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14 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA 1.9). This is mainly due to the free trade agreement between the two nations, its geographical proximity, free current account convertibility between its currency and Indian rupees and generous grants from India. Table 1.9 Top Export Markets of Bhutan (in Million Nu), 2000–03 Countries 2000 2001 2002 2003 India 4376.95 4700.47 5153.78 5188.23 Bangladesh 164.72 222.38 222.97 120.83 Nepal 28.44 41.51 32.79 14.19 Fig 1.4 Trade-GDP ratio in Bhutan: 1981–2005 (%) Source: Estimated from ADB (1999, 2000) and RMA (2000, 2004, 2005), Trade-Poverty Nexus in Bhutan Fig 1.5 Export-GDP and Import-GDO ratios: 1981–2005 Source: Estimated from ADB (1999, 2000) and RMA (2000, 2004, 2005), Trade-Poverty Nexus in Bhutan both the export and import to GDP ratio declined. However, with the commissioning of the Tala Project, these ratios return to its upward trend. Despite rapid growth of exports, trade deficits remained large as a result of very high level of imports, which stems from continued disability of Bhutan’s economy to expand its productive base. Bhutan is a member of two regional economic cooperation SAARC and BIMSTEC which seek to promote free trade in the region. Bhutan continues to participate in the progressive trade liberalisation initiatives under SAFTA. Besides Bhutan has bilateral trade agreements with India and Bangladesh. Initiatives are underway to establish bilateral trade agreements with Nepal and Thailand. Despite the efforts of diversification, India continues to be the major trading partner constituting 97% of export and 90% of import (Table Source: Department of revenue and customs, Article: Trade Logistic Service Liberalisation in Bhutan The regional market will continue to be of significant importance to Bhutan in view of the underdeveloped domestic transport infrastructure and network. Bhutan’s prospects of benefiting from other international markets other than regional markets are limited to those goods of high value low volume which could overcome the diseconomies of transport costs. In order to enhance market access opportunities through trade liberalisation initiatives at bilateral as well as regional levels, the Regional and Bilateral Trade Section through its concerned department and ministry would continue to work towards enhancing trade between Bhutan and India under the existing FTA between the two countries. Bilateral consultations on transport, transit and other procedural aspects will be initiated with India from time to time to facilitate Bhutan’s third country trade. India India, with a GDP growth rate of 9.4% in 2006–07, is one of the fastest growing economy in the world. When measured in terms of purchasing power parity, India has the world’s fourth largest GDP at US $4.726 trillion. India, at the time of independence was characterized by low level of living, low level of productivity, high rates of unemployment and population growth rate and significant dependence on agriculture production. From less than 1% rate of growth of GDP prior to 1951, Indian economy recorded a growth rate of 3.5% in first decade of planning and over 5% in 1980s. However, the high growth phenomenon of the 1980s could not be sustained, as the experience of the crisis in 1991–92 revealed, when the annual average GDP growth rate declined to 3.3%. After 1991–92, the GDP recorded a growth rate of over 6% which has been accompanied by government policies of liberalisation, privatisation and globalisation.
I NTRODUCTION 15 The period from 1992–93 and 1993–94 was the period of recovery from the crisis while the period from 1994–95 to 1996–97 was marked by the high growth of economy (Table 1.10). The growth rate of GDP averaged as much as 7.5% per annum in the latter, higher from 5.5% in the former. This was the only period in India’s economic history during which real GDP growth exceeded 7% consecutively over a period of three years. The sharp acceleration in the rate of growth of overall GDP was the result of phenomenal growth of 10.8% per annum in the industrial sector. Table 1.10 Growth rate of GDP at Factor Cost at constant prices in India, 1992–2006 (%) Year Growth Rate of GDP at Factor Cost 1992–93 5.1 1993–94 5.9 1994–95 7.3 1995–96 7.3 1996–97 7.8 1997–98 4.8 1998–99 6.5 1999–00 6.1 2000–01 4.4 2001–02 5.6 2002–03 4.3 2003–04 8.5 2004–05 6.9 2005–06 9.0 2006–07 9.2 Source: Economic Suvey, various issues. The phase from 1997–98 to 2002–03 was marked by a general deceleration in growth with the average rate of growth during this period turning out to be 5.3%., which was much lower than the average growth of 7.5% per annum recorded during the period of high growth from 1994–95 to 1996–97. The reason is attributed to the steep decline in industrial growth, led by a severe slowdown in the manufacturing sector. Within this second phase, real GDP growth, after dipping to 4.8% in 1997–98, recovered during the years 1998–99 and 1999–2000 to over 6%. One of the factors contributing to this recovery was the high growth emanating from service sector, and within the service sector, the growth of ‘community, social and personal services’, particularly ‘public administration and defence’ in 1997–98, with its lagged effect persisting till 1999–2000. In 2000–01, growth of overall GDP dipped to 4.4%. This was a result of poor performance of agriculture, coupled with significant deceleration in the growth rate of GDP from the service sector, particularly ‘finance, insurance, real estate and business services’. In 2002–03, the rate of growth registered was again 4.3% as compared to 5.8% in 2001–02, which has been an outcome of a sharp fall in agricultural growth to a negative of 3.1% owing to the drought conditions. Buoyed by a rebound in agriculture sector, and strongly helped by improved performance in industry and services, the economy registered a growth rate of 8.5% in 2003–04. In spite of a deficient south-west monsoon, hardening international prices of oil and steel and extensive damage of life and property caused by tsunami, the economy managed to maintain the growth momentum, with the growth recorded at 6.9% in 2004–05. The growth of 9% and 9.2% in 2005–06 and 2006–07, respectively surpassed expectations. While the uneven pattern in agriculture continued with growth estimated at 6% and 2.7% in the two recent years, services maintained its vigorous growth performance. There were distinct signs of sustained improvements on the industrial front. The economy has moved decisively to a higher growth phase, with the growth in GDP exceeding 8% each year since 2003–04. The projected economic growth of 8.7% for 2008–09 is in line with this trend. The contribution of agriculture to overall growth of economy has decelerated from 28.4% in 1993–94 to 19.8% in 2003–04. The share of manufacturing remained between 16–17%. The major impetus to growth has come from service sector. The service sector accounted for 38.6% of GDP in the 1980s and 44.3% in the 1990s. It rose to 54.1% in 2001–02. India, in the initial era of planning adopted an ‘inward looking’ strategy of industrialisation. India Fig 1.6 Share of agriculture and manufacturing in GDP: 1993–2003 Source: National Account Statistics
Page 3 and 4: QUANTIFICATION OF BENEFITS FROM ECO
Page 5 and 6: QUANTIFICATION OF BENEFITS FROM ECO
Page 7: Preface Our consultations with seni
Page 10 and 11: viii CONTENTS 7. Revenue and Welfar
Page 13 and 14: Executive Summary OBJECTIVE This st
Page 15 and 16: EXECUTIVE SUMMARY xiii Table 1 EAMA
Page 17 and 18: EXECUTIVE SUMMARY xv India A full S
Page 19 and 20: EXECUTIVE SUMMARY xvii indicates th
Page 21 and 22: EXECUTIVE SUMMARY xix ments on basi
Page 23: Part I BENEFITS FROM TRADE, INVESTM
Page 26 and 27: 4 QUANTIFICATION OF BENEFITS FROM E
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Page 46 and 47: 2 Literature Review and Rationale f
Page 60 and 61: 4 Effective Additional Market Acces
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Page 76 and 77: 7 Revenue and Welfare Implications
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9 Quantification of Benefits from T
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Part II BENEFITS FROM DEEPENING INT
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11 Construction and Related Enginee
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12 Tourism and Travel Related Servi
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14 Health and Related Services 1 IN
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15 Prospects for the Telecommunicat
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APPENDICES
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Appendix 8 Intra SAARC FDI Collabor
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Appendix 11 Table A11.1 On an Emplo
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Appendix 12 Original Commitments/In
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Appendix 14 Table A14.1 Telecommuni
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Appendix 15 REFERENCE PAPER Scope T
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Bibliography Abelson, P. (1996),
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BIBLIOGRAPHY 241 Cuba (2002), Negot
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BIBLIOGRAPHY 243 (2004), Impacts of
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BIBLIOGRAPHY 245 Silva, Patricia an
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BIBLIOGRAPHY 247 (1998), Tourism Se
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