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India and Latin America and the Caribbean

Opportunities and challenges in trade and investment relations


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Opportunities and challenges in trade and investment relations


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Alicia Brcena

Executive Secretary

Antonio Prado

Deputy Executive Secretary

Osvaldo Rosales

Chief, Division of International Trade and Integration

Ricardo Prez

Chief, Documents and Publications Division

The preparation o this document, which has not been subject to editorial revision, was the responsibility o Osvaldo Rosales, Chie o the Division oInternational Trade and Integration o the Economic Commission or Latin America and the Caribbean (ECLAC). Mikio Kuwayama, Senior EconomicAairs Ocer, coordinated the research. Mariano Alvarez also participated in the preparation o the document.

LC/L.3426Copyright United Nations, November 2011.

All rights reserved.

United Nations publication. Printed in Santiago, Chile2011-867


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India and Latin America and the Caribbean: opportunities and challenges in trade and investment relations

Foreword 7

Chapter I

India and Latin America and the Caribbean in the world economy 91. Indias population will surpass that o China by 2030. With its growing middle class, India presents a

large potential market or Latin American and Caribbean countries 11

2. Countries in Latin America and the Caribbean weathered the recent world economic crisis with

unprecedented resilience and emerged rom it more quickly and robustly than the developed economies.

In the uture, the region will be called on to assume an ever larger role in the global economy 12

3. When measured at PPP, India is likely to surpass Japan as the worlds third largest economy in 2011.

However, its per capita GDP still remains less than 10% o that o the United States 13

4. India has been responsible or almost 10% o world economic growth in recent years. This impressive

perormance has contributed to the stabilit y o the world economy 14

5. The Indian economy has seen signicant structural changes. The share o services in GDP has increased,

while that o agriculture has declined. Indias trade-to-GDP ratio has increased considerably in the past

decade, but its level o trade integration remains low compared with that o other Asian countries 15

6. Total actor productivity has been a major source o economic growth or India, whereas Latin American

perormance in this area has been disappointing 16

7. Indias central Government has a dicult task o maintaining high growth rates with a twin decit and

relatively high infation 17

8. Despite its increasing volume, India is still at an incipient stage o merchandise trade expansion 18

9. By contrast, India plays a much more important role in world services trade 19

10. Over the years, trade in services has become an engine o growth or Indias external sector 20

11. Asia is Indias largest trading partner both in exports and imports, while the role o Latin America and the

Caribbean as a trading partner remains modest 21

12. Historically, India has not relied heavily on FDI as a source o gross xed capital ormation; however, in

recent years, the country has become not only a major recipient but also a signicant investor worldwide 22

13. Although developing countries are receiving an ever larger proportion o Indias outward FDI, developed

economies have, until recently, been Indias main outward FDI hosts. However, even among the ormer,

Latin America and the Caribbean has not been a avoured destination or those investment fows 23

14. The drivers o Indias outward oreign direct investment in recent years have been mergers and

acquisitions in developed economies 24

15. Manuacturing is the primary destination sector or Indias FDI overseas, though its share has been

declining in recent years 25

ndice


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Economic Commission or Latin America and the Caribbean (ECLAC)

16. There are substantive dierences in outward FDI between China and India 26

17. Though to a lesser degree than China, India is a major importer and consumer o the types o primary

products o which Latin America and the Caribbean is a major producer 27

18. India is a major world producer o industrial goods 28

19. Indias domestic demand presents trade and investment opportunities in a number o sectors o the

manuacturing industry or the region 29

20. In comparison with Latin American countries, Indias income distribution is avourable; however,

the country has the highest poverty rate o all the BRICS 30

21. Among the weaknesses o the Indian economy, the poor condition o inrastructure is a major

hindrance to growth 31

22. India oers sizeable markets or Latin American agricultural products. The region has untapped

agricultura l assets such as resh water and cultivable land or uture use 32

Chapter II

Trade and investment relations between India and Latin America and the Caribbean 331. China is a key component in the Latin American and Caribbean regions strategy to diversiy into

Asia-Pacic markets. However, the dynamism o Asia-Pacic does not lie solely in China India has

also become an important trading partner 35

2. Trade between Latin America and India is a recent phenomenon 36

3. The regions trade with India is concentrated in a small number o countries 37

4. According to Indias ocia l statistics, the order o importance o its trade partners diers dramatical ly 38

5. For the majority o the countries in the region, India is still an unexploited export market and a minor

source o imports 39

6. The regions exports to India are concentrated in primary products and natural resource-based

manuactures, while its imports rom India are o a more diverse nature 40

7. The regions exports to Asia, and especially to India, are limited in terms o range o products 41

8. Indias imports rom the region are concentrated in a small number o primary products 42

9. As is the case or the trade fows between Latin America and the Caribbean and other Asian countries,India has little intra-industry trade with Latin America 43

10. To date, the lions share o Indias outward FDI in the region has been directed towards tax

haven countries 44

11. Though it is still concentrated in natural-resources intensive sectors, India is beginning to expand

and diversiy its FDI into various types o services, especially outsourcing, sotware development,

and manuacturing 45

12. A complex network o trade agreements has emerged within and between Asia-Pacic and Latin

America; however, India has shown reluctance towards signing comprehensive trade agreements

with countries in the latter region 46


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13. India is creating a complex network o trade agreements, though most o them are partial agreements,

with countries inside and outside Asia-Pacic, including partial agreements with Chile and MERCOSUR.

India has been negotiating a ree trade agreement with the European Union, its largest trading partner 47

14. The regions exports o raw materials to India are expected to grow, but will ace sti competition in theIndian market rom exporters rom other regions 48

15. The regions imports rom India range rom primary products to manuactures o varying technological

intensities. Countries o the region are expected to ace strong competition rom the Asian country in

relation to these products in the uture 49

16. Latin America and the Caribbean competes with other countries in Indian markets o primary products

and their processed goods, and competes with India in third markets 50

17. The continuing process o reducing trade barriers between Asian countries continues could prejudice

trade with Latin America and the Caribbean 51

18. The most-avoured-nation tari rates applied to the sectors that are o interest to the region remain high 52

19. The Indian markets that are o major interest to Latin America and the Caribbean apply extremely high

most-avoured-nation rates 53

Conclusions and recommendations 55

Annex 63


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Foreword

India and Latin America and the Caribbean, together with China, are the worlds new growthpoles. Economies in developing Asia, led by China and India, are growing three times as ast asthe industrialized countries. Latin America and the Caribbean weathered the international crisiswith remarkable resilience and emerged rom it sooner and more robustly than the developed

economies. In the coming years, the industrialized economies will continue to ace complexchallenges, in particular the need to rein in and gradually reduce the scal decit and publicdebt in a context o slower growth and high unemployment. The rise o the emerging economiesrefects not only their growing contribution to the world economy, but also the stronger linkagesbetween emerging and developing economies through increased South-South trade and investmentand cooperation. In this context, India continues to deepen its trade and investment relationswith the Latin American and Caribbean region in search o a more coordinated, institutionalizedapproach among countries.

On the back o recent global economic events, India and the countries o Latin America and

the Caribbean must rethink strategic alliances both globally and regionally. In this respect, Indiaand Latin America and the Caribbean need to reposition themselves in the world economy andto address the growing relevance o South-South linkages (in areas such as trade, oreign directinvestment and nance) by enhancing cooperation in innovation and human capital in order todiversiy trade, add greater value and apply new knowledge to exports, thus helping to createmore stable conditions or growth.

Latin Americas resilience during the international nancial crisis and its recent strongrecovery have aroused Indias interest in the region, while countries in the region have showna renewed enthusiasm or learning about the Indian economy as a uture trade and investment

partner. Indeed, the regions trade with India will continue to grow rapidly, though rom asmall base, while an increasing number o Indian companies have begun to invest and operatein the region.

Despite recent improvements on many ronts, however, both India and the countries oLatin America and the Caribbean ace some ormidable challenges. They still have some othe highest inequality indices in the world, as well as serious deciencies in inrastructure,technology, innovation and competitiveness. India and the Latin American and Caribbeanregion, together with their main partners, could approach these challenges as opportunitiesto orge new partnerships to promote growth and development through increased trade and

investment. India could be an active partner o the region in this endeavour.


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Increasing trade between Latin America and the Caribbean and the Asia-Pacic region hasbeen prompted primarily by China, while India still remains an unexploited export market aswell as an untapped source o imports or the majority o countries in Latin America and the

Caribbean. Furthermore, despite the rising interest in investing in the region shown recentlyby Indian rms, the regions share o Indias overseas oreign direct investment (FDI) remainsquite small. The regions trade and investment relations with India are still at an incipientstage, making it necessary to consolidate and strengthen ties, while identiying and takingadvantage o complementarities and promoting business alliances with a view to stimulatingtheir internationalization and enhancing competitiveness. Several countries in Latin America andthe Caribbean have beneted rom growing trade fows with the Asia-Pacic region, includingArgentina, Brazil, Chile, Costa Rica, Cuba and Peru. However, this trade is mainly o an inter-industry nature, whereby the region exports primary products and natural resource-basedmanuactures and imports manuactures o dierent technological intensities, thus limiting thepotential or deeper economic relations between the two regions. Trade development thereoreneeds to be promoted at the intra-industry level with an emphasis on export diversicationthrough business initiatives that draw on the competitive advantage o each region and promoteincreased investment fows centred on value chains involving both Asian and Latin Americanrms. Eorts should be made to reduce transaction and transport costs, streamline trade logistics,promote communication with trading partners and enhance the international competitivenessand innovation capabilities o countries in both regions.

For the past ve years, the Economic Commission or Latin America and the Caribbean

(ECLAC) has closely monitored developments in economic relations between Latin Americaand the Caribbean and China, Japan and the Republic o Korea. The opportunity now to expandthe analysis to include India is a welcome challenge. We hope that this document will serveas an input or deliberations during the seminar The New India and the New Latin America-Synergies and Complementarities, to be held in December 2011 in Buenos Aires, and contributeto the regions goal to urther promote trade and investment and enhance economic cooperationwith India.

Alicia BrcenaExecutive Secretary

Economic Commission or Latin Americaand the Caribbean (ECLAC)


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in the world economy

Chapter I


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1. Indias population will surpass that of China by 2030. With its growing middle class,India presents a large potential market for Latin American and Caribbean countries

Indias 1.2 billion inhabitants account or almost 18% o theworlds population. I the population continues to grow ata high rate, India is likely to be the most populous countryin the world by 2030.Indias rapid economic growth has set the stage orundamental change among the countrys consumers. Whilethere is no ocial denition o the middle class, estimateso the number o people making up this segment o the

population range rom 30 million to 300 million; even usingthe most generous estimates, the middle class comprisesless than 30% o the population. Though the rich and thepoor combined ar outweigh the Indian middle class, themiddle class is the astest growing segment o the population.Average household incomes are expected to triple over the

next two decades and India looks set to become the worldsth-largest consumer economy by 2025, up rom the twelthplace it currently holds.On the other hand, Latin America and the Caribbean has ayoung population with a birth rate higher than that o Asiaand the European Union, but slightly lower than that o theUnited States o America.Until 2050, population growth rates in the countries o the

region are expected to be quite heterogeneous: Guatemalawill have the highest annual growth rate (1.7%), while Cubawill experience an annual decline in its population (0.3%). Thelargest populations o the region (Brazil, Mexico, Argentina,the Bolivarian Republic o Venezuela and Colombia) areexpected to grow at an annual rate o 0.46%.

Table I.1Selected countries and regions: population growth, 2000-2050

(Millions of people and annual growth rates)

2000 2010 2020 2030 2040 2050Rate o growth

2010-2050

Latin America and the Caribbean 521.2 588.6 645.5 689.9 718 729.2 0.54

Andean Countries 110.8 128.6 145.6 160.3 171.6 179 0.83Caribbean 34.7 38.1 41.2 43.8 45.6 46.5 0.5Central America 35.4 42.2 49.6 56.9 63.0 67.9 1.2

Mexico 99 110.7 120.1 127.5 132.1 133.3 0.47Southern Cone 235.1 263.2 283.2 296.3 302.8 303.2 0.35

Asia a, b, c 3 032.2 3 368.0 3 661.2 3 857.5 3 959.2 3 979.8 0.42East Asiaa 1 472.4 1 564.0 1 640.4 1 666.4 1 649.8 1 600.0 0.06

China 1 267.0 1 354.1 1 431.2 1 462.5 1 455.1 1 417.0 0.11Korea, Republic o 46.4 48.5 49.5 49.1 47.3 44.1 -0.24Japan 126.7 127.0 123.7 117.4 109.8 101.7 -0.55

South-east Asiab 517.2 589.6 653.5 706.5 744.7 766.0 0.66Indiac 1 042.6 1 214.5 1 367.2 1 484.6 1 564.8 1 613.8 0.71

United States 287.8 317.6 346.2 370.0 388.9 403.9 0.60European Union 481.2 497.5 505.3 505.6 501.4 493.9 -0.02

World 6 115.4 6 908.7 7 674.8 8 308.9 8 801.2 9 150.0 0.70

Asias share in the world total 49.6 48.8 47.7 46.4 45.0 43.5

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis o World Population Prospects, 2008.

a China, Democratic Peoples Republic o Korea, Hong Kong Special Administrative Region o China, Japan, Macao Special Administrative Region o China, Mongolia and Republic o Korea.b Brunei Darussalam, Cambodia, Indonesia, Lao Peoples Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand, Timor-Leste and Viet Nam.c Includes India.


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2.

The Latin American and Caribbean region is a large marketo 33 countries, with a population o 580 million people,regional GDP o US$ 4.9 trillion (at current prices), percapita GDP over ve times higher than that o India, andUS$ 1.6 trillion in merchandise trade, accounting or 6% o

the world total.Following a 1.7% decline in GDP in 2009, Latin America andthe Caribbean grew by 6.1% in 2010, with most countries inthe region experiencing an economic rebound.The regions economic reorms o past decades, its scal andmacroeconomic prudence and its sound nancial supervision,together with ever closer commercial ties with China and theemerging economies, have allowed it not only to successullynavigate through the worst international crisis o the past80 years but also to enter the new decade with a promising

outlook or growth and development.O course, signicant challenges remain. Latin America andthe Caribbean is still the region with the highest levels oinequality in the world and there are serious deciencies intechnology, innovation and competitiveness.The region and its main partners are approaching thesechallenges as opportunities or growth, investment andtrade with a view to opening the way or new businessopportunities and partnerships. On the strength o its solidrecent perormance and its abundance o natural resources,energy, water and biodiversity, the region will be called onto assume an ever larger role in the global economy.India can and should be an active partner in the regionsendeavour.

Countries in Latin America and the Caribbean weathered the recent world economiccrisis with unprecedented resilience and emerged from it more quickly and robustly

than the developed economies. In the future, the region will be called on to assumean ever larger role in the global economy

Figure I.1WORLD GDP GROWTH RATES BY REGION, 2008-2012(Percentages)

Source: International Monetary Fund (IMF), World Economic Outlook database, September 2011.

a Projections.

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-6

-4

-2

0

2

4

6

8

10

12

Advancedeconomies

UnitedStates

EuropeanUnion

Emergingand

developingeconomies

LatinAmerica

and theCaribbean

Brazil DevelopingAsia

Ch in a I nd ia

2 00 9 2 01 0 2 01 1a 2012a


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Figure I.4BRAZIL, CHINA AND INDIA: ANNUAL GDP GROWTH, 1970-2010(Percentages)

Source: World Bank, World Development Indicators 2011.

India has been responsible for almost 10% of world economic growth in recent years.This impressive performance has contributed to the stability of the world economy

Figure I.6CHINA AND INDIA: CONTRIBUTION TO WORLD ECONOMICGROWTH, 2002-2011(Percentage points)

Source: Economic Commission or Latin America and the Caribbean (ECLAC),on the basis oInternational Monetary Fund (IMF), World Economic Outlook database, September 2011.

Figure 1.5BRICS: ANNUAL GDP GROWTH BY PERIODS, 1970-2010(Percentages)

Source: World Bank, World Development Indicators 2011.

Even though it slowed substantially, India managed tomaintain a positive growth rate during the 2008-2009international nancial crisis. The economy grew at 4.9% in2009 and at an almost double-digit rate in the subsequenttwo years.For over a decade, India has been contributing more than10% to world economic growth, a level similar to that oLatin America and the Caribbean as a whole. Together withChina, the growth rates o the two BRICs account or more

than 40% o the overall growth o the world economy.India has thus become one o the most important growthpoles o the world economy.

0.730.85 0.90

1.071.29

1.56

1.13 1.191.41 1.36

0.18

0.270.31

0.39

0.43

0.47

0.300.35

0.550.44

0.0

0.5

1.0

1.5

2.0

2.5

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

I nd ia C hi na

4.

1970

1972

1974

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India China Brazil

2.1

3.7

5.5 5.94.7

6.65.9

8.7

-10

-5

0

5

10

15

1970-1974

1976-1979

1980-1984

1985-1989

1990-1994

1995-1999

2000-2004

2005-2010

China Brazil South Africa Russian Federation India


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Figure I.9CHINA AND INDIA: SHARE OF EXPORTS AND IMPORTS (GOODSAND SERVICES) IN GDP, 1970-2010(Percentages)

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis oWorld Bank, World Development Indicators 2011

Private consumption has long been the largest componento GDP in India, although its share has allen rom 75% in1980 to 60% in 2010. By contrast, the share o gross xedcapital ormation has risen signicantly over the last ortyyears, though it remains lower as a proportion o GDP thanin China. In India, the contribution o net exports to GDPis negative, in strong contrast to China.A boom in the services sector has raised its share o GDP

rom 38% during the 1970s to 53% in the 2000s. The industrialsector has maintained a share slightly over 25% o GDP.Although the economys dependence on agriculture hasdeclined in recent years, the sector still absorbs 56% o thetotal labour orce.The economy is also becoming more exposed to externaltrade, with the share o exports (goods and services) risingrom 7% in 1990 to 19% in 2010. Compared with China,Indias trade openness is still modest in terms o exports;however, imports (goods and services) now account or a

similar proportion o GDP in India as in China.

The Indian economy has seen signicant structural changes. The share of servicesin GDP has increased, while that of agriculture has declined. Indias trade-to-GDP

ratio has increased considerably in the past decade, but its level of trade integrationremains low compared with that of other Asian countries

Figure I.8INDIA: GDP BY SECTOR, 1960-2010(Percentages)

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis oWorld Bank, World Development Indicators 2011

Figure I.7INDIA: GDP BY EXPENDITURE, 1970-2010(Percentages)

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis o

World Bank, World Development Indicators 2011

0

5

10

15

20

2530

35

40

45

1970

1972

1974

1976

1978

1980

1982

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1994

1996

1998

2000

2002

2004

2006

2008

2010

China exports China imports India exports India imports

-20

0

20

40

60

80

100

1970-1979 1980-1989 1990-1999 2000-2010

Change in inventories Net exports Private consumption

Government cosumption Gross fixed capital formation

0

10

20

30

40

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60

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90

100

1960-1969 1970-1979 1980-1989 1990-1999 2000-2010

Services Industry Agriculture

5.


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When measured in terms o PPP, a major source o economicgrowth, and one that has been gaining ground over the lastten years, or India has been total actor productivity (TFP).For example, total actor productivity accounted or 34% othe 8.4% growth rate recorded or the period 2004-2008, onlyslightly less than the contribution o non-ICT capital.Latin American experience in this area has been quite meagrein comparison with that o Eastern Europe and developingAsia. The TFP perormance o Brazil has not been very strong

and in Mexico, the contribution o TFP to overall growth in2004-2008 was even negative.The above indicates that economic growth in India is beingdriven increasingly by improvements in quality rather thanincreases in the quantity o capital and labour inputs.

Total factor productivity has been a major source of economic growth for India,whereas Latin American performance in this area has been disappointing

Figure I.10INDIA: SOURCES OF GROWTH, 1989-2008(Percentages)

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis oDale W. Jorgenson and Khuong M. Vu, Potential Growth o the World Economy, Journal o PolicyModeling, vol. 32, Issue 5, September-October 2010.

Figure I.11SELECTED ASIAN AND LATIN AMERICAN COUNTRIES:SOURCES OF GROWTH, 2004-2008(Percentages)

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis oDale W. Jorgenson and Khuong M. Vu, Potential Growth o the World Economy, Journal o Policy

Modeling, vol. 32, Issue 5, September-October 2010.

5.0

5.7

6.2

8.4

0.0 2.0 4.0 6.0 8.0 10.0 12.0

1989-1995

1995-2000

2000-2004

2004-2008

ICT Capital Non-ICT capital

Labour quality Labour hours Total factor priductivity

5.7

3.2

7.0

4.4

5.0

10.4

8.4

-2 0 2 4 6 8 10 12

Indonesia

Mexico

Russia, Fed.

Brazil

Korea, Rep. of

China

India

ICT Capital Non-ICT Capital

Labour hours Labour quantity Total factor productivity

6.


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Figure I.12BRICS: FISCAL DEFICIT, 2000-2010(Percentages of GDP)

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis oInternational Monetary Fund (IMF), World Economic Outlook database, September 2011.

The Indian economy is not ree rom problems. The centralGovernment has a dicult task o attenuating rising scaldecit and the resulting public debt. Among the BRICScountries, India shows the highest level o scal decit whenmeasured by comparing central government revenues withexpenditures as percentages o GDP.Unlike China and the Russian Federation, India runs achronic current account decit, which is continuing to grow

in size as a percentage o GDP.Infation, a constant source o concern in India, remains at thehighest level among the ve BRICS countries considered.

Indias central Government has a difcult task of maintaining high growth rates witha twin decit and relatively high ination

-15

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2000

2001

2002

2003

2004

2005

2006

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India Brazil China RussianFederation

South Africa

Figure I.13BRICS: CURRENT ACCOUNT DEFICIT, 2000-2010(Percentages of GDP)

Source: Economic Commission or Latin America and the Caribbean (ECLAC) on the basis oInternational Monetary Fund (IMF), World Economic Outlook database, September 2011.

-10

-5

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20

2000

2001

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2004

2005

2006

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2009

2010


South Africa

Figure 1.14BRICS: INFLATION, 2000-2010(Percentages)

Source: Economic Commission or Latin America and the Caribbean (ECLAC) on the basis oInternational Monetary Fund (IMF), World Economic Outlook database, September 2011.

-5

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Table I.3WORLD MERCHANDISE TRADE, 2010(Billions of dollars and percentages)

Country/Region Exports Imports

China 1 578 10.4 1 368 8.9Russian Federation 400 2.6 248 1.6India 216 1.4 323 2.1Brazil 202 1.3 191 1.2BRIC total 2 396 15.7 2 130 13.9

ASEAN 1 052 6.9 950 6.2Newly industrialized economies 1 111 7.3 1 103 7.2

Japan 770 5.1 693 4.5Asia total 4 511 29.6 2 746 17.9United States 1 278 8.4 2 681 17.4European Union 5 147 33.8 5 337 34.7Latin America and the Caribbean 872 5.7 887 5.8World 15 238 100.0 15 376 100.0

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basiso World Trade Organization (WTO) press release, World Trade 2010. Prospects o a 2011,Press/628, April 2011.Note: The newly industrialized economies include Hong Kong Special Administrative Region oChina, Republic o Korea, Singapore and Taiwan Province o China.

Compared with its share in world GDP, Indias participationin world merchandise trade remains small, accounting or1.4% and 2.1% o world exports and imports, respectively,in 2010. The country ranked twentieth in exports that year.Its export value was similar to that o Brazil, but lower thanthat o Mexico.Indias share in world merchandise imports was slightlylarger than in exports. With an import value o US$ 323billon, India ranked thirteenth in the world in 2010.

The Latin American and Caribbean region accounted or 5.7%and 5.8% o world exports and imports, respectively.

Despite its increasing volume, India is still at an incipient stage of merchandisetrade expansion

Figure I.15BRICS AND REST OF THE WORLD: SHARE IN WORLDMERCHANDISE TRADE, 2010(Percentages of world total)

A. Exports

B. Imports

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basiso World Trade Organization (WTO) press release, World Trade 2010. prospects o a 2011,Press/628, April 2011.

8.

China

10.4%

India

1.4%Brazil

1.3% RussianFederation

2.6%

South Africa

0.5%

Rest

83.7%

China

9.1%

India

2.1%Brazil

1.2%Russian

Federation

1.6%

South Africa

0.6%

Rest

85.4%


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India exported US$ 123 billion o services in 2010, morethan double the value o its services exports in 2005. Thecounty was the worlds tenth largest services exporter in2010. Indias 3.3% share in world services exports wasalmost equal to that o Latin American and the Caribbean.

Indias annualized growth rate or the period 2005-2010was almost 19%, the highest rate among the countries andregions under consideration.

By contrast, India plays a much more important role in world services trade

Table I.4WORLD TRADE IN SERVICES BY VALUES, ANNUALIZED GROWTH RATES AND SHARES IN WORLD TOTAL, 2005-2010(Billions of dollars and percentages)

A. Exports B. Imports

2005 2010Annualizedgrowth rates

2005-2010

Share inworld total

2010

United States 353 518 8.0 14.0

European Union 1 181 1 569 5.8 42.5

Latin America and the Caribbean 86 127 8.1 3.4

Brazil 15 30 15.3 0.8

Mexico 16 15 -0.8 0.4

Commonwealth o Independent States 41 79 13.9 2.1

Russian Federation 25 44 12.2 1.2

Arica 56 85 8.7 2.3

South Arica 11 14 4.3 0.4

Middle East 65 97 8.4 2.6

Asia 539 975 12.6 26.4

China 74 146 14.7 4.0

India 52 123 18.8 3.3

World 2 496 3 693 8.1 100.0

2005 2010Annualizedgrowth rates

2005-2010

Share inworld total

2010

United States 271 358 5.8 10.2

European Union 1 072 1 404 5.6 40.0

Latin America and the Caribbean 92 136 8.2 3.9Brazil 22 60 21.7 1.7

Mexico 21 22 1.3 0.6

Commonwealth o Independent States 59 107 12.7 3.1

Russian Federation 38 70 13.2 2.0

Arica 72 139 14.1 4.0

South Arica 12 18 8.8 0.5

Middle East 97 184 13.6 5.2

Asia 571 958 10.9 27.3

China 83 192 18.2 5.5

India 47 116 19.9 3.3

World 2 373 3 511 8.2 100.0

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis o World Trade Organization (WTO) Trade Statistics database.

Indias services imports reached US$ 116 billion, equivalentto 3.3% o world services imports in 2010. The country wasranked seventh in world services imports that year. Indiasimports grew at a high rate, but slightly below that registeredby Brazil. The import value o India was US$ 20 billion lower

than that o Latin America and the Caribbean as a whole.Among the ve BRICS countries, India ranks second behindChina in both exports and imports.

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C. BREAKDOWN OF OTHER SERVICES, 2000, 2005 AND 2010

(Percentages of the other services total)

Indias trade in services continues to expand, accounting

or 35% and 26% o total exports and imports (merchandiseand services), respectively.The major growth engine o service exports has been theother services category, growing at a much aster rate thanthe other two major categories, travel and transport.Among the dierent subsectors within other services,the most dynamic has been the computer and inormationcategory. Together with the other business servicescategory, these two subsectors account or 90% o the other

services total.Indian companies operating in these areas, especiallyin business process outsourcing (BPO) and knowledgeprocess outsourcing (KPO), have become Indias majorinvestors abroad.

Over the years, trade in services has become an engine of growth for Indiasexternal sector

Figure I.16INDIA: TRADE IN SERVICES

A. SHARE OF SERVICES IN TOTAL TRADE, 1990-2010

(Percentages of exports and imports)

B. BREAKDOWN OF SERVICES EXPORTS BY MAJOR SECTORS, 1990-2010

(Millions of dollars)

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis oInternational Monetary Fund (IMF), Balance o Payments Statistics, 2011.

0

5

10

15

20

25

30

35

40

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Share in total exports Share in total imports

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

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2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Other services Travel Transport

0

10

20

30

40

50

60

70

80

90

100

2000 2005 2010

Government services Personal, cultural and recreationalOther business services Royalties and license feesComputer and information FinancialInsurance Construction

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Table I.5INDIA: EXPORTS AND IMPORTS, BY MAJOR REGIONS,ANNUAL AVERAGE, APRIL 2009-MARCH 2010 ANDAPRIL 2010-MARCH 2011(Millions of dollars and percentages of national total)

Exports Imports

European Union 41 424 19.3 41 487 12.6Other Europe 3 168 1.5 21 960 6.7

Arica 13 294 6.2 23 389 7.1North America 23 784 11.1 20 576 6.3

Latin America and the Caribbean 8 223 3.8 12 305 3.7Asia 118 718 55.2 200 760 61.0ASEAN 22 696 10.6 28 203 8.6

Commonwealth o Independent States 2 276 1.1 5 884 1.8

Unspecied 4 057 1.9 2 711 0.8

Total 214 944 100.0 329 071 100.0

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis o theMinistry Commerce and Industry, Export Import Data Bank [online] http://commerce.nic.in/eidb/irgn.asp [Date o reerence: 10 November 2011].

Abbreviation: ASEAN, Association o Southeast Asian Nations.

Asia is Indias largest trading partner both in exports and imports, while the role ofLatin America and the Caribbean as a trading partner remains modest

The annual average value o Indian exports and importsduring the scal years 2009 and 2010 reached US$ 215 billion

and US$ 329 billion, respectively.Asia is Indias largest trading region, accounting or 55% oexports and 61% o imports during the same period.The European Union represented almost 19% and 13% othe countrys exports and imports, respectively. The UnitedStates had a much lower share in Indias exports and imports

than the European Union.Latin America and the Caribbean is neither an importantexport destination nor a point o origin or Indias imports. Ineach, the regions share was less than 4%. This compares quiteunavourably with Aricas share, which was almost doublethat o Latin American and Caribbean in both cases.Among the developing regions, the countries o theAssociation o Southeast Asian Nations (ASEAN) havebecome a signicant trade partner or India, accountingor 11% o exports and 9% o imports, during the two scal

years under consideration.

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Table I.6BRICS, SELECTED ECONOMIES AND WORLD: INWARD ANDOUTWARD FDI STOCK, DECEMBER 2010(Millions of dollars and percentages)

Inward Outward

China 578 818 3.0 297 600 1.5India 197 937 1.0 92 407 0.5Brazil 472 579 2.5 180 949 0.9Russian Federation 423 150 2.2 433 655 2.1

BRIC Total 1 290 306 6.7 713 368 3.5South Arica 132 396 0.7 81 127 0.4BRICS 1 296 002 6.8 714 952 3.5Developing economies 5 951 203 31.1 3 131 845 15.3

World 19 140 603 100.0 20 408 257 100.0

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis oUnited Nations Conerence on Trade and Development (UNCTAD) World Investment Report 2011[online] www.unctad.org/wir or www.unctad.org/distatistics.

Historically, India has not relied heavily on FDI as a source of gross xed capitalformation; however, in recent years, the country has become not only a major

recipient but also a signicant investor worldwideTable I.7INDIA, SELECTED ECONOMIES AND WORLD: INWARD ANDOUTWARD FDI FLOWS, 1995-2010(Millions of dollars and percentages)

1995-2004Annualaverage



2008-2010Share in totaldevelopingeconomies

2008-2010Share in

Worldtotal

India

Inward 3 789 17 766 34 278 5.9 2.5Outward 824 11 501 16 651 5.5 1.1

ChinaInward 46 475 76 213 102 349 17.6 7.4Outward 2 976 18 630 58 893 19.5 4.0

BrazilInward 19 174 22 824 39 815 6.9 2.9Outward 1 885 12 595 7 297 2.4 0.5

Korea, Rep. oInward 5 075 4 855 7 594 1.3 0.5Outward 3 745 12 418 18 893 6.2 1.3

Taiwan Prov. o ChinaInward 2 165 5 606 3 576 0.6 0.3Outward 5 022 8 178 9 116 3.0 0.6

SingaporeInward 12 980 27 780 20 835 3.6 1.5

Outward 7 752 20 910 12 649 4.2 0.9Argentina

Inward 7 351 5 759 6 693 1.2 0.5Outward 1 269 1 751 1 022 0.3 0.1

MexicoInward 17 097 24 636 20 103 3.5 1.4Outward 1 549 6 830 7 507 2.5 0.5

Developing economiesInward 199 794 444 940 580 716 100.0 41.8Outward 74 301 214 332 302 402 100.0 20.6

WorldInward 718 542 1 471 784 1 390 934 100.0Outward 703 779 1 487 426 1 468 124 100.0

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis oUnited Nations Conerence on Trade and Development (UNCTAD) World Investment Report 2011

[online] www.unctad.org/wir or www.unctad.org/distatistics.

India accounted or only 1.0% and 0.5% o world inward

and outward FDI stock, respectively, in 2010, which wasmuch lower than the shares o Brazil, China and theRussian Federation.However, Indias FDI fows have increased substantially inrecent years. Annual average infows in 2008-2010 reachedUS$ 34 billion, almost 10 times the annual average amountreceived in 1995-2004. At the same time, India has beenincreasing its FDI abroad: in the period 2008-2010, annualaverage outward FDI totalled US$ 17 billion, much more

than the amount invested abroad by Brazil and Mexico.

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Traditionally, developed economies have been the mainrecipients o Indias FDI abroad. In the period 2002-2009,Europe received more than US$ 30 billon o Indias outwardFDI, absorbing more than 40% o the total.In recent years, developing economies as a whole havebecome important destinations or Indias FDI abroad,accounting or almost hal o outfows during the 2000s.

Although developing countries are receiving an ever larger proportion of Indiasoutward FDI, developed economies have, until recently, been Indias main outward

FDI hosts. However, even among the former, Latin America and the Caribbean hasnot been a favoured destination for those investment ows

Among developing regions, developing Asia is increasingits share as a host region o Indias FDI, absorbing almost30% o total FDI in recent years.Latin America and the Caribbean received almost 4% oIndias FDI abroad between 2002 and 2010.

Table I.8INDIA: GEOGRAPHICAL DISTRIBUTION OF OUTWARD FDI FLOWS,a 1996-2010b

(Millions of dollars and percentages)

1996-2002 2002-2009 2009-2010 1996-2002 2002-2009 2009-2010

Developed economies 5 267 39 487 3 384 70.0 52.0 31.9

Europe 827 30 715 2 134 11.0 40.4 20.1

North America 1 546 7 185 1 191 20.5 9.5 11.2

Other developed economies 248 1 587 59 3.3 2.1 0.6

Developing economies 36 498 7 239 - 48.0 68.1

Arica 750 9 321 1 521 10.0 12.3 14.3

Asia and Oceania 1 544 21 032 4 923 20.5 27.7 46.3

South-east Europe/CIS 1 787 3 448 76 23.7 4.5 0.7

Latin America and the Caribbean 821 2 697 718 10.9 3.5 6.8

World 7 525 75 985 10 623 100.0 100.0 100.0

Source: Adapted rom Premila Nazareth Satyanand and Pramila Raghavendran, Outward FDI rom India and its policy context, Columbia, FDI Proles, Vale Columbia Center, 22 September 2010.Abbreviation: CIS, Commonwealth o Independent States.

a This table relies on investment approval data because the Government o India does not publish a geographical breakdown o outward FDI fows.

b Data are by scal year (1 April to 31March).

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Prior to the 1990s, Indias outward FDI fows were largelylimited to its neighbouring developing countries. Suchinvestments were viewed by the Government o India asits contribution to South-South cooperation.During the 1980s, the share o Indias total outward FDI

going to developing countries stood at 76%. However, thischanged in the early 1990s. The share o developed countriesrose continuously rom 24% in the 1980s to 44% in the 1990s,and climbed urther to 64% in 2000-2007.

The drivers of Indias outward foreign direct investment in recent years have beenmergers and acquisitions in developed economies

Table I.9INDIA: TOP 15 OUTWARD FDI DESTINATIONS, 1996-2002 AND 2002-2009a, b

(Billions of United States dollars and percentages)

1996-2002 2002-2009

Dest inat ion Outfows author ized Share Dest ination Outfows authorized Share

Russian Federation 1.7 23.8 Singapore 14.2 20.8United States 1.5 20.5 Netherlands 10.6 15.4British Virgin Islands 0.8 10.3 Mauritius 5.6 8.1Mauritius 0.6 8.2 Channel Islands 5.4 7.9

Hong Kong SAR 0.4 5.9 United Kingdom 5.2 7.6United Kingdom 0.4 5.5 United States 5.1 7.4Bermuda 0.2 3.1 Cyprus 4.7 6.8

Viet Nam 0.2 3.0 United Arab Emirates 2.1 3.1Oman 0.2 2.7 Russian Federation 1.4 2.0Netherlands 0.1 2.1 Sudan 1.2 1.7Singapore 0.1 2.0 Switzerland 1.1 1.6United Arab Emirates 0.1 1.5 China 0.9 1.3

Austria 0.1 1.0 British Virgin Islands 0.9 1.2Nepal 0.1 0.9 Egypt 0.8 1.2Sri Lanka 0.1 0.8 Denmark 0.8 1.2

Source: Adopted rom Premila Nazareth Satyanand and Pramila Raghavendran, Outward FDI rom India and its policy context, Columbia, FDI Proles, Vale Columbia Center, 22 September 2010.

a Rankings are based on the cumulative stock o outward investment approvals or each period.b

Data are by scal year (1 April to 31 March).

The sharp rise in Indias outward FDI to developedregions was also refected in its overseas mergers andacquisitions. During the period rom 2000 to March 2008,Indian FDI fows into developed countries in the orm oacquisitions stood at US$ 47.4 billion, accounting or 80% o

the total acquisitions made by Indian companies. A total o306 Indian irms were engaged in acquisitions in 28developed countries.

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Over the years, manuacturing has been the leading sectoror Indias outward FDI, though in the last hal o the pastdecade, the predominance o manuacturing was slowlydisplaced by services.While the pharmaceutical, consumer electronics andautomotive sectors accounted or the bulk o manuacturingFDI abroad in the rst hal o the decade, the secondhal saw a concentration in metals, energy and naturalresource investments, and consumer goods and oods andbeverages.Similarly, while inormation and communications technologyinitially dominated services, there has been a rising trendin investment in other services sectors, such as nancialand insurance services, entertainment and broadcasting,construction and telecommunications.Since 2000, Indian rms have tended to use cross-bordermergers and acquisitions as the main vehicle or entryinto developed economies and greeneld investments

as a way into developing countries. Firms systematicallyacquire leading developed country rms to boost domainexpertise, technological competitiveness, market size andbrand recognition.Energy and mineral security have been the major drivingorces o Indian rms investments in developing countries,although many telecommunications, consumer goods, ood,inormation and communications technology, metal andpower rms are now using mergers and acquisitions to obtainmarket size or secure raw materials in these economies.

Manufacturing is the primary destination sector for Indias FDI overseas, though itsshare has been declining in recent years

Figure I.17INDIA: DISTRIBUTION OF OUTWARD FDI FLOWSBY MAJOR SECTORSa, b

(Percentages)

A. Cumulative 2000/2001-2004/2005

B. Cumulative 2005/2006-2009/2010

Source: Adapted rom Premila Nazareth Satyanand and Pramila Raghavendran, OutwardFDI rom India and its policy context, Columbia, FDI Proles, Vale Columbia Center, 22September, 2010.

a These gures use investment approval data.b

Data are by scal year (1 April to 31 March).

Manufacturing

64%

Financialservices

1%

Non-financialservices27%

Trade4%

Others4%

Manufacturing41%

Financialservices

1%

Non -financialservices

19%

Trade33%

Others6%

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1. Indias outward FDI is primarily driven by markets and

private companies, while Chinas outward FDI is mainlygovernment-led

Most Indian outward FDI is undertaken by publicly-listed,private rms and, as yet, only a handul o Indian public-sector rms have internationalized.Unlike State-driven Chinese FDI outfows, Indian outwardFDI has chiefy been led by leading Indian multinationalsowned by large Indian business houses and driven bymarkets, with little coordination with the Government,

except in the case o a ew public-sector rms operating inthe energy sector.

2. Chinas outward FDI mainly goes to developing countries andmining sectors while Indias goes to developed economiesand manuacturing and, increasingly, services sectors

The growing importance o developed countries as a hostto Indian outward FDI can be attributed to the emergence

o the knowledge-based segment o the Indian economy,including, or example, the pharmaceuticals and sotwaredevelopment industries.The non-nancial services and mining sectors accounted or thelargest shares o Chinese outward FDI, while manuacturingaccounted or a relatively small share.

3. China has advantages in its government-led strategy andeconomic diplomacy, whereas India has advantages in

enterprise governance and management

Many of Indias family-run companies have beeninvolved in outward ventures far longer than theirChinese counterparts and have thus developed the

requisite knowledge and business acumen to deal with

the complex issues relating to the management o cross-border alliances.Indian outward FDI is driven undamentally by inherentincentives and innovations, global growth, competition andbusiness opportunities.Chinese local and private enterprises still lack sucientcapital and the technological capabilities to invest abroad.A priority in the Chinese outward FDI strategy hasbeen to secure access to strategic assets and natural

resources by supporting large State-owned enterprises toinvest abroad.

4. Mergers and acquisitions will remain an active componento both countries overseas resource acquisition strategy

For many latecomers and less technologically advancedirms, outward FDI in the orm o overseas mergersand acquisitions provides an important means to accessadvanced proprietary technology, immobile strategicassets (such as brands and local distribution networks)and other capabilities required or survival and growth ina globalizing world economy.Many Chinese and Indian irms engaged in overseasmergers and acquisitions have been motivated to acquireskills, technology and widen their distribution networksoverseas, in addition to achieving the objective o accessingoverseas markets.It is not just large conglomerates that are active investors

abroad. In the period 2000-2008, 34% o all Indian mergersand acquisitions abroad were made by smaller rms, eventhough they accounted or just 8% o the total investmentvalue and were less geographically diverse than theirlarger counterparts.

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Table I.10SHARE OF CHINA AND INDIA IN GLOBAL PRODUCTION,CONSUMPTION AND IMPORTS OF AGRICULTURAL PRODUCTS,2008/2009(Millions of metric tons and percentages)

Production

Product World China India China India

Wheat 683.3 112.5 78.6 16.5 11.5Corn 797.8 165.9 19.7 20.8 2.5Rice 448.2 134.3 99.2 30.0 22.1

Soybean 212.0 15.5 9.1 7.3 4.3Soybean meal 151.4 32.5 5.8 21.4 3.8Soybean oil 35.7 7.3 1.3 20.5 3.6Cotton 23.6 8.1 4.9 34.2 20.8Sugar 151.1 13.6 16.0 9.0 10.6

Consumption


Wheat 635.8 105.0 72.5 16.5 11.4Corn 778.7 155.0 17.0 19.9 2.2Rice 437.5 131.0 93.2 29.9 21.3Soybean 220.8 51.4 8.5 23.3 3.8Soybean meal 151.9 31.7 2.0 20.8 1.3Soybean oil 35.9 9.5 2.3 26.4 6.4Cotton 22.7 8.8 4.0 38.8 17.6

Sugar 161.8 14.9 23.8 9.2 14.7

Imports


Wheat 136.9 0.5 0.0 0.4 0.0Corn 82.4 0.1 0.0 0.1 0.0Rice 27.2 0.3 0.0 1.3 0.0Soybean 77.2 41.1 0.0 53.3 0.0Soybean meal 51.2 0.2 0.0 0.4 0.0Soybean oil 8.9 2.5 1.1 27.9 11.9Cotton 30.0 7.0 0.8 23.3 2.7Sugar 48.2 1.1 2.8 2.2 5.8

Source: United States Department o Agriculture; Economist Intelligence Unit, World CommodityForecasts: industrial raw materials, January 2010; Economist Intelligence Unit, World CommodityForecasts: ood, eedstus and beverages, November 2010.

Though to a lesser degree than China, India is a major importer and consumerof the types of primary products of which Latin America and the Caribbean is

a major producer Table I.11SHARE OF CHINA AND INDIA IN GLOBAL PRODUCTION,CONSUMPTION AND IMPORTS OF MINERALS AND METALS,2008/2009(Millions of metric tons and percentages)

Production


Alminium 36 891.2 12 846.0 1 478.6 34.8 4.0Copper 18 606.7 4 109.5 721.4 22.1 3.9Lead 8 903.7 3 707.9 137.7 41.6 1.5

Nickel 1 326.7 246.7 - 18.6 0.0Tin 333.0 134.5 3.6 40.4 1.1Zinc 11 465.4 4 356.7 615.5 38.0 5.4Primary steel 1 219.7 567.8 56.6 46.6 4.6Crude oil 82.3 3.8 0.8 4.6 1.0

Consumption


Aluminium 34 581.5 14 275.7 1 478.1 38.7 4.3Copper 18 256.4 7 144.1 551.5 38.4 3.0Lead 8 951.4 3 859.9 180.0 43.4 2.0Nickel 1 305.6 541.3 24.5 40.8 1.9

Tin 321.5 143.0 9.0 44.5 2.8Zinc 11 255.6 4 888.3 532.2 43.4 4.7Primary steel 1 300.7 452.9 53.6 34.8 4.1

Crude oil 83.7 8.2 3.0 9.8 3.6Imports


Aluminium 17 250.3 1 739.8 257.7 10.1 1.5Copper 7 970.0 3 185.0 15.5 40.0 0.2Lead 1 734.5 175.6 116.3 10.1 6.7Nickel 638.8 247.0 17.9 38.7 2.8

Tin 254.0 20.5 6.1 8.1 2.4Zinc 3 660.1 670.2 93.6 18.3 2.6Iron ore 933.2 444.0 0.6 47.6 0.1Sponge iron 24.0 0.4 0.0 1.5 0.1Crude oila 44.5 3.6 2.5 8.2 5.6

Source: United States Department o Agriculture; Economist Intelligence Unit, World CommodityForecasts: industrial raw materials, January 2010; Economist Intelligence Unit, World Commodity

Forecasts: ood, eedstus and beverages, November 2010.

a Millions o barrels a day. The gures reer to 2008: US Energy Inormation Administration ,Independent Statistics and Analysis [online] http://www.eia.gov/.

India is a major global producer and consumer o wheat,rice, cotton and sugar, and its share in world imports osoybean oil is quite high.Indias share in world production, consumption and importso minerals and metals, and crude oil is much lower thanthat o agricultural products.I the sustained economic growth that the country has shown

over the last two decades continues, Indias consumption

and imports o the type o commodities o which LatinAmerica and the Caribbean is a major producer shouldincrease over time. However, India is trying to diversiyits suppliers and in this regard, Latin America and theCaribbean has to compete with other regions o the world

to supply primary products to India.

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In addition to the dominant positions that China hasconsolidated in selected International Standard IndustrialClassication (ISIC) industrial sectors, Brazil and India, andto a lesser extent, the Russian Federation, have also becomemajor producers o manuactures worldwide.When measured in terms o manuacturing value-added,at constant 2000 prices, India ranks quite highly among

the top 15 producing countries in sectors such as textiles

(ISIC division code 17), chemicals and chemical products(ISIC division code 24), basic metals (ISIC division code27) and electrical machinery and apparatus (ISIC divisioncode 31).India has a solid industrial base in many sectors, pointing touture trade and investment opportunities, on the one hand,and competition in domestic and third country markets, on

the other, or Latin America and the Caribbean.

India is a major world producer of industrial goods

Table I.12BRICS: RANKING AMONG WORLD TOP 15 PRODUCERS IN SELECTED INTERNATIONAL STANDARD INDUSTRIAL CLASSIFICATION

(ISIC REV. 3) DIVISIONS AND SHARE IN WORLD TOTAL VALUE-ADDED, 2007(World total value-added at constant 2000 prices and percentages)

ISIC Product description Ranking China(Percentages)

Ranking Brazil(Percentages)

Ranking India(Percentages)

Ranking RussianFederation

(Percentages)

15 Food and beverages 2 14.3 9 2.6 14 1.716 Tobacco products 1 51.4 12 0.917 Textiles 1 36.7 4 4.218 Wearing apparel, ur 1 28.7 8 2.019 Leather, leather products and ootwear 1 39.1 9 2.2 10 2.020 Wood products (except urniture) 2 8.9 7 3.721 Paper and paper products 3 12.9 12 2.1 15 1.522 Printing and publishing 5 3.8

23 Coke, rened petroleum products and nuclear uel 2 15.7 4 6.0 10 1.824 Chemicals and chemical products 2 3.5 12 1.9 7 3.525 Rubber and plastics products 1 18.3 9 2.2 15 1.426 Non-metalic mineral products 1 16.1 9 2.5 13 2.1 12 2.227 Basic metals 1 36.3 14 1.3 6 2.9 7 2.328 Fabricated metal products 4 9.4 9 2.429 Machinery and equipment n.e.c. 2 15.9 10 1.6 12 1.4 11 1.530 Oce, accounting and computing machinery 7 3.2 9 1.1 15 0.331 Electrical machinery and apparatus n.e.c. 1 30.8 7 2.0 5 3.1 15 0.832 Radio, television and communication equipment 3 7.2 10 0.233 Medical, precision and optical instruments 4 5.1 8 2.4 6 4.434 Motor vehicles, trailers and semi-trailers 13 1.5 12 1.635 Other transport equipment 1 35.9 3 5.6 10 2.4 13 1.036 Furniture, manuacturing n.e.c. 2 20.7 11 1.4

Source: United Nations Industrial Development Organization (UNIDO), Industrial Statistical Yearbook, 2009.

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Strong economic growth and targeted labour market andsocial policies have helped to reduce extreme poverty inIndia in the past 15 years. However, the country has notmanaged to achieve reductions on the scale o Brazil orChina where the number o people living on less than US$1.25 per day has allen by more than hal. Nevertheless,poverty levels remain high, aecting approximately 5%o the population in Brazil, 16% in China, 18% in SouthArica and 35% in India.

Where progress on overall poverty reduction has been made,income inequality has oten increased. While Brazil has seena remarkable reduction in income inequality since 2000, thelevels have worsened in India, China, and South Arica.Depending on the denition used, inormal employmentrepresents between 15% and 30% o total employment inChina, between 25% and 50% in Brazil and between 55%and 85% in India.Indias social expenditure as a percentage o GDP is lowerthan that o Brazil, China and South Arica.

In comparison with Latin American countries, Indias income distribution isfavourable; however, the country has the highest poverty rate of all the BRICS

Figure I.18SHARE OF INCOME BY QUINTILES(Percentages)

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis oWorld Bank, World Development indicators, 2010.

Figure 1.19SELECTED ASIAN AND LATIN AMERICAN COUNTRIES: GINIINDEX IN RELATION TO PER CAPITA GDP, 2009

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis oWorld Bank, World Development indicators, 2010.

0 20 40 60 80 100

India (2005)

China (2005)

Indonesia (2009)

Brazil (2009)

Mexico (2008)

H ig he st 2 0% Se co nd 2 0% T hi rd 2 0% F ou rt h 2 0% L owes t 2 0%

AUS

CHN

IDN

JPN

KHM

KOR

LAO

MNG

MYS

NZL

PHL

SGPTHA

VTM

ARG

BOL

BRA

CHI

COL

CRI

DOM

ECUGTM

MEX

NIC

PAN

PER

PRY

SLVUGY

VEN

IND

20

25

30

35

40

45

50

55

60

0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000 50 000

Giniindex

Per capita GDP

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Although recent pronouncements by the Government o India

have increasingly emphasized the need to secure investmentin major inrastructure projects, most o the progress hasthus ar been limited to the telecommunications sector, andmore recently to road construction. It is imperative that theGovernment continue to improve the countrys inrastructure(particularly its power supply and road network) in orderto support industrial development. The Government is

mobilizing more public resources to address this issue,

but, at 5% o GDP, spending on inrastructure trails arbehind that o China (around 10% o GDP). According tothe Planning Commission, that gure must be raised to 9%by 2011/2012 to maintain average annual GDP growth o9-10%. It must also promote the training o human resourcesin the services sector and make necessary investments toincrease rural productivity.

Among the weaknesses of the Indian economy, the poor condition of infrastructure isa major hindrance to growth

Figure 1.20KEY COMPONENTS OF COMPETITIVENESS, SELECTED ASIAN AND LATIN AMERICAN COUNTRIES, 2010

India China Singapore

Brazil Chile Mexico

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis o World Economic Forum, The Global Competitiveness Report 2010-2011

0.0

2.0

4.0

6.0

8.0

Institutions

Infrastructure

Macroeconomic

environment

Health and primary

education

Higher education and

training

Goods market efficiency

Labour market efficiency

Financial market

development

Technological readiness

Market size

Business sophistication

Innovation

0.0

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4.0

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Institutions

Infrastructure

Macroeconomic

environment

Health and primary

education


training



Financial market

development


Market size


Innovation

0.0

2.0

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Institutions

Infrastructure

Macroeconomic

environment

Health and primary

education


training



Financial market

development


Market size


Innovation

0.0

1.0

2.0

3.0

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Institutions

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environment

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0.0

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2.0

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environment



training



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Innovation

0.0

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environment



training



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development


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Innovation

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Latin America and the Caribbean has the worldslargest reshwater reserves, accounting or one third oworld reserves.In addition, together with Sub-Saharan Arica, the region hasthe largest area o cultivable land available or uture use. Theregion has 885 million hectares o land that could be usedor production, equivalent to one third o the world total.

On the basis o world population growth projections, anadditional 1 billion tons o grain and 200 million tons o meatwill be needed to eed the worlds population in 2050. LatinAmerica and the Caribbean has an abundance o naturalresources, which represent strategic assets.

India offers sizeable markets for Latin American agricultural products.The region has untapped agricultural assets such as fresh water andcultivable land for future use

Figure I.21WATER RESERVES, BY MAJOR REGIONS, 2007(Percentages)

Source: World Resource Institute (WRI), Earth Trends: Environmental inormation, 2007 [online]http://earthtrends.wri.org.

Figure 1.22CULTIVABLE AREA IN USE, BY MAJOR REGIONS, 2011(Percentages)

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis oFood and Agriculture Organization (FAO) database TERRASAT [online]http://ao.org/ag/agl/agll/terrastat/#terrasatdb.

Latin America andthe Caribbean

34%

European Union4%

Asia-Pacific28%

North America10%

Rest of the world24%

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Trade and investment relations between India

and Latin America and the Caribbean

Chapter II


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Figure II.1LATIN AMERICA AND THE CARIBBEAN: SHARE OF SELECTEDCOUNTRIES AND ASEAN IN EXPORTS AND IMPORTS, 1985-2010(Percentages)

A. Exports

B. Imports

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis oUnited Nations Commodity Trade Statistics Database (COMTRADE).Note: ASEAN (6) includes Indonesia, Malaysia, the Philippines, Singapore, Thailand and Viet Nam.

Abbreviations: ASEAN, Association o Southeast Asian Nations.

China is a key component in the Latin American and Caribbean regions strategy todiversify into Asia-Pacic markets. However, the dynamism of Asia-Pacic does notlie solely in China India has also become an important trading partner

Asia-Pacic has become a very important trading partneror the Latin American and Caribbean region, particularlyin terms o the latters imports. Indeed, the dierence in thevolume o imports and exports has generated a growingtrade decit with the Asia-Pacic region over the last threedecades, amounting to US$ 85 billion in 2010.Behind the dynamic trade between the two regions, Chinais playing an increasing role in both exports and imports,

rapidly displacing Japan as the largest trade partner inthe Asia-Pacic region at the start o the decade, despiteJapans slight recovery in recent years on the export side.In addition, the ASEAN (6) grouping (Indonesia, Malaysia,the Philippines, Singapore, Thailand and Viet Nam) hasovertaken the Republic o Korea as a source o imports orLatin America and the Caribbean and as a destination orits exports.

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( )

The regions trade with India was negligible until the beginning

o the past decade. Since then, trade with the Asian countryhas burgeoned. According to the ocial statistics o thecountries o the region. Imports rom India are estimatedto have reached US$ 10 billion in 2010, while the value othe regions exports to India totalled US$ 9 billion.Even compared with the impressive perormance o Chinain the Latin American and Caribbean region, India hasbecome an important trading partner or the region as awhole. Nonetheless, Indias share in Latin American and

Caribbean trade with Asia-Pacic is still at an incipientstage; its 6.2 % share in the regions exports to Asia-Pacicis below the 8.8% share o Republic o Korea and the 12.9%share o ASEAN (6). Indias share in the regions importsrom Asia-Pacic is even lower, at 5.1%.There is signicant potential or boosting trade in the comingyears, given the new growth paradigm o Latin Americaand the Caribbean and the avourable mindset o LatinAmericans towards India.

Trade between Latin America and India is a recent phenomenon

Figure II.2

INDIAS TRADE WITH LATIN AMERICA AND THE CARIBBEAN,1985-2010(Millions of dollars)

Figure II.3LATIN AMERICA AND THE CARIBBEAN: INDIAS SHARE IN THE

REGIONS TRADE WITH ASIA-PACIFIC, 1985-2010(Percentages)

Source: Economic Commission or Latin America and the Caribbean (ECLAC) on the basis oUnited Nations Commodity Trade Statistics Database (COMTRADE).Note: Asia-Pacic includes Australia, China, Japan and the Republic o Korea, and ASEAN (6)consists o Indonesia, Malaysia, the Philippines, Thailand, Singapore and Viet Nam.

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Figure II.4

LATIN AMERICA AND THE CARIBBEAN: TRADE WITH INDIA, AVERAGE 2008-2010a, b(Percentages of total trade)


Source: Economic Commission or Latin America and the Caribbean (ECLAC) on the basis o United Nations Commodity Trade Statistics Database (COMTRADE).

a Data are not available or Antigua and Barbuda and Honduras rom 2008; or Saint Kitts and Nevis and Saint Lucia rom 2009 ; or or Bahamas, Granada, Honduras, Saint Kitts and Nevis, Saint Lucia,Trinidad and Tobago and Uruguay rom 2010.

b Oil statistics were estimated by COMTRADE and may not be included or every country.

The regions trade with India is concentrated in a small number of countries

According to the ocial statistics o the countries o LatinAmerica and the Caribbean, the regions exports to Indiareached US$ 7 billion a year in 2008 and 2009. The ourmajor exporters, Brazil, Chile, Mexico and Argentina,accounted or almost 90% o regions exports to Indiaduring the period. The Caribbean countries represented1.3 % o total exports.

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The regions imports rom India totalled an annual averagevalue o US$ 7.7 billion. Brazil, Mexico, Colombia, Argentina,Peru and Chile, by order o importance, absorbed 86% othe regions total imports rom India. The Caribbean playeda more signicant role in imports than exports, accountingor 2.8% o total imports (or more detailed inormation bycountry, see tables A.1 and A.2 o the annex).

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Table II.1INDIA: TRADE WITH LATIN AMERICA AND THE CARIBBEAN, ANNUAL AVERAGE, APRIL 2009 TO MARCH 2011(Millions of dollars and percentages of regional total)

Exports Imports

Ranking Country US$ million Share Country US$ million Share

1 Brazil 3 192.5 38.83 Venezuela (Bol. Rep. o) 4 047.9 32.90

2 Bahamas 1 528.4 18.59 Brazil 3 493.4 28.39

3 Mexico 754.7 9.18 Chile 1 334.8 10.85

4 Colombia 471.9 5.74 Mexico 1 106.2 8.99

5 Chile 413.6 5.03 Argentina 847.5 6.89

6 Peru 364.9 4.44 Colombia 640.2 5.20

7 Argentina 334.1 4.06 Panama 277.4 2.258 Venezuela (Bol. Rep. o) 176.9 2.15 Peru 162.0 1.32

9 Ecuador 107.5 1.31 Ecuador 118.1 0.96

10 Trinidad and Tobago 104.7 1.27 Costa Rica 94.5 0.77

11 Guatemala 99.1 1.21 Trinidad and Tobago 68.9 0.56

12 Panama 98.0 1.19 Guatemala 23.0 0.19

13 Uruguay 69.4 0.84 Uruguay 16.7 0.14

14 Dominican Republic 67.6 0.82 Honduras 13.4 0.11

15 Honduras 53.1 0.65 Domincan Republic 12.6 0.10

16 Haiti 46.7 0.57 Guyana 8.8 0.07

17 Costa Rica 46.6 0.57 Antigua 7.8 0.06

18 British Virgin Islands 40.9 0.50 El Salvador 5.4 0.04

19 Netherlands Antilles 40.5 0.49 Paraguay 5.3 0.04

20 Paraguay 39.7 0.48 Bolivia (Plur. State o) 5.0 0.04

Others 171.8 2.09 Others 15.8 0.13

Total 8 222.6 100.00 Total 12 304.7 100.00

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis o the Ministry o Commerce and Industry, Export Import Data Bank [online] http://commerce.nic.in/eidb/Deault.asp.

Mexico, Argentina and Colombia were also importantsources o Indian imports.The major dierences between the ocial statistics produced

by India and those produced by the countries o LatinAmerica and the Caribbean probably stem rom the act that:(i) data on oil trade destinations are not always available,as is the case or the Bolivarian Republic o Venezuela; and(ii) Indias statistics report on the basis o ports o arrivalrather than nal destination.

According to Indias ofcial statistics, the order of importance of its trade partnersdiffers dramatically

According to Indias ocial statistics or the scal years 2009and 2010, the countrys exports to Latin America and theCaribbean reached US$ 8.2 billion, while its imports rom

the region totalled US$ 12.3 billion.Brazil is the largest export destination, accounting or almost40% o total exports to the region. The combined share o thetop seven destination countries (Brazil, Bahamas, Mexico,Colombia, Chile, Peru and Argentina) represented 86% ototal exports to the region.With respect to imports, the Bolivarian Republic o Venezuelaand Brazil led the list, with a combined share o 61%. Chile,

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Figure II.5LATIN AMERICA AND THE CARIBBEAN: RELATIVE IMPORTANCE OF INDIA AS A TRADE PARTNER, ANNUAL AVERAGE, 2008-2010a, b

(Percentages of each countrys total exports and imports)


Source: Economic Commission or Latin America and the Caribbean (ECLAC) on the basis o United Nations Commodity Trade Statistics Database (COMTRADE).

a Data are not available or Antigua and Barbuda and Honduras rom 2008; or or Saint Kitts and Nevis and Saint Lucia rom 2009; or or Bahamas, Granada, Honduras, Saint Kitts and Nevis, Saint Lucia,Trinidad and Tobago and Uruguay rom 2010.

b Oil statistics were estimated by COMTRADE and may not be included or every country.

For the majority of the countries in the region, India is still an unexploited exportmarket and a minor source of imports

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India is not yet a major destination or the regions exports,receiving only 0.9% o the regions total exports in 2008-2010. Among the countries o the region, Chile sends the

highest proportion o its total exports to India: 2.2%. Brazil,Argentina and Paraguay are the only other countries tosurpass the regional average.

Nor is India an important source o the regions imports. In2008-2010, only 1% o the regions total imports originatedrom India. The countries that rely more on India as an

import source are Brazil, Peru, Colombia and Nicaragua(or more detailed inormation by country, see tables A.1and A.2 o the annex).

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Figure II.6LATIN AMERICA AND THE CARIBBEAN: TRADE STRUCTUREWITH SELECTED MARKETS IN ASIA-PACIFIC, BYTECHNOLOGICAL INTENSITY, ANNUAL AVERAGE, 2008-2010a, b

(Percentages of total )

A. Exports

B. Imports

Source: Economic Commission or Latin America and the Caribbean (ECLAC) on the basis oUnited Nations Commodity Trade Statistics Database (COMTRADE).

a Data are not available or the Bolivarian Republic o Venezuela rom 2007; or Antigua andBarbuda and Honduras rom 2008; or or Saint Kitts and Nevis and Saint Lucia rom 2009.

b Oil statistics or the Bolivarian Republic o Venezuela were estimated by COMTRADE and may notinclude data or every country.

The regions export basket or India is similar to that orother Asian countries, that is, primary products and naturalresource-based manuactures account or the lions shareo total exports. The share o primary products could beeven higher i oil exports rom the Bolivarian Republic oVenezuela were taken into account. This contrasts with theregions export basket or other trading partners, especially orintraregional trade within Latin America and the Caribbean,

which consists o a high proportion o manuactures odierent technological intensities.Notably, the regions import structure rom India is quitedierent to that rom other Asian countries. The importbasket rom India consists not only o manuactures, butalso natural resource-based manuactures. The shares omedium- and high-tech manuactures are also much lowerwhen compared with the import baskets rom China, Japanand the Republic o Korea.Thereore, the typical inter-industry trade structure o the

region with Asia, in which the region exports primaryproducts and imports manuactures, does not necessarilyapply to India.

The regions exports to India are concentrated in primary products andnatural resource-based manufactures, while its imports from India areof a more diverse nature

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Table II .2LATIN AMERICA AND THE CARIBBEAN: NUMBER OF PRODUCTS EXPORTED TO THE MAIN MARKETS, ANNUAL AVERAGE, 2007-2009(Number of products at the six-digit level of the 2002 Harmonized System)

India China Japan

Republic oKorea

ASEAN European Union United StatesLatin America and

the Caribbean

Argentina 373 521 453 251 674 2 258 1 751 3 815

Bolivia (Plur. State o) 15 40 82 34 18 359 364 673

Brazil 1 031 1 172 1 266 524 1 395 3 148 2 864 3 964

Chile 113 307 324 173 254 1 429 1 340 3 108

Colombia 73 155 210 118 156 1 314 1 827 3 258

Costa Rica 54 160 112 68 176 684 1 457 2 472

Ecuador 22 65 109 61 61 753 1 020 1 803

El Salvador 15 36 39 24 40 336 1 008 2 435

Guatemala 25 193 140 304 161 843 1 534 3 284

Hondurasa 27 74 76 31 47 323 922 1 851

Mexico 591 1 093 1 150 671 1 043 2 772 4 129 3 895

Nicaragua 7 35 22 44 16 174 840 1 726

Panama 45 98 50 52 92 718 1 029 2 716

Paraguay 18 57 27 12 30 345 246 1 002

Peru 58 252 447 172 184 1 555 1 688 2 872

Uruguay 42 121 49 42 100 717 448 1 430

Venezuela (Bol. Rep. o)b 40 63 67 19 120 778 849 1 663

Caribbean countriesc 108 289 147 37 189 1 422 2 600 3 037

Latin America and the Caribbean 1 613 2 275 2 234 1 529 2 319 4 225 4 625 4 852

Source: Economic Commission or Latin America and the Caribbean (ECLAC), on the basis o United Nations Commodity Trade Statistics Database (COMTRADE).

a Does not include 2008.b Does not include 2007.c Includes Bahamas, Barbados, Belize, Dominica, Dominican Republic, Guyana, Jamaica and Trinidad and Tobago.

The regions exports to Asia, and especially to India, are limited in termsof range of products

The number o products exported by Latin America and theCaribbean, as categorized under the Harmonized Systemat the six-digit level (5,052 tari lines), to India is muchsmaller than to other regions and countries o the world.

Export baskets within the region, or the United States, andor the European Union are much more diversied. At theregional level, 1,613 products (at the six-digit level o the

Harmonized System) were exported to India, a much smallernumber than or China, Japan and ASEAN.Among the countries o the region, Brazil exports the largestnumber o products to India, ollowed by Mexico, while the

number o products exported by Central American countriesand Paraguay is very small.

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Table II.3INDIA: TOP THREE IMPORT PRODUCTS FROM LATIN AMERICAN AND CARIBBEAN COUNTRIES, ANNUAL AVERAGE 2008-2010(Percentages)

First Second Third Share in total

Argentina Fixed vegetable oils (73.8) Wheat, unmilled (7.6) Leather (3.3) 84.9

Bolivia (Plur. Sta