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EU-India Trade and Transport Integration

EU-India Trade and Transport Integration. Prabir De RIS, New Delhi TRANSBALTIC CONFERENCE 2010 17-18 March 2010, Malmö, Sweden. Presentation Outline. Introduction EU – Asia trade EU- India trade EU-Asia transport linkages Trade barriers India infrastructure projects

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EU-India Trade and Transport Integration

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  1. EU-India Trade and Transport Integration Prabir De RIS, New Delhi TRANSBALTIC CONFERENCE 2010 17-18 March 2010, Malmö, Sweden

  2. Presentation Outline • Introduction • EU – Asia trade • EU- India trade • EU-Asia transport linkages • Trade barriers • India infrastructure projects • Opportunities for Baltic Sea region for EU– India trade

  3. Rise of regionalism • Regional trade agreements (RTAs) have increased by nearly five-fold over 1990-2008, from 86 in 1990 to 421 in 2008 (WTO, 2009) • Among the Asian countries, India leads with the largest number of FTAs (30), followed by Singapore (26), China and Korea (22 each) and Japan (19). • EU is India’s largest trading partner while India ranks as the EU’s 10th most important trading partner and that trade in goods more than doubled over 2000-2008 (EUROSTAT 2009). • In 2008, nearly 22% of total India’s exports went to the EU and 18% of India’s total imports came from the EU. • Top export destinations within the EU were Germany (26%) followed by the United Kingdom (16%) and Belgium (13%). • Goods exports have grown at an average of 14% per year, particularly commodities and manufacturing goods. • A large portion of India – EU trade is remained unrealized. • India – EU FTA negotiation has been slow.

  4. India has high trade potential, but largely unrealized • International trade in India is moving below potential • Global trade in 2006: US$ 350 billion • Global trade potential: US$ 680 billion • About 48% of trade potential is remained to be realized • Causes of high underutilization of trade are mostly economic in nature • High trade barriers – both visible and invisible • Poor transportation links • Inadequate trade facilitation measures • Lack of supply capabilities

  5. Poor infrastructure holding back India’s growth • Infrastructure in South Asian countries is largely inadequate and generally of poor quality. • Infrastructure gap in South Asia in terms of the index widened than narrowed. • South Asia’s growth potential will be realized only if we can narrow the infrastructure gap, not only between them but also with the global best practice. • Laggard areas (pocket of deficits) in South Asia need utmost importance so that they can enjoy the opportunities created by regional trade liberalization and integration. South Asia in Global Infrastructure Rankings: RIS Index Source: Kumar, N. and P. De (2008), and RIS (2008)

  6. India’s soft infrastructure grew much faster than hard infrastructure Note: AAGR – Annual Average Growth Rate (%) Source: World Development Indicators CD ROM 2009, World Bank

  7. India needs huge investment in physical infrastructure development • Supply side bottleneck – Country’s investment in physical infrastructure is very low - 4.86% of GDP in 2004-05. • ‘Deficit Everywhere’ (contrary to ‘India Everywhere’ in Davos) • Shortfall in capacity in port and poor performance (avg. 24 box / hour handling rate; avg. 3 days to clear a container vessel, 6 days to clear a export consignment at port) • Same repeat at airports (Delhi, Mumbai……) • Planning Commission desired to raise the investments from 4.86% of GDP to 7.5% in the 11th Five Year Plan (FYP) period. • Requirement is US$ 320 billion, estimated by Planning Commission, during the 11th FYP (2007-2011) • Infrastructure is the critical element to India’s growth. Investment in Infrastructure as Percent of GDP

  8. EU’s Trade with Asia Growing Fast

  9. EU (25) trade with China (2008) *SITC revision 4 ** Share in total trade Source: UNCOMTRADE

  10. EU (25) trade with Indonesia (2008) *SITC revision 4 ** Share in total trade Source: UNCOMTRADE

  11. EU (25) trade with India (2008) *SITC revision 4 *SITC revision 4 *SITC revision 4 ** Share in total trade ** Share in total trade ** Share in total trade Source: UNCOMTRADE Source: UNCOMTRADE

  12. EU (25) trade with Japan (2008) *SITC revision 4 *SITC revision 4 *SITC revision 4 ** Share in total trade ** Share in total trade Source: UNCOMTRADE Source: UNCOMTRADE Source: UNCOMTRADE

  13. EU (25) trade with Korea (2008) *SITC revision 4 *SITC revision 4 *SITC revision 4 ** Share in total trade ** Share in total trade ** Share in total trade Source: UNCOMTRADE Source: UNCOMTRADE

  14. EU (25) trade with Malaysia (2008) *SITC revision 4 *SITC revision 4 *SITC revision 4 ** Share in total trade ** Share in total trade ** Share in total trade Source: UNCOMTRADE Source: UNCOMTRADE

  15. EU (25) trade with Thailand (2008) *SITC revision 4 ** Share in total trade Source: UNCOMTRADE

  16. Transport costs outweigh tariff in EU-Asia trade

  17. Transport costs outweigh tariff in EU-Asia trade Importer: European Union (27) *Ad-valorem (as % of import value), simple average, calculated based on DOTS, IMF #Averaged over 2003-2007 ** Simple average tariff, sourced from WITS, World Bank Source: Author

  18. India has high trade potential with EU

  19. India’s trade potential with EU (contd.) (Gravity model)

  20. India’s trade potential with EU Notes: *Actual trade. #Average annual growth rate Source: De, Prabir, (2010), South Asia: Trade Integration after the Global Financial Crisis, Mimeo, World Bank, Washington, D.C

  21. India offers high investment opportunities in infrastructure Telecom, Tourism, SEZs & Townships, Supporting Urban Infrastructure, Water & Sanitation, State & Rural Roads, Logistics etc. Source: Planning Commission, Government of India

  22. Delhi – Mumbai Industrial Corridor (DMIC)

  23. Dedicated Freight Corridors

  24. SPV - India Infrastructure Finance Company Limited • Lack of long term debt in capital markets • SPV to provide long term debt to viable infrastructure projects • Direct lending to PPP and public sector projects • Refinance for private projects • Funds to be raised from domestic and external markets on strength of government guarantees • Reliance on lead bank for appraisal and lending operations • Guarantee limit of Rs.100 billion for first year of operation

  25. India – Myanmar-Thailand Trilateral Highway India – Myanmar – Thailand – Vietnam Railway Cooperation: Delhi – Hanoi Railway Link Afghanistan – Pakistan – India – Bangladesh – Myanmar (APIBM) Transport Corridor Towards Middle East Towards Central Asia Nepal China Bhutan Afghanistan Pakistan India Myanmar Maldives Bangladesh Overland Maritime Towards Southeast / East Asia & Pacific Towards West Asia / Europe Sri Lanka Maritime Hub India’s Overland Connectivity with East Asia Potential Transport Hubs in South Asia

  26. Opportunities for Baltic Sea region for EU– India trade • EU- India investment towards production / services networks holds the key • Baltic sea region has to increase its FDI in India • India – Germany partnership a successful case • Removal of trade barriers • Higher trade costs impede trade flows between India and EU • Opening of Asia – Europe overland connectivity • Extending Asian Highway / Trans-Asian Railway

  27. Thank youFor further information, please contactPrabir De, PhDFellowResearch and Information System for Developing Countries (RIS)India Habitat CentreLodhi RoadNew Delhi, IndiaTel. (+91-11) 2468 2177Fax. (+91-11) 2468 2174Email: prabirde@ris.org.inprabirde@hotmail.comWeb: www.ris.org.in

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