronics industry and to develop a skilled workforce in the sector.
The NPE 2019 provides several incentives to promote the growth of the electronics manufacturing industry in India.
These include financial incentives such as capital subsidies, tax benefits, and access to low-cost financing. The policy also aims to simplify regulatory procedures and provide infrastructure support to the industry.
The policy also promotes the development of the electronics manufacturing ecosystem in the country, including the development of industrial clusters, the establishment of research and development centers, and the development of human resources in the sector. MCO 15 Solved Free Assignment 2023
The policy also emphasizes the importance of creating a sustainable electronics manufacturing industry that is environmentally friendly and socially responsible.
Since the introduction of the NPE 2019, India has made significant progress in the electronics manufacturing sector.
The policy has led to the establishment of several electronics manufacturing clusters in the country, such as the Electronics Manufacturing Cluster in Telangana and the Electronics Manufacturing Cluster in Uttar Pradesh.
The policy has also led to an increase in the domestic production of electronics goods and a reduction in the country’s dependence on imported electronics goods.