1. World Trade
IMPACT OF THE World Trade Organisation ON THE INDIAN ECONOMY
INTRODUCTION:
The World Trade organization was
established to deal with all the major aspects
of international trade and it had far reaching
effects not only on India’s foreign trade but
also on its internal economy.
The impact of the WTO on the Indian
economy can be analysed on the basis and
general concepts.
IMPACT:
The WTO has both favourable and non-favourable impact on the Indian economy.
FAVOURABLE IMPACT:
1) Increase in export earnings:
Increase in export earnings can be viewed from growth in merchandise exports and growth
in service exports:
• Growth in merchandise exports:
The establishment of the WTO has increased the exports of developing countries because of
reduction in tariff and non-tariff trade barriers. India’s merchandise exports have increased
from 32 billion us $ (1995) to 185 billion u $ (2008-09).
• Growth in service exports:
The WTO introduced the GATS (general Agreement on Trade in Services) that proved
beneficial for countries like India. India’s service exports increased from 5 billion us $ (1995)
to 102 billion us $ (2008-09) (software services accounted) for 45% of India’s service
exports)
2) Agricultural exports :
Reduction of trade barriers and domestic subsidies raise the price of agricultural products in
international market, India hopes to benefit from this in the form of higher export earnings
from agriculture
3) Textiles and Clothing :
The phasing out of the MFA will largely benefit the textiles sector. It will help the developing
countries like India to increase the export of textiles and clothing.
4) Foreign Direct Investment:
As per the TRIMs agreement, restrictions on foreign investment have been withdrawn by
the member nations of the WTO. This has benefited developing countries by way of foreign
direct investment, euro equities and portfolio investment. In 2008-09, the net foreign direct
investment in India was 35 billion us $.
5) Multi-lateral rules and discipline:
It is expected that fair trade conditions will be created, due to rules and discipline related to
practices like anti-dumping, subsidies and countervailing measure, safeguards and dispute
settlements. Such conditions will benefit India in its attempt to globalise its economy.
1 Shashi Prakash, PGDM(ABM), MANAGE

2. World Trade
UNFAVOURABLE IMPACT:
1) TRIPs
Protection of intellectual property rights has been one of the major concerns of the WTO. As
a member of the WTO, India has to comply with the TRIPs standards.
However, the agreement on TRIPs goes against the Indian patent act, 1970, in the following
ways:
• Pharmaceutical sector :
Under the Indian Patent act, 1970, only process patents are granted to chemicals, drugs and
medicines. Thus, a company can legally manufacture once it had the product patent. So
Indian pharmaceutical companies could sell good quality products (medicines) at low prices.
However under TRIPs agreement, product patents will also be granted that will raise the
prices of medicines, thus keeping them out of reach of the poor people, fortunately, most of
drugs manufactured in India are off –patents and so will be less affected.
• Agriculture
Since the agreement on TRIPs extends to agriculture as well; it will have considerable
implications on Indian agriculture. The MNG, with their huge financial resources, may also
take over seed production and will eventually control food production. Since a large
majority of Indian population depends on agriculture for their livelihood, these
developments will have serious consequences.
Micro-organisms: Under TRIPs Agreement, patenting has been extended to micro-organisms
as well. These mills largely benefit MNCs and not developing countries like India.
2) TRIMS :
The Agreement on TRIMs also favours developed nations as there are no rules in the
agreement to formulate international rules for controlling business practices of foreign
investors. Also, complying with the TRIMs agreement will contradict our objective of self –
reliant growth based on locally available technology and resources.
3) GATS:
The Agreement on GATS will also favour the developed nations more. Thus, the rapidly
growing service sector in India will now have to compete with giant foreign firms. Moreover,
since foreign firms are allowed to remit their profits, dividends and royalties to their parent
company, it will cause foreign exchange burden for India.
4) TRADE AND NON – TARIFF Barriers:
Reduction of trade and non-tariff barriers has adversely affected the exports of various
developing nations. Various Indian products have been hit by. Non- tariff barriers. These
include textiles, marine products, floriculture, pharmaceuticals, basmati rice, carpets,
leather goods etc.
5) LDC exports:
Many member nations have agreed to provide duty – frce and quota – frce market access to
2 Shashi Prakash, PGDM(ABM), MANAGE

3. World Trade
all products originating from least developed countries.
India will have to now bear the adverse effect of competing with cheap LDC exports
internationally. Moreover, LDC exports will also come to the Indian market and thus
compete with domestically produced goods.
CONCLUSION:
Thus the WTO is a powerful body that will enact international laws on various matters.
It will also globalise many countries and help them to develop their competitive advantages
and seek benefits from advanced technology of other nations.
Though countries like India will face serious problems by complying to the WTO agreements,
it can also benefit from it by taking advantage of the changing international environment.
X
SHASHI PRAKASH
PGDM (ABM) 19-12-2012 00:42:08
3 Shashi Prakash, PGDM(ABM), MANAGE