INDIAN EXPORTS WITH OTHER COUNTRIES ESPECIALLY STEEL

A project report submitted by

KUKKADAPU.V.N.J.HARIKA B.A.ECONOMICS(HONS.) LADY SHRI RAM COLLEGE FOR WOMEN

Under the guidance of

K. REVATHI Sr.Manager (Marketing Exports &Imports) Facilitated by O.R.M.RAO(AGM);HRD M.L.S.VARMA(DM);HRD

(HRD GROUP)

DECLERATION
I, Miss. KUKKADAPU.V.N.J.HARIKA here by declare that the project work titled Indian exports with other countries especially steel is the original work done by me under the supervision of Ms K.REVATHI Senior Manager of Marketing Export Visakhapatnam Steel Plant. NAME: KUKKADAPU.V.N.J.HARIKA PLACE:VISAKHAPATNAM at

ACKNOWLEDGEMENT
I express my sincere thanks to Ms K.REVATHI , of Rashtriya Ispat Nigam Limited, Visakhapatnam Steel Plant, who has taken time and effort in helping me in getting proper information and guiding me throughout the project without which it would not have been possible for me to complete this project. We have benefited immensely from our interactions with various corporate people and we acknowledge their contribution to my learning. And even after such support if you find any mistake in the project, then we are extremely sorry for that and will try to be perfect next time.

INDEX
TOPIC COVER PAGE DECLERATION ACKNOWLEDGEMENT CERTIFICATE INTRODUCTION INDIAN RELATIONS WITH OTHER COUNTRIES INDIAN AND SOUTH EAST ASIA EXIM POLICY RECESSION IMPACT ON INDIAN TRADING EXCHANGE RATE FLUCTUATIONS AND TRADE INCENTIVES AND DISINCENTIVES BRICS SUMMIT :2012 STEEL INDUSTRY OF INDIA NATIONAL STEEL POLICY FUTURE OF INDIAN STEEL INDUSTRY CONTRIBUTION OF STEEL INDUSTRY IN INDIAN GDP WORLD STEEL PRODUCTION AND EXPORTS STEEL PRODUCTION IN CHINA STEEL PRODUCTION IN JAPAN STEEL PRODUCTION IN USA PAGE NO. I II III IV 1 5 17 19 25 28 31 35 41` 54 56 59 61 66 69 72

INTRODUCTION
Geography
Area: 3.29 million sq. km. (1.27 million sq. mi.); about one-third the size of the U.S. Cities: Capital--New Delhi (pop. 12.8 million, 2001 census). Other major cities-Mumbai, formerly Bombay (16.4 million); Kolkata, formerly Calcutta (13.2 million); Chennai, formerly Madras (6.4 million); Bangalore (5.7 million); Hyderabad (5.5 million); Ahmedabad (5 million); Pune (4 million). Terrain: Varies from Himalayas to flat river valleys and deserts in the west. Climate: Alpine to temperate to subtropical monsoon.

People
Type: Federal republic Nationality: Noun and adjective--Indian(s). Population (2012 est.): 1.21 billion; urban 29%. Annual population growth rate (2012 est.): 1.312%. Density: 324/sq. km. Ethnic groups: Indo-Aryan 72%, Dravidian 25%, others 3%. While the national census does not recognize racial or ethnic groups, it is estimated that there are more than 2,000 ethnic groups in India. Religions (2001 census): Hindu 80.5%; Muslim 13.4%; Christian 2.3%; Sikh 1.9%; other groups including Buddhist, Jain, Parsi within 1.8%; unspecified 0.1%. Languages: Hindi, English, and 16 other official languages. Education: Years compulsory--K-10. Literacy--61%. Health: Infant mortality rate--46.07/1,000. Life expectancy--67.14 years (2012 est.). Work force (est.): 467 million. Agriculture--52%; industry and commerce-14%; services and government--34%.

Government
Independence: August 15, 1947. Constitution: January 26, 1950. Branches: Executive--president (chief of state), prime minister (head of government), Council of Ministers (cabinet). Legislative--bicameral parliament (Rajya Sabha or Council of States, and Lok Sabha or House of the People). Judicial--Supreme Court. Political parties: Indian National Congress (INC), Bharatiya Janata Party (BJP), Communist Party of India-Marxist, and numerous regional and small national parties. Political subdivisions: 28 states,* 7 union territories (including National Capital

Territory of Delhi). Suffrage: Universal over 18.

Economy
GDP (FY 2011 est.): $1.843 trillion. Real growth rate (2011 est.): 7.8%. Per capita GDP (PPP, FY 2011 est.): $3,700. Natural resources: Coal, iron ore, manganese, mica, bauxite, chromite, thorium, limestone, barite, titanium ore, diamonds, crude oil. Agriculture: 18.1% of GDP. Products--wheat, rice, coarse grains, oilseeds, sugar, cotton, jute, tea. Industry: 26.3% of GDP. Products--textiles, jute, processed food, steel, machinery, transport equipment, cement, aluminum, fertilizers, mining, petroleum, chemicals, and computer software. Services and transportation: 55.6% of GDP.

Trade
Exports (FY 2011 est.)--$298.2 billion; engineering goods, petroleum products, precious stones, cotton apparel and fabrics, gems and jewelry, handicrafts, tea. Services exports ($101.2 billion in 2008-2009) represent more than one-third of India's total exports.Software exports (FY 2009)--$35.76 billion. Imports (FY 2011 est.)--$451 billion; petroleum, machinery and transport equipment, electronic goods, edible oils, fertilizers, chemicals, gold, textiles, iron and steel. Major trade partners--U.S., China, U.A.E., EU, Russia, Japan.

DEFENSE
The supreme command of the Indian armed forces is vested in the president of India. Policies concerning India's defense, and the armed forces as a whole, are formulated and confirmed by the cabinet. The Indian Army numbers over 1.4 million strong and fields 34 divisions. Its primary task is to safeguard the territorial integrity of the country against external threats. The Army has been heavily committed in the recent past to counterterrorism operations in Jammu and Kashmir, as well as the in the Northeast. Its modernization program focuses on obtaining equipment to be used in combating terror. The Army often provides aid to civil authorities and assists the government in organizing relief operations. The Indian Navy is by far the most capable navy in the region. The Navy's primary missions are the defence of India and of India's vital sea lines of communication. India relies on the sea for 90% of its oil and natural gas and over 90% of its foreign trade. The Navy operates one aircraft carrier with two on order, 15 submarines, and 15 major surface combatants. It is capable of projecting power within the Indian Ocean basin and occasionally operates in the South China Sea, the Mediterranean Sea, and the Arabian Gulf. Fleet introduction of the Brahmos cruise missile, the possible lease of nuclear submarines from Russia, and the introduction of a new aircraft carrier in 2012 will add significantly to the Indian Navy's flexibility and striking power. Although small, the Indian Coast Guard has been expanding rapidly in recent years. Indian Navy officers typically fill top Coast Guard positions to ensure coordination between the two services. India's Coast Guard is responsible for control of India's huge exclusive economic zone. Fielding nearly 900 combat aircraft, the Indian Air Force is the worlds fourth largest. It is becoming a 21st-century force through modernization, new tactics, and the acquisition of modern aircraft, such as the SU-30MKI, a new advanced jet trainer (BAE Hawk), and the indigenously produced advanced light helicopter (Dhruv). In April 2008 six firms submitted proposals to the Indian Government to manufacture 126 multi-role combat aircraft for the Indian Air Force.

FOREIGN RELATIONS
India's size, population, and strategic location give it a prominent voice in international affairs, and its growing economic strength, military prowess, and scientific and technical capacity give it added weight. The end of the Cold War dramatically affected Indian foreign policy. India remains a leader of the developing world and the Non-Aligned Movement (NAM). India is now strengthening its political and commercial ties with the United States, Japan, the European Union, Iran, China, and the Association of Southeast Asian Nations.

India is an active member of the South Asian Association for Regional Cooperation (SAARC). Always an active member of the United Nations, India seeks a permanent seat on the UN Security Council. The country holds a non-permanent seat on the Security Council 2011-2012. India has a long tradition of participating in UN peacekeeping operations. Now we have to have a deeper look at the trade relation of our country with the other countries.

INDIAN RELATIONS WITH OTHER COUNTRIES

UNITED STATES
Recognizing India as a key to strategic U.S. interests, the United States has sought to strengthen its relationship with India. The two countries are the world's largest democracies, both committed to political freedom protected by representative government. India is also moving gradually toward greater economic freedom. The U.S. and India have a common interest in the free flow of commerce and resources, including through the vital sea lanes of the Indian Ocean. They also share an interest in fighting terrorism and in creating a strategically stable Asia. There were some differences, however, including over India's nuclear weapons programs and the pace of India's economic reforms. In the past, these concerns may have dominated U.S. thinking about India, but today the U.S. views India as a growing world power with which it shares common strategic interests. A strong partnership between the two countries will continue to address differences and shape a dynamic and collaborative future. In late September 2001, President Bush lifted sanctions imposed under the terms of the 1994 Nuclear Proliferation Prevention Act following India's nuclear tests in May 1998. The nonproliferation dialogue initiated after the 1998 nuclear tests has bridged many of the gaps in understanding between the countries. In a meeting between President Bush and Prime Minister Vajpayee in November

2001, the two leaders expressed a strong interest in transforming the U.S.-India bilateral relationship. High-level meetings and concrete cooperation between the two countries increased during 2002 and 2003. In January 2004, the U.S. and India launched the Next Steps in Strategic Partnership (NSSP), which was both a milestone in the transformation of the bilateral relationship and a blueprint for its further progress. In July 2005, President Bush hosted Prime Minister Singh in Washington, DC. The two leaders announced the successful completion of the NSSP, as well as other agreements to further enhance cooperation in the areas of civil nuclear, civil space, and high-technology commerce. Other initiatives announced at this meeting included: a U.S.-India economic dialogue, the fight against HIV/AIDS, disaster relief, technology cooperation, a democracy initiative, an agriculture knowledge initiative, a trade policy forum, an energy dialogue, and a CEO forum. President Bush made a reciprocal visit to India in March 2006, during which the progress of these initiatives was reviewed, and new initiatives were launched. In December 2006, Congress passed the historic Henry J. Hyde United StatesIndia Peaceful Atomic Cooperation Act, allowing direct civilian nuclear commerce with India for the first time in 30 years. U.S. policy had opposed nuclear cooperation with India because the country had developed nuclear weapons in contravention of international conventions and never signed the Nuclear NonProliferation Treaty. The legislation cleared the way for India to buy U.S. nuclear reactors and fuel for civilian use. In July 2007, the United States and India reached a historic milestone in their strategic partnership by completing negotiations on the bilateral agreement for peaceful nuclear cooperation, also known as the "123 agreement." This agreement, signed by Secretary of State Condoleezza Rice and External Affairs Minister Pranab Mukherjee on October 10, 2008, governs civil nuclear trade between the two countries and opens the door for American and Indian firms to participate in each other's civil nuclear energy sector. In July 2009, Secretary of State Hillary Clinton traveled to India to launch the Strategic Dialogue, which called for collaboration in a number of areas, including energy, climate change, trade, education, and counterterrorism. Prime Minister Singh visited Washington, DC in November 2009 for the first state visit of the Barack Obama administration. The inaugural session of the U.S.-India Strategic Dialogue was held in June 2010 in Washington, DC. The event was successful and showed progress in the U.S. India relationship. President Obama visited India in November 2010. In July 2011, Secretary Clinton led a U.S. delegation to India for the second round of the U.S.-India Strategic Dialogue, which took place in New Delhi on July 19, 2011, followed by a visit to Chennai.

China
China and India are two of the worlds oldest civilizations and have coexisted in peace for millennia. Cultural and economic relations between China and India date back to ancient times. The Silk Road not only served as a major trade route between India and China, but is also credited for facilitating the spread of Buddhism from India to East Asia. During the 19th century, China's growing opium trade with the British Raj triggered the Opium Wars. During World War II, India and China played a crucial role in halting the progress of Imperial Japan. Relations between contemporary China and India have been characterized by border disputes, resulting in three major military conflicts the Sino-Indian War of 1962, the Chola incident in 1967, and the 1987 Sino-Indian skirmish. However, since late 1980s, both countries have successfully attempted to reignite diplomatic and economic ties. In 2008, China emerged as the largest trading partner of India and the two countries have also attempted to extend their strategic and military relations. Despite growing economic and strategic ties, several issues continue to strain Sino-Indian relations. Though bilateral trade has continuously grown, India faces massive trade imbalance heavily in favor of China. The two countries have failed to resolve their long-standing border dispute and Indian media outlets repeatedly report Chinese military incursions into Indian territory. Both nations have steadily built-up military infrastructure along border areas. Additionally, India harbors suspicions about China's strong strategic relations with its archrival Pakistan while China has expressed concerns about Indian military and economic activities in disputed South China Sea. Recently, China has said that "Sino-Indian ties" would be the most "important bilateral partnership of the century". On June 21, 2012, Wen Jiabao, the Premier of China and Manmohan Singh, the Prime Minister of India set a goal to increase bilateral trade between the two countries to 100 billion dollars by 2015 With Indian President K. R. Narayanan's visit to China, 2000 marked a gradual re-engagement of Indian and Chinese diplomacy. In a major embarrassment for China, the 17th Karmapa, Urgyen Trinley Dorje, who was proclaimed by China, made a dramatic escape from Tibet to the Rumtek Monastery in Sikkim. Chinese officials were in a quandary on this issue as any protest to India on the issue would mean an explicit endorsement on India's governance of Sikkim, which the Chinese still hadn't recognised. In 2002, Chinese Premier Zhu Rongji reciprocated by visiting India, with a focus on economic issues. 2003 ushered in a marked improvement in Sino-Indian relations following Indian Prime Minister Atal Bihari Vajpayee's landmark June 2003 visit to China. China

officially recognized Indian sovereignty over Sikkim as the two nations moved toward resolving their border disputes. 2004 also witnessed a gradual improvement in the international area when the two countries proposed opening up the Nathula and Jelepla Passes in Sikkim which would be mutually beneficial to both countries. 2004 was a milestone in Sino-Indian bilateral trade, surpassing the $10 billion mark for the first time. In April 2005, Chinese Premier Wen Jiabao visited Bangalore to push for increased Sino-Indian cooperation in high-tech industries. In a speech, Wen stated "Cooperation is just like two pagodas (temples), one hardware and one software. Combined, we can take the leadership position in the world." Wen stated that the 21st century will be "the Asian century of the IT industry." The high-level visit was also expected to produce several agreements to deepen political, cultural and economic ties between the two nations. Regarding the issue of India gaining a permanent seat on the UN Security Council, on his visit, Wen Jiabao initially seemed to support the idea, but had returned to a neutral position on the subject by the time he returned to China. In the South Asian Association for Regional Cooperation (SAARC) Summit (2005) China was granted an observer status. While other countries in the region are ready to consider China for permanent membership in the SAARC, India seems reluctant. A very important dimension of the evolving Sino-Indian relationship is based on the energy requirements of their industrial expansion and their readiness to proactively secure them by investing in the oilfields abroad - in Africa, the Middle East and Central Asia. On the one hand, these ventures entail competition (which has been evident in oil biddings for various international projects recently). But on the other hand, a degree of cooperation too is visible, as they are increasingly confronting bigger players in the global oil market. This cooperation was sealed in Beijing on January 12, 2006 during the visit of Petroleum and Natural Gas Minister Mani Shankar Aiyar, who signed an agreement which envisages ONGC Videsh Ltd (OVL) and the China National Petroleum Corporation (CNPC) placing joint bids for promising projects elsewhere. This may have important consequences for their international relations. On July 6, 2006, China and India re-opened Nathula, an ancient trade route which was part of the Silk Road. Nathula is a pass through the Himalayas and it was closed 44 years prior to 2006 when the Sino-Indian War broke out in 1962. The initial agreement for the re-opening of the trade route was reached in 2003, and a final agreement was formalized on June 18, 2006. Officials say that the re-opening of border trade will help ease the economic isolation of the region.[33] In November 2006, China and India had a verbal spat over claim of the north-east Indian state of Arunachal Pradesh. India claimed that China was occupying 38,000 square kilometres of its territory in Kashmir, while China

claimed the whole of Arunachal Pradesh as its own. In May 2007, China denied the application for visa from an Indian Administrative Service officer in Arunachal Pradesh. According to China, since Arunachal Pradesh is a territory of China, he would not need a visa to visit his own country. Later in December 2007, China appeared to have reversed its policy by granting a visa to Marpe Sora, an Arunachal born professor in computer science. In January 2008, Prime Minister Manmohan Singh visited China and met with President Hu Jintao and Premier Wen Jiabao and had bilateral discussions related to trade, commerce, defense, military, and various other issues. Until 2008 the British Government's position remained the same as had been since the Simla Accord of 1913: that China held suzerainty over Tibet but not sovereignty. Britain revised this view on 29 October 2008, when it recognised Chinese sovereignty over Tibet by issuing a statement on its website.[38][39][40] The Economist stated that although the British Foreign Office's website does not use the word sovereignty, officials at the Foreign Office said "it means that, as far as Britain is concerned, 'Tibet is part of China. Full stop.'" This change in Britain's position affects India's claim to its North Eastern territories which rely on the same Simla Accord that Britain's prior position on Tibet's sovereignty was based upon. In October 2009, Asian Development Bank formally acknowledging Arunachal Pradesh as part of India, approved a loan to India for a development project there. Earlier China had exercised pressure on the bank to cease the loan, however India succeeded in securing the loan with the help of the United States and Japan. China expressed displeasure at ADB for the same. 2010s In April 2010, the second BRIC summit was held in Braslia. Chinese Premier Wen Jiabao paid an official visit to India from Dec.15-17,2010 at the invitation of Prime Minister Manmohan Singh. He was accompanied by 400 Chinese business leaders, who wished to sign business deals with Indian companies. India and China are two very populous countries with ancient civilizations, friendship between the two countries has a time-honoured history, which can be dated back 2,000 years, and since the establishment of diplomatic ties between our two countries, in particular the last ten years, friendship and cooperation has made significant progress. Premier Wen Jiabao at the Tagore International School, Dec 15 2010 In April 2011, the first BRICS summit was held in Sanya, Hainan, China. During the event, the two countries agreed to restore defence co-operation, and China

had hinted that it may reverse its policy of administering stapled visas to residents of Jammu and Kashmir. This practice was later stopped, and as a result, defence ties were resumed between the two nations and joint military drills were expected. It was reported in February 2012 that India will reach US$100 billion dollar trade with China by 2015. The second BRICS summit was held in New Delhi, India. It was agreed during the summit that China's government would encourage domestic companies to import more products from India in order to balance the trade deficit. Also during the summit, Chinese President Hu Jintao told Indian Prime Minister Manmohan Singh that "it is China's unswerving policy to develop SinoIndian friendship, deepen strategic cooperation and seek common development" and "China hopes to see a peaceful, prosperous and continually developing India and is committed to building more dynamic China-India relationship". Other topics were discussed, including border dispute problems and a unified BRICS central bank. In repose to India's test of a missile capable of carrying a nuclear warhead to Beijing, the PRC called for the two countries to "cherish the hard-earned momentum of co-operation"

PAKISTAN
India and Pakistan have been locked in a tense rivalry since the partition of the subcontinent based on the two-nations theory upon achieving independence from Great Britain in 1947. The principal source of contention has been Kashmir, whose Hindu Maharaja at that time chose to join India, although a majority of his subjects were Muslim. India maintains that his decision and subsequent elections in Kashmir have made it an integral part of India. This dispute triggered wars between the two countries in 1947 and 1965 and provoked the Kargil conflict in 1999. Pakistan and India fought a war in December 1971 following a political crisis in what was then East Pakistan and the flight of millions of Bengali refugees to India. The brief conflict left the situation largely unchanged in the west, where the two armies reached an impasse, but a decisive Indian victory in the east resulted in the creation of Bangladesh. Since the 1971 war, Pakistan and India have made slow progress toward normalization of relations. In July 1972, Indian Prime Minister Indira Gandhi and Pakistani President Zulfikar Ali Bhutto met in the Indian hill station of Simla. They signed an agreement by which India would return all personnel and captured territory in the west and the two countries would "settle their differences by peaceful means through bilateral negotiations." Diplomatic and

trade relations were re-established in 1976. The 1979 Soviet invasion of Afghanistan caused new strains between India and Pakistan. Pakistan supported the Afghan resistance, while India implicitly supported the Soviet occupation. In the following 8 years, India voiced increasing concern over Pakistani arms purchases, U.S. military aid to Pakistan, and Pakistan's nuclear weapons program. In an effort to curtail tensions, the two countries formed a joint commission. In December 1988, Prime Ministers Rajiv Gandhi and Benazir Bhutto concluded a pact not to attack each other's nuclear facilities and initiated agreements on cultural exchanges and civil aviation. In 1997, high-level Indo-Pakistani talks resumed after a 3-year pause. The Prime Ministers of India and Pakistan met twice, and the foreign secretaries conducted three rounds of talks. In June 1997 at Lahore, the foreign secretaries identified eight "outstanding issues" around which continuing talks would be focused. The dispute over the status of Jammu and Kashmir, an issue since partition, remains the major stumbling block in their dialogue. India maintains that the entire former princely state is an integral part of the Indian union, while Pakistan insists upon the implementation of UN resolutions calling for selfdetermination for the people of the state. In September 1997, the talks broke down over the structure of how to deal with the issues of Kashmir and peace and security. Pakistan advocated that separate working groups treat each issue. India responded that the two issues be taken up along with six others on a simultaneous basis. In May 1998 India, and then Pakistan, conducted nuclear tests. Attempts to restart dialogue between the two nations were given a major boost by the February 1999 meeting of both Prime Ministers in Lahore and their signing of three agreements. These efforts were stalled by the intrusion of Pakistani-backed forces into Indian-held territory near Kargil in May 1999 (that nearly turned into full scale war), and by the military coup in Pakistan that overturned the Nawaz Sharif government in October the same year. In July 2001, Prime Minister Vajpayee and General Pervez Musharraf, leader of Pakistan after the coup, met in Agra, but talks ended after 2 days without result. After the terrorist attack on the Indian parliament in December 2001, IndiaPakistan relations cooled further as India accused Pakistan of involvement. Tensions increased, fueled by killings in Jammu and Kashmir, peaking in a troop buildup by both sides in early 2002. Prime Minister Vajpayee's April 18, 2003 speech in Srinagar (Kashmir) revived bilateral efforts to normalize relations. In November 2003, Prime Minister Vajpayee and President Musharraf agreed to a ceasefire, which still holds, along the Line-of-Control in Jammu and Kashmir. After a series of confidence building measures, Prime Minister Vajpayee and President Musharraf met on the sidelines

of the January 2004 SAARC summit in Islamabad and agreed to commence a Composite Dialogue addressing outstanding issues between India and Pakistan, including Kashmir. In February 2004, India and Pakistan agreed to restart the "2+6" Composite Dialogue formula, providing for talks on Peace and Security and Jammu and Kashmir, followed by technical and Secretary-level discussions on six other bilateral disputes: Siachen Glacier, Wuller Barrage/Tulbul Navigation Project, Sir Creek estuary, Terrorism and Drug Trafficking, Economic and Commercial cooperation, and the Promotion of Friendly Exchanges in various fields. The restart of the Composite Dialogue process was especially significant given the almost 6 years that had transpired since the two sides agreed to this formula in 1997-1998. The UPA government continued the Composite Dialogue with Pakistan. Following the October 2005 earthquake in Kashmir, the two governments coordinated relief efforts and opened access points along the Lineof-Control to allow relief supplies to flow from India to Pakistan and to allow Kashmiris from both sides to visit one another. The Foreign Secretary talks resumed in November 2006, after a 3-month delay following July 11, 2006 terrorist bombings in Mumbai. The meeting generated modest progress, with the two sides agreeing to establish a joint mechanism on counterterrorism. Since 2006, India and Pakistan have continued to take part in the Composite Dialogue process in an effort to maintain the peace process and strengthen bilateral relations. Following Pakistani elections in February 2008 the Indian Minister of External Affairs and the Indian Foreign Secretary met with their new counterparts to advance the Composite Dialogue talks, reaffirming a commitment to maintain the ceasefire along the Line-of-Control as well as increasing people-to-people connections through improving cross-border bus services. The July 2008 bombing of the Indian Embassy in Kabul and the Mumbai terrorist attacks in November 2008 increased tensions between India and Pakistan. Although Prime Minister Singh and Pakistan Prime Minister Yousuf Gilani agreed to resume talks following the 2010 SAARC summit, India continued to insist that Pakistan must do its part to dismantle terror networks operating from its territory and prosecute those who had a hand in planning the Mumbai attacks.

NEPAL
Relations between India and Nepal are close yet fraught with difficulties stemming from geographical location, economics, the problems inherent in big power-small power relations, and common ethnic, linguistic and cultural identities that overlap the two countries' borders. New Delhi and Kathmandu initiated their intertwined relationship with the 1950 Indo-Nepal Treaty of Peace and Friendship and accompanying letters that defined security relations between

the two countries, and an agreement governing both bilateral trade and trade transiting Indian soil. The 1950 treaty and letters stated that "neither government shall tolerate any threat to the security of the other by a foreign aggressor" and obligated both sides "to inform each other of any serious friction or misunderstanding with any neighboring state likely to cause any breach in the friendly relations subsisting between the two governments." These accords cemented a "special relationship" between India and Nepal that granted Nepal preferential economic treatment and provided Nepalese in India the same economic and educational opportunities as Indian citizens. Jayant Prasad is India's ambassador to Nepal. Nepal remains poor and deprived in 21st century while India has acquired a central place in the world with a very high development rate.In 2005, after King Gyanendra took over, Nepalese relations with India soured. However, after the restoration of democracy, in 2008, Prachanda, the Prime Minister of Nepal, visited India, in September 2008. He spoke about a new dawn, in the bilateral relations, between the two countries. He said, "I am going back to Nepal as a satisfied person. I will tell Nepali citizens back home that a new era has dawned. Time has come to effect a revolutionary change in bilateral relations. On behalf of the new government, I assure you that we are committed to make a fresh start." He met Indian Prime minister, Manmohan Singh, and Foreign Minister, Pranab Mukherjee. He asked India to help Nepal frame a new constitution, and to invest in Nepal's infrastructure, and its tourism industry. In 2008, Indo-Nepali ties got a further boost with an agreement to resume water talks after a 4 year hiatus.[1] The Nepalese Water Resources Secretary Shanker Prasad Koirala said the Nepal-India Joint Committee on Water Resources meet decided to start the reconstruction of breached Kosi embankment after the water level goes down.[2] During the Nepal PM's visit to New Delhi in September the two Prime Ministers expressed satisfaction at the age-old close, cordial and extensive relationships between their states and expressed their support and cooperation to further consolidate the relationship. The two issued a 22-point statement highlighting the need to review, adjust and update the 1950 Treaty of Peace and Friendship, amongst other agreements. India would also provide a credit line of up to 150 crore rupees to Nepal to ensure uninterrupted supplies of petroleum products, as well as lift bans on the export of rice, wheat, maize, sugar and sucrose for quantities agreed to with Nepal. India would also provide 20 crore as immediate flood relief. In return, Nepal will take measures for the "promotion of investor friendly, enabling business environment to encourage Indian investments in Nepal." In 2010 India extended Line of credit worth $ 250 millions & 80,000 tones of foodgrains .Furthermore, a three-tier mechanism at the level of ministerial, secretary and technical levels will be built to push forward discussions on the development of water resources between the two sides. Politically, India acknowledged a willingness to promote efforts towards peace in Nepal. Indian

External affairs minister Pranab Mukherjee promised the Nepali Prime Minister Prachanda that he would "extend all possible help for peace and development." In 2008, the Bollywood film Chandni Chowk to China was banned in Nepal, because of a scene suggesting the Gautama Buddha was born in India. Some protesters called for commercial boycott of all Indian films.

SRILANKA
Bilateral relations between the Democratic Socialist Republic of Sri Lanka and the Republic of India have been generally friendly, but were controversially affected by the Sri Lankan civil war and by the failure of Indian intervention during the war. India is the only neighbour of Sri Lanka, separated by the Palk Strait; both nations occupy a strategic position in South Asia and have sought to build a common security umbrella in the Indian Ocean. India and Sri Lanka are member nations of several regional and multilateral organisations such as the South Asian Association for Regional Cooperation (SAARC), South Asia Co-operative Environment Programme, South Asian Economic Union and BIMSTEC, working to enhance cultural and commercial ties. Since a bilateral free trade agreement was signed and came into effect in 2000, Indo-Sri Lankan trade rose 128% by 2004 and quadrupled by 2006, reaching USD 2.6 billion. Between 2000 and 2004, India's exports to Sri Lanka in the last four years increased by 113%, from USD 618 million to $1,319 million while Sri Lankan exports to India increased by 342%, from $44 million to USD $194 million. Indian exports account for 14% of Sri Lankas global imports. India is also the fifth largest export destination for Sri Lankan goods, accounting for 3.6% of its exports. Both nations are also signatories of the South Asia Free Trade Agreement(SAFTA). Negotiations are also underway to expand the free trade agreement to forge stronger commercial relations and increase corporate investment and ventures in various industries. The year 2010 is predicted to be the best year for bilateral trade on record, with Sri Lanka's exports to India increasing by 45% over the first seven months of the year. India's National Thermal Power Corp (NTPC) is also scheduled to build a 500 MW thermal power plant in Sampoor (Sampur). The NTPC claims that this plan will take the Indo-Srilankan relationship to new level. India is active in a number of areas of development activity in Sri Lanka. About one-sixth of the total development credit granted by GOI is made available to Sri Lanka. Lines of credit: In the recent past three lines of credit were extended to Sri Lanka: US$ 100 million for capital goods, consumer durables, consultancy services and food items, US$ 31 million for supply of 300,000 MT of wheat and

US$ 150 million for purchase of petroleum products. All of these lines of credit have been fully utilized. Another line of credit of US$ 100 million is now being made available for rehabilitation of the Colombo-Matara railway. A number of development projects are implemented under Aid to Sri Lanka funds. In 2006-07, the budget for Aid to Sri Lanka was Rs 28.2 Crs. Small Development Projects: A MoU on Cooperation in Small Development Projects has been signed. Projects for providing fishing equipments to the fishermen in the East of Sri Lanka and solar energy aided computer education in 25 rural schools in Eastern Sri Lanka are under consideration. Health Projects: We have supplied medical equipments to hospitals at Hambantota and Point Pedro, supplied 4 state of the art ambulances to the Central Province, implemented a cataract eye surgery programme for 1500 people in the Central Province and implemented a project of renovation of OT at Dickoya hospital and supplying equipment to it. The projects under consideration are: Construction of a 150-bed hospital at Dickoya, upgradation of the hospital at Trincomalee and a US$ 7.5 million grant for setting up a Cancer Hospital in Colombo. Education Projects: Upgradation of the educational infrastructure of the schools in the Central province including teachers training, setting up of 10 computer labs, setting up of 20 e-libraries (Nenasalas), Mahatma Gandhi scholarship scheme for +2 students and setting up of a vocational training centre in Puttalam. India also contributes to the Ceylon Workers Education Trust that gives scholarships to the children of estate workers. Training: A training programme for 465 Sri Lankan Police officers has been commenced in Dec 2005. Another 400 Sri Lankan Police personnel are being trained for the course of Maintenance of Public Order.

SINGAPORE
Indias trade in goods and services with South-east and East Asia are set to get a boost with signing of market-opening pacts with Japan, Malaysia and the entire ASEAN bloc in the next 2-3 months. Comprehensive pacts for elimination of duties and removal of obstacles will be signed with Japan and Malaysia in February, Commerce and Industry minister Anand Sharma said here. We have concluded negotiations for a Comprehensive Economic Partnership Agreement (CEPA) with Japan as well as a Comprehensive Economic Cooperation

Agreement (CECA) with Malaysia. We will be signing them in next few weeks, definitely in February, Sharma said. Besides, over and above an existing Free Trade Agreement (FTA) with the 10nation Association of Southeast Asian Nations, a fresh pact for opening trade in services is expected to be finalised by March. Services are of major interest to India and they were not included in the FTA with ASEAN which was operationalised from January,2010. What we are seeking is to reach an early conclusion on an agreement in trade in services by March, that is the mandate, Sharma said at India Show 2011, organised by his Ministry and the industry chamber CII. The agreement with Malaysia would be ASEAN plus, as it is one of the 10 members of the trading bloc. The bilateral trade in goods and services with Kuala Lumpur would be more open than the bloc as a whole. Similarly, in the next 10 days, a bilateral pact with Indonesia would also be initiated. According to an official, Sharma is expected to visit Tokyo and Kuala Lumpur by mid-February for signing CEPA and CECA. The agreements are aimed at reducing or eliminating tariffs over 90% of the goods traded between the countries. A framework pact with Malaysia was finalised during Prime Minister Manmohan Singhs visit to Malaysia in October 2010. The agreement is expected to come into effect from July and would give a boost to the $8 billion bilateral trade in 2009-10. Indias trade with ASEAN, which stood at $45 billion currently, is likely to reach $70 billion in the next two years. India would stand to benefit in sectors like textiles and services (IT, lawyers and accountants) in Malaysia while Malaysia will get advantage in tourism and event management.

INDIA AND SOUTH EAST ASIA : Strategic

Engagement and Trade Enhancement

India seems poised to take on Southeast Asian powers in its march towards a new strategic partnership following it up with enhanced trade. The Indian Navy seems to be taking India's 'Look East Policy' one-step further by engaging in strategic bilateral and multilateral exercises with South East Asian countries. Incidentally, the largest number of India's naval exercises has been taking place in the Bay of Bengal under the Andaman & Nicobar Command. These bilateral exercises lay great stress on enhancing and sustaining bilateral ties, as also on improving mutual understanding with regional navies. They not only provide immense training value to our sea-going personnel but also help in fostering mutual trust and friendship India conducts Joint Co-ordination Patrol (CORPAT) series of exercises with Indonesia and Thailand. The CORPAT (India-Indonesia) was signed in 2002 and the exercises began in March 2003. It is held twice a year in March and September and the focus areas are Coordinated Patrolling, Anti Piracy exercise and Search and Rescue (SAR) exercise. The purpose of the India-Indonesia CORPAT is to prevent acts of smuggling, illegal fishing, piracy and illegal entries into each other's waters. The CORPAT is carried around the international maritime boundary line between the two nations, which falls south of Indira point. Similarly CORPAT (India-Thailand) occurs twice a year in April and October. This was signed in 2005 and became operational in 2006. Both the naval forces seek coordinated patrolling, anti piracy and search and rescue exercises. The Indian Navy's operational interaction with the Navy of the Republic of Singapore (RSN), which commenced with anti-submarine training exercises in 1994, has grown steadily and impressively over the past 14 years. India and Singapore agreed in March 2006 to conduct joint naval exercise, called as 'Singapore India Maritime Bilateral Exercises' (SIMBEX). The first SIMBEX exercise was held in March 2007. The operating area in India is Kochi, Port Blair, and Vizag. In Singapore it is held in the South China Sea. The 'SIMBEX 2008' (16-30 February) was held on India's Eastern seaboard. The SIMBEX initially began as Anti Submarine Warfare (ASW) exercise and has evolved to include three dimensional war face and maritime security exercises (Surface, Sub Surface and Air). Both the naval forces engage in coordinated ASW exercise, Aircraft tracking exercise, anti aircraft firing exercise, surface target tracking and firing exercise and maritime exercise. Early this year, the Andaman & Nicobar Command conducted the sixth multilateral naval extravaganza, MILAN in Port Blair (January 18-23, 2008). Started in 1995, the biennial MILAN brought in some crucial powers of the Asia Pacific region. It seeks regional maritime security, mutual trust, cooperation and understanding. Ships of littoral navies of Australia, New Zealand, Myanmar, Thailand, Indonesia, Sri Lanka, Singapore, Malaysia, Bangladesh, Vietnam and Brunei participated in the five-day affair. The MILAN aims at fostering bonds of 'Friendship Across The Seas' and sharing views on common maritime issues.

They not only engage in maritime issues, but actively promote India's tourism as well. Indian navy seeks to leverage strategic partnership as it engages with Southeast Asian nations. It is effectively following it up with trade with the ASEAN members. India signed an agreement with Thailand for a Free Trade Area (FTA) and quickly succeeded by a similar agreement with Singapore in a Comprehensive Economic Cooperation Agreement (CECA). Meanwhile, subregional cooperation has accelerated too. The Mekong-Ganga Cooperation (MGC) and the BIMST-EC (Bangladesh, India, Myanmar, Sri Lanka, Thailand Economic Cooperation) are other noteworthy initiatives. Incidentally, India's trade with ASEAN rose from US$9.7 thousand million in 2002-2003 to over US$30.64 billion in 2006-07. Almost 10 per cent of India's exports go to the ASEAN nations. According to the Directorate General of Commercial Intelligence and Statistics (DGCIS), India's exports to ASEAN countries increased from US$10.41 billion in 2005-06 to US$12.56 billion in 2006-07, registering a growth of 20.67 per cent. During the first six months of 2007-08, India exported to the tune of US$6445.4 million, accounting for 8.96 per cent of the total Indian exports. These are indications of India's increasing intimacy with its Southeast Asian counterparts. India has proposed a US$1 million fund for an India-ASEAN Science and Technology Fund which would be used for collaborative research and development. Besides, a joint network on climate change has also been proposed for which India has made an initial contribution of US$5 million to set up India-ASEAN Green Fund. India may benefit immensely from the rising economic power of Southeast Asia if it continues its policies of strategic and prudent trade and commerce partnerships. Here we will be looking forward to look at the policies created by India for smooth trading with these countries...

EXIM POLICY 2009-14

Higher Support for Market and Product Diversification Incentive schemes under Chapter 3 have been expanded by way of addition of new products and markets. 26 new markets have been added under Focus Market Scheme. These include 16 new markets in Latin America and 10 in Asia-Oceania. The incentive available under Focus Market Scheme (FMS) has been raised from 2.5% to 3%. The incentive available under Focus Product Scheme (FPS) has been raised from 1.25% to 2%. A large number of products from various sectors have been included for benefits under FPS. These include, Engineering products (agricultural machinery, parts of trailers, sewing machines, hand tools, garden tools, musical instruments, clocks and watches, railway locomotives etc.), Plastic (value added products), Jute and Sisal products, Technical Textiles, Green Technology products (wind mills, wind turbines, electric operated vehicles etc.), Project goods, vegetable textiles and certain Electronic items. Market Linked Focus Product Scheme (MLFPS) has been greatly expanded by inclusion of products classified under as many as 153 ITC(HS) Codes at 4 digit level. Some major products include; Pharmaceuticals, Synthetic textile fabrics, value added rubber products, value added plastic goods, textile madeups, knitted and crocheted fabrics, glass products, certain iron and steel products and certain articles of aluminium among others. Benefits to these products will be provided, if exports are made to 13 identified markets (Algeria, Egypt, Kenya, Nigeria, South Africa, Tanzania, Brazil, Mexico, Ukraine, Vietnam, Cambodia, Australia and New Zealand). MLFPS benefits also extended for export to additional new markets for certain products. These products include auto components, motor cars, bicycle and its parts, and apparels among others. A common simplified application form has been introduced for taking benefits under FPS, FMS, MLFPS and VKGUY. Higher allocation for Market Development Assistance (MDA) and Market Access Initiative (MAI) schemes is being provided.

Technological Upgradation To aid technological upgradation of our export sector, EPCG Scheme at Zero Duty has been introduced. This Scheme will be available for engineering & electronic products, basic chemicals & pharmaceuticals, apparels & textiles, plastics, handicrafts, chemicals & allied products and leather & leather products (subject to exclusions of current beneficiaries under Technological Upgradation Fund Schemes (TUFS), administered by Ministry of Textiles and beneficiaries of Status Holder Incentive Scheme in that particular year). The scheme shall be in operation till 31.3.2011.

 Jaipur, Srinagar and Anantnag have been recognised as 'Towns of Export Excellence' for handicrafts; Kanpur, Dewas and Ambur have been recognised as 'Towns of Export Excellence' for leather products; and Malihabad for horticultural products. EPCG Scheme Relaxations To increase the life of existing plant and machinery, export obligation on import of spares, moulds etc. under EPCG Scheme has been reduced to 50% of the normal specific export obligation. Taking into account the decline in exports, the facility of Re-fixation of Annual Average Export Obligation for a particular financial year in which there is decline in exports from the country, has been extended for the 5 year Policy period 2009-14. Support for Green products and products from North East Focus Product Scheme benefit extended for export of 'green products'; and for exports of some products originating from the North East. Status Holders To accelerate exports and encourage technological upgradation, additional Duty Credit Scrips shall be given to Status Holders @ 1% of the FOB value of past exports. The duty credit scrips can be used for procurement of capital goods with Actual User condition. This facility shall be available for sectors of leather (excluding finished leather), textiles and jute, handicrafts, engineering (excluding Iron & steel & non-ferrous metals in primary and intermediate form, automobiles & two wheelers, nuclear reactors & parts, and ships, boats and floating structures), plastics and basic chemicals (excluding pharma products) [subject to exclusions of current beneficiaries under Technological Upgradation Fund Schemes (TUFS)]. This facility shall be available upto 31.3.2011. Transferability for the Duty Credit scrips being issued to Status Holders under paragraph 3.8.6 of FTP under VKGUY Scheme has been permitted. This is subject to the condition that transfer would be only to Status Holders and Scrips would be utilized for the procurement of Cold Chain equipment(s) only. Stability/ continuity of the Foreign Trade Policy To impart stability to the Policy regime, Duty Entitlement Passbook (DEPB) Scheme is extended beyond 31-12-2009 till 31.12.2010. Interest subvention of 2% for pre-shipment credit for 7 specified sectors has been extended till 31.3.2010 in the Budget 2009-10. Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of Income Tax Act, has been extended for the financial year

2010-11 in the Budget 2009-10. The adjustment assistance scheme initiated in December, 2008 to provide enhanced ECGC cover at 95%, to the adversely affected sectors, is continued till March, 2010. Marine sector

Fisheries have been included in the sectors which are exempted from maintenance of average EO under EPCG Scheme, subject to the condition that Fishing Trawlers, boats, ships and other similar items shall not be allowed to be imported under this provision. This would provide a fillip to the marine sector which has been affected by the present downturn in exports. Additional flexibility under Target Plus Scheme (TPS) / Duty Free Certificate of Entitlement (DFCE) Scheme for Status Holders has been given to Marine sector. Gems & Jewellery Sector To neutralize duty incidence on gold Jewellery exports, it has now been decided to allow Duty Drawback on such exports. In an endeavour to make India a diamond international trading hub, it is planned to establish "Diamond Bourse (s)". A new facility to allow import on consignment basis of cut & polished diamonds for the purpose of grading/ certification purposes has been introduced. To promote export of Gems & Jewellery products, the value limits of personal carriage have been increased from US$ 2 million to US$ 5 million in case of participation in overseas exhibitions. The limit in case of personal carriage, as samples, for export promotion tours, has also been increased from US$ 0.1 million to US$ 1 million. Agriculture Sector To reduce transaction and handling costs, a single window system to facilitate export of perishable agricultural produce has been introduced. The system will involve creation of multi-functional nodal agencies to be accredited by APEDA. Leather Sector Leather sector shall be allowed re-export of unsold imported raw hides and skins and semi finished leather from public bonded ware houses, subject to payment of 50% of the applicable export duty. Enhancement of FPS rate to 2%, would also significantly benefit the leather sector.

Tea Minimum value addition under advance authorisation scheme for export of tea has been reduced from the existing 100% to 50%. DTA sale limit of instant tea by EOU units has been increased from the existing 30% to 50%. Export of tea has been covered under VKGUY Scheme benefits. Pharmaceutical Sector Export Obligation Period for advance authorizations issued with 6-APA as input has been increased from the existing 6 months to 36 months, as is available for other products. Pharma sector extensively covered under MLFPS for countries in Africa and Latin America; some countries in Oceania and Far East. Handloom Sector To simplify claims under FPS, requirement of 'Handloom Mark' for availing benefits under FPS has been removed. EOUs EOUs have been allowed to sell products manufactured by them in DTA upto a limit of 90% instead of existing 75%, without changing the criteria of 'similar goods', within the overall entitlement of 50% for DTA sale. To provide clarity to the customs field formations, DOR shall issue a clarification to enable procurement of spares beyond 5% by granite sector EOUs. EOUs will now be allowed to procure finished goods for consolidation along with their manufactured goods, subject to certain safeguards. During this period of downturn, Board of Approvals (BOA) to consider, extension of block period by one year for calculation of Net Foreign Exchange earning of EOUs. EOUs will now be allowed CENVAT Credit facility for the component of SAD and Education Cess on DTA sale. Thrust to Value Added Manufacturing To encourage Value Added Manufactured export, a minimum 15% value addition on imported inputs under Advance Authorization Scheme has now been prescribed. Coverage of Project Exports and a large number of manufactured goods under FPS and MLFPS.

DEPB DEPB rate shall also include factoring of custom duty component on fuel where fuel is allowed as a consumable in Standard Input-Output Norms. Flexibility provided to exporters Payment of customs duty for Export Obligation (EO) shortfall under Advance Authorisation / DFIA / EPCG Authorisation has been allowed by way of debit of Duty Credit scrips. Earlier the payment was allowed in cash only. Import of restricted items, as replenishment, shall now be allowed against transferred DFIAs, in line with the erstwhile DFRC scheme. Time limit of 60 days for re-import of exported gems and jewellery items, for participation in exhibitions has been extended to 90 days in case of USA. Transit loss claims received from private approved insurance companies in India will now be allowed for the purpose of EO fulfillment under Export Promotion schemes. At present, the facility has been limited to public sector general insurance companies only. Waiver of Incentives Recovery, On RBI Specific Write off In cases, where RBI specifically writes off the export proceeds realization, the incentives under the FTP shall now not be recovered from the exporters subject to certain conditions. Simplification of Procedures To facilitate duty free import of samples by exporters, number of samples/pieces has been increased from the existing 15 to 50. Customs clearance of such samples shall be based on declarations given by the importers with regard to the limit of value and quantity of samples. To allow exemption for up to two stages from payment of excise duty in lieu of refund, in case of supply to an advance authorisation holder (against invalidation letter) by the domestic intermediate manufacturer. It would allow exemption for supplies made to a manufacturer, if such manufacturer in turn supplies the products to an ultimate exporter. At present, exemption is allowed upto one stage only. Greater flexibility has been permitted to allow conversion of Shipping Bills from one Export Promotion scheme to other scheme. Customs shall now permit this conversion within three months, instead of the present limited period of only one month. To reduce transaction costs, dispatch of imported goods directly from the Port to the site has been allowed under Advance Authorisation scheme for deemed supplies. At present, the duty free imported goods could be taken only to the manufacturing unit of the authorisation holder or its supporting manufacturer.

 Disposal of manufacturing wastes / scrap will now be allowed after payment of applicable excise duty, even before fulfillment of export obligation under Advance Authorisation and EPCG Scheme. Regional Authorities have now been authorised to issue licences for import of sports weapons by 'renowned shooters', on the basis of NOC from the Ministry of Sports & Youth Affairs. Now there will be no need to approach DGFT(Hqrs.) in such cases. The procedure for issue of Free Sale Certificate has been simplified and the validity of the Certificate has been increased from 1 year to 2 years. This will solve the problems faced by the medical devices industry. Automobile industry, having their own R&D establishment, would be allowed free import of reference fuels (petrol and diesel), upto a maximum of 5 KL per annum, which are not manufactured in India. Acceding to the demand of trade & industry, the application and redemption forms under EPCG scheme have been simplified. Reduction of Transaction Costs No fee shall now be charged for grant of incentives under the Schemes in Chapter 3 of FTP. Further, for all other Authorisations/ licence applications, maximum applicable fee is being reduced to Rs. 100,000 from the existing Rs. 1,50,000 (for manual applications) and Rs. 50,000 from the existing Rs. 75,000 (for EDI applications). To further EDI initiatives, Export Promotion Councils/ Commodity Boards have been advised to issue RCMC through a web based online system. It is expected that issuance of RCMC would become EDI enabled before the end of 2009. Electronic Message Exchange between Customs and DGFT in respect of incentive schemes under Chapter 3 will become operational by 31.12.2009. This will obviate the need for verification of scrips by Customs facilitating faster clearances. For EDI ports, with effect from December '09, double verification of shipping bills by customs for any of the DGFT schemes shall be dispensed with. In cases, where the earlier authorization has been cancelled and a new authorization has been issued in lieu of the earlier authorization, application fee paid already for the cancelled authorisation will now be adjusted against the application fee for the new authorisation subject to payment of minimum fee of Rs. 200. An Inter Ministerial Committee will be formed to redress/ resolve problems/issues of exporters. An updated compilation of Standard Input Output Norms (SION) and ITC (HS) Classification of Export and Import Items has been published. Directorate of Trade Remedy Measures To enable support to Indian industry and exporters, especially the MSMEs, in availing their rights through trade remedy instruments, a Directorate of Trade Remedy Measures shall be set up.

RECESSION IMPACT ON INDIAN TRADING

The current global financial crisis is rooted in the subprime crisis which surfaced over a year ago in the United States of America. During the boom years, mortgage brokers attracted by the big commissions, encouraged buyers with poor credit to accept housing mortgages with little or no down payment and without credit checks. A combination of low interest rates and large inflow of foreign funds during the booming years helped the banks to create easy credit conditions for many years. Banks lent money on the assumption that housing prices would continue to rise. Also the real estate bubble encouraged the demand for houses as financial assets. Banks and financial institutions later repackaged these debts with other high-risk debts and sold them to world- wide investors creating financial instruments called CDOs or Collateralized Debt Obligations (Sadhu2008). In this way risk was passed on multifold through derivatives trade. Since US is one of the major super powers, a recessionmild or deeper will have eventual global Consequences? The crisis rapidly developed and spread into a global economic shock, resulting in a number of European bank failures, declines in various stock indices, and large reductions in the market value of equities and commodities A slowdown in the US economy was definitely a bad news for India because Indian companies have major outsourcing deals from the US. India's exports to the US have also grown substantially over the years. But inspite of all this India has successfully weathered the great financial crisis of September 2008. Indian gross domestic product (GDP) has grown around 6% in every quarter of the most difficult 12 months in recent history.

Why did India suffer so little in the Great Recession that laid low the biggest economies of the West? There were many factors that saved the Indian economy from dire consequences of the global recession. Indian banks and financial institutions had almost entirely avoided buying the mortgage-backed securities and credit default swaps that turned toxic and felled western Financial institutions. India's merchandise exports were indeed hit by the Great Recession but Service exports did not fall computer software and BPO exports held up well. Foreign direct investment remained high in 2008-09 despite the global financial crisis. Financiers reversed Flows into India, but long-term investors in plant and factories completed their ongoing projects. Monetary policy was accommodating in 2008. The RBI lowered interest rates and expanded Credit. The government cut excise duties to stoke demand. All these factors cushioned the shock to the economy.

Global economic meltdown has affected almost all the countries of the world. Strongest of American, European and Japanese companies are facing severe crisis of liquidity and credit. This global financial and economic crisis keeps on getting worse. Recession in the United States is a very bad news for our country. Our companies in India have most outsourcing deals from the US. Even our exports to US have increased over the years. Exports for January, 2009 have declined by 22 per cent. There is a decline in the employment market due to the recession in the West. There has been a significant drop in the new hiring which is a cause of great concern for us. Some companies have laid off their employees and there have been cut in promotions, compensation and perks of the employees. Companies in the private sector and government sector are hesitant to take up new projects. And they are working on existing projects only. The textile, garment and handicraft industry are badly affected. According to the Federation of Indian Export Organisations (FIEO) survey they are going to lose four million jobs by April 2009. There has also been a decline in the tourist inflow lately. The real estate has also a problem of tight liquidity situations, where the developers are finding it hard to raise finances. Further, the manufacturing sector has equally been hit hard by the economic slowdown. According to CII, one third of the manufacturing sub sectors out of the 96 monitored by it have reported a negative growth in production during April to December 2008 as compared to the same period last year. A recession is a decline in a country's gross domestic product (GDP) growth for two or more consecutive quarters of a year. A recession is also preceded by several quarters of slowing down. An economy which grows over a period of time tends to slow down the growth as a part of the normal economic cycle. A recession normally takes place when consumers lose confidence in the growth of the economy and spend less. This leads to a decreased demand for goods and services, which in turn leads to a decrease in production, lay-offs and a sharp rise in unemployment. Investors spend less as they fear stocks values will fall and thus stock markets fall on negative sentiment. The economy and the stock market are closely related. The stock markets reflect the buoyancy of the economy. The Indian stock markets crashed due to a slowdown in the US .The Sensex crashed by nearly 13 per cent in just two trading sessions in January, 2008. For the first time in five years, Indias export growth has turned negative. Exports for October 2008 contracted by 15% on a year-on-year basis. This should not surprise as the OECD economies that account for over 40% of Indias export market have been slowing for months. With the US and EU already entering a phase of recession, Indias export growth had to fall sharply. It must be noted this growth contraction has come after a robust 25%-plus average export growth since 2003. A low-to-negative growth in exports may continue for sometime until consumption revives in the developed economies. A decelerating export growth has implications for India, even though our economy is far more domestically driven than those of the east Asia. Still, the contribution of merchandise exports to GDP has risen steadily over the past six years from about 10% of GDP in 2002-03, to nearly 17% by 2007-08. If one

includes service exports, the ratio goes up further. Therefore, any downturn in the global economy will hurt India. There also seems to be a positive correlation between growth in exports and the countrys GDP. For instance, when between 1996 and 2002 the average growth rate in exports was less than 10%, the GDP growth also averaged below 6%. A slowdown in export growth also has other implications for the economy. Close to 50% of Indias exports textiles, garments, gems and jewellery, leather and so on originate from the labour-intensive small- and medium-enterprises. A sharp fall in export growth could mean job losses in this sector. This would necessitate government intervention. A silver lining here, however, is the global slowdown will also lower cost of imports significantly, thereby easing pressures on the balance of payment. The impact of oil and other commodity prices, halving over the past few months, will reflect in the import data for the second half of 2008-09. Oil import bill, earlier projected to cross $100 billion in 2008-09 with prices surging to $140 per barrel, could easily shrink by about $20 billion. The fall in imports may exceed the decline in exports in the latter half of 2008-09. This would also help soften the current account deficit. The global economic recession has taken its toll on the Indian economy that has led to multi-crore loss in business and export orders, thousands of job losses, especially in key sectors like the IT, automobiles, industry and export-oriented firms. It has also shaken up the investment arena. It is a difficult phase for a growing economy like India. In August, 2008 India recorded inflation at its 16 year high of 12.91%. This inflationary situation forced the regulatory bodies of the country to take certain anti-inflationary measures by tightening the monetary policy which in turn made it difficult for institutions and individuals to borrow money from banks. In some ways, this has also contributed to the slowdown in different sectors and can be considered to be the start of slowdown in different sectors in India.

EXCHANGE RATE FLUCTUATIONS AND TRADE

Money is not an organic creature but its value keeps changing with the society and its economic conditions. One rupee in 1947 is not the same as one rupee today, both in terms of appearance and purchasing power. The value of a country's currency is linked with its economic conditions and policies. Income levels influence currencies through consumer spending. When incomes increase, people spend more. Higher demand for imported goods increases demand for foreign currencies and, thus, weakens the local currency. Balance of payments, which comprises trade balance (net inflow/outflow of money) and flow of capital, also affects the value of a country's currency. Another factor is the difference in interest rates between countries. Let us consider the recent RBI move to deregulate interest rates on savings deposits and fixed deposits held by non-resident Indians (NRIs). The move was part of a series of steps to stem the fall in the rupee. By allowing banks to increase rates on NRI rupee accounts and bring them on a par with domestic term deposit rates, the RBI expects fund inflows from NRIs, triggering a rise in demand for rupees and an increase in the value of the local currency. The RBI manages the value of the rupee with several tools, which involve controlling its supply in the market and, thus, making it cheap or expensive. The RBI also fixes the statutory liquidity ratio, that is, the proportion of money banks have to invest in government bonds, and the repo rate, at which it lends to banks. While an increase in interest rates makes a currency expensive, changes in cash reserve and statutory liquidity ratios increase or decrease the quantity of money available, impacting its value.

Lets first see two very commonly used terminologies: Rupee Appreciation & Rupee Depreciation (instead of using the word currency we are using rupee for the Indian context and explain the fluctuation with respect to dollar). When rupee is said to be appreciating it means that our currency is gaining strength and its value is increasing with respect to dollar. However, when rupee depreciates it means our currency is getting weaker & its value is falling with respect to dollar. Rupees appreciation or depreciation against the dollar depends on the change in demand and supply for both the currencies. If the demand for rupee is comparatively high, rupee appreciates; if low, it depreciates. The important question here is what factors drive the demand for a currency? They are: Interest Rate: A demand for a currency is hugely dependent on the interest rate differential between two countries. A country like India where int. rate is around 7-8% experiences greater capital inflow as investors get better return than what they might get in US. (with Interest rates of 2-3%). This results into rupee appreciation. Inflation Rate: The demand for a countrys goods & services by the foreign buyers would be more if the inflation rate is lower in that country compared to other countries. Higher demand for goods & services would mean higher demand for that currency resulting in the appreciation of that currency. For instance if Indias inflation rate is lower than that of Zimbabwe then the demand for our goods, services and currency would be higher than that for Zimbabwes. Export-Import: If a country is exporting more than its imports from other countries, then this would mean higher demand for that currency, causing appreciation of that currency against others. Trading in currencies in the Forex market: The exchange rate fluctuates minute by minute because of speculative trading in the Forex market. Though trading in Forex market causes fluctuations in the exchange rate, over a period the change is backed by the fundamental factors like the growth potential in the economy, interest rate differential and the inflation rate existing in different countries. In a manage floating exchange rate system like India the government purchases rupee in exchange for the foreign currency to increase money supply in the economy which leads to depreciation of the home currency. Conversely, it purchases foreign currency in exchange for rupee to reduce the money supply in the economy leading to appreciation of the home currency. Impact on economy: Exchange rate fluctuation has a significant impact on the overall economy of a country. Rupee appreciation against US dollar is an indication of the strengthening of Indian economy with respect to US economy. Impact on foreign investors: If a foreign investor invests in Indian stock market and even if its value doesnt change in 1 year, hell earn profit if rupee appreciates and make a loss if it depreciates. You can understand this with an example:

Suppose an FII Invests Re. 1 Cr. in the Indian stock market and at an exchange rate of $1 = Rs. 50. So, the amount invested is $200,000. Suppose, after 1 year, even if the value of investment doesnt appreciate the foreign investor can earn a profit if the exchange rate has changed to $1 = Rs. 40 (Rupee appreciation) If the investor sells his investment and converts the currency, he would get $ 250,000. So, he would earn $ 50,000 as a profit thanks to a change in the exchange rate i.e. rupee appreciation So, a continuously appreciating rupee would lead to greater investment by the FIIs. Impact on industry/companies: Appreciation of the rupee makes imports cheaper and exports expensive. So, it can spell good news for companies who rely on import of goods like heavy machinery, technology, micro chips etc. According to reports by Associated Chambers of Commerce and Industry of India (ASSOCHAM) sectors like Petro & Petro Products, Drugs & Pharma and Engineering Goods which have import inputs of as much as 77%, 19% and 21% respectively would stand to gain the most if rupee appreciates. They would have to pay less for the imported raw materials which would increase their profit margins.

Similarly, a depreciating rupee makes exports cheaper and imports expensive. So, it is welcome news for sectors like IT, Textiles, Hotel & Tourism etc. which generates revenue mainly from exporting their products or services. Rupee depreciation makes Indian goods & services cheaper for the foreign buyers thus leading to increase in demand and higher revenue generation. The foreign tourist would find it cheaper to come to India thus increasing the business of hotel, tours & travel companies.

INCENTIVES & DISINCENTIVES PROVIDED BY INDIAN GOVT.

The Government of India has framed several schemes to promote exports and to obtain foreign exchange. These schemes grants incentive and other benefits. The few important export incentives, from the point of view of indirect taxes are briefed below: Free Trade Zones (FTZ) Several FTZs have been established at various places in India like Kandla, Noida, Cochin, etc. No excise duties are payable on goods manufactured in these zones provided they are made for export purpose. Goods being brought in these zones from different parts of the country are brought without the payment of any excise duty. Moreover, no customs duties are payable on imported raw material and components used in the manufacture of such goods being exported. If entire production is not sold outside the country, the unit has the provision of selling 25% of their production in India. On such sale, the excise duty is payable at 50% of basic plus additional customs or normal excise duty payable if the goods were produced elsewhere in India, whichever is higher. Electronic Hardware Technology Park / Software Technology Parks This scheme is just like FTZ scheme, but it is restricted to units in the electronics and computer hardware and software sector. Advance Licence / Duty Exemption Entitlement Scheme (DEEC) In this scheme advance licence, either quantity based (Qbal) or value based (Vabal), is given to an exporter against which the raw materials and other components may be imported without payment of customs duty provided the manufactured goods are exported. These licences are transferable in the open market at a price. Export Promotion Capital Goods Scheme (EPCG) According to this scheme, a domestic manufacturer can import machinery and plant without paying customs duty or settling at a concessional rate of customs duty. But his undertakings should be as mentioned below:

Customs Duty Rate 10% Nil in case CIF value is Rs200mn or more.

Export Obligation

Time

Nil in case CIF value is Rs50mn or more for agriculture, aquaculture, animal husbandry, floriculture, horticulture, poultry and sericulture.

4 times exports (on FOB basis) of CIF 5 years value of machinery. 6 times exports (on FOB basis) of CIF 8 years value of machinery or 5 times exports on (NFE) basis of CIF value of machinery. 6 times exports (on FOB basis) of CIF 8 years value of machinery or 5 times exports on (NFE) basis of CIF value of machinery.

Note: NFE stands for net foreign earnings. CIF stands for cost plus insurance plus freight cost of the machinery. FOB stands for Free on Board i.e. export value excluding cost of freight and insurance. Deemed Exports The Indian suppliers are entitled for the following benefits in respect of deemed exports: Refund of excise duty paid on final products Duty drawback Imports under DEEC scheme Special import licenses based on value of deemed exports

The following categories are treated as deemed exports for seller if the goods are manufactured in India: Supply of goods against duty free licences under DEEC scheme Supply of goods to a 100 % EOU or a unit in a free trade zone or a unit in a software technology park or a unit in a hardware technology park Supply of goods to holders of licence under the EPCG scheme Supply of goods to projects financed by multilateral or bilateral agencies or funds notified by the Finance Ministry under international competitive bidding or under limited tender systems in accordance with the procedures of those agencies or funds where legal agreements provide for tender evaluation without including customs duty Supply of capital goods and spares upto 10% of the FOR value to fertilizer plants under international competitive bidding Supply of goods to any project or purpose in respect of which the Ministry of Finance permits by notification the import of goods at zero customs duty along with benefits of deemed exports to domestic supplies

 Supply of goods to power, oil and gas sectors in respect of which the Ministry of Finance permits by notification benefits of deemed exports to domestic supplies

Manufacture Under Bond This scheme furnishes a bond with the manufacturer of adequate amount to undertake the export of his production. Against this the manufacturer is allowed to import goods without paying any customs duty, even if he obtain it from the domestic market without excise duty. The production is made under the supervision of customs or excise authority. Duty Drawback It means the rebate of duty chargeable on imported material or excisable material used in the manufacturing of goods in and is exported. The exporter may claim drawback or refund of excise and customs duties being paid by his suppliers. The final exporter can claim the drawback on material used for the manufacture of export products. In case of re-import of goods the drawback can be claimed. The following are Drawbacks: Customs paid on imported inputs plus excise duty paid on indigenous imports. Duty paid on packing material. Drawback is not allowed on inputs obtained without payment of customs or excise duty. In part payment of customs and excise duty, rebate or refund can be claimed only on the paid part. In case of re-export of goods, it should be done within 2 years from the date of payment of duty when they were imported. 98% of the duty is allowable as drawback, only after inspection. If the goods imported are used before its reexport, the drawback will be allowed as at reduced percent.

he Securities and Exchange Board of India (Sebi) has put in place additional

checks and balances for algorithmic trading to minimise the possibilities of any flash crash in the Indian capital market. The guidelines come close on the heels of the regulator expressing its concerns on the increased usage of algos by market players.

The capital market regulator has directed stock exchanges to put in place effective economic disincentives to ensure maintenance of orderly trading in the market. Exchanges have also been told to put in place monitoring systems to identify and initiate measures to impede any possible instances of order flooding by algos. The guidelines also call for algo orders to be necessarily routed through broker servers located in India apart from built-in risk controls like price and quantity limit checks. In other words, algos cannot violate the price bands or quantity limits prescribed by the exchange. Exchanges also need to have in place a system to identify dysfunctional algos and should be in a position to advise members to shut down and remove any outstanding orders in the system that have emanated from such algos. Further, in exigency, the stock exchange should be in a position to shut down the brokers terminal, says Sebi. Stock exchange have also been given authority to seek details of trading strategies used by the algo for purposes like inquiry, surveillance, investigation, etc. Meanwhile, stock brokers will have to ensure that all algorithmic orders are tagged with a unique identifier provided by the stock exchange in order to establish audit trail. Brokers also need to have real-time monitoring systems to identify algos that may not behave as expected and will have to inform the exchanges immediately.

BRICS SUMMIT : 2012

Leaders from Brazil, Russia, India, China and South Africa met on Thursday, Mar 29, 2012 in Delhi for the fourth annual Summit. Earlier known as BRIC before the addition of South Africa, BRICS is the group of emerging economies around the world, who are exploring new ways of collaboration, collective economic growth and developing common ground on foreign policy. All five economies maintain a great potential to become a superpower, but most of them are dependent on western economies. Any ups and down in the western markets leave their impact on these markets. The summit stressed on linking economies, as in trading in local currencies as well as linking stock exchanges of the member countries. The leaders also stressed on setting up of an international bank on par with Asian Development Bank, IMF and World Bank. It would fund various development projects in member countries and other emerging economies and may act as a relief provider for first time buyer mortgages in case of real financial crisis and disaster. The goal of the bank will also include lending, in the long term, if there comes a global financial crises such as the Eurozone crisis and issuing convertible debt, which could be bought by the central banks of all the member nations. Hence it will be acting as a vessel for risk-sharing. The idea of setting up such bank was put forward by India, which received a good response from the member countries as well as from the countries who were observing the event carefully. Analyst John Mashaka called India's move "long overdue", and said that setting up a bank was a means of "pulling out of the western-dominated World Bank and the International Monetary Fund." Assistant professor at the Institute of African Studies (China) Yuhua Xiao noted that setting up the bank showed signs of growing self-assertiveness and interdependence among developing economies. Dr. Alexandra A Arkhangelskaya noted that creating such a bank would effectively "shift the weight of economic power", and could also be very beneficial to non-BRICS nations. The nations also signed an agreement to extend credit facilities in their local currencies, a step to reduce the role of dollar between them. As of now, if Russia wants to trade with India, Russia will convert Rubles to Dollars send it to India,

and then India will convert Dollars to Rupees. Completely removing the intermediate step of converting to and from dollar is not so easy, but if removed, the trade between the two countries will become independent of what the value of dollar is, which is highly unstable. Also the nations will be launching a benchmark equity index derivatives that would allow investor of one member country to bet on the performance of stock exchanges of other member countries without currency risk. Accounted 50% of global economic growth in last decade, BRICS accounts for 26% of global landmass, 42% of the global population and 40% of global GDP. Below is the tabulation of the countries and their economy in therms of GDP (PPP). The data is taken from CIA World Factbook GDP PPP data update of 2011. PPP is one of the scale to measure difference between two economies. Using a PPP basis is arguably more useful when comparing generalized differences in total economic output between countries because PPP takes into account the relative costs and the inflation rates of the countries, rather than using just exchange rates, which may distort the real differences in income. The table shows BRICS as a single entity is more powerful than European Union. The data for GDP at purchasing power parity (PPP) has also been re based using the new International Comparison Program (ICP) price surveys and extrapolated to 2007. Final figures are estimates in billions of international dollars.
Rank 1 2 3 4 5 6 7 8 9 10 Country BRICS GDP (PPP) $Billion 20,975 Year 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est.

European Union 15,390 United States China India Japan Germany Russia Brazil 15,040 11,300 4,463 4,389 3,085 2,373 2,284

United Kingdom 2,250 France Italy 2,214 1,826

Another method of measuring economy is GDP (nominal) based on official exchange rates. The list below includes mostly 2011 estimates from the CIA World Factbook. The table shows BRICS as the third largest economy after EU and US.
Rank 1 2 3 4 5 6 7 8 9 10 Country GDP nominal $Billion Year 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est.

European Union 17,720,000 United States BRICS China Japan Germany France Brazil 17,720,000 13,766,000 6,988,000 5,866,000 3,739,000 2,919,000 2,407,000

United Kingdom 2,370,000 Italy Russia India 2,135,000 1,995,000 1,954,000

The performance of the BRICS nations on the international platform has been brilliant, despite the fact all these countries come from different continents, having different government, political and economical structure. How far this concept of BRICS will sustain no body knows, but if it works then it will bring a great change in the current world, a change for good. The countries have been working together to find some common ground and fortunately their thoughts match on the issues of West Asia, North Africa and Afghanistan. All five countries called for the international community to continue development projects in Afghanistan for 10 years after America led international forces will withdraw from the nation by the end of 2014. BRICS nations together have strongly condemned the Western worlds politics on Iran to make other countries stick to the restrictions imposed by them on trade ties. China's Trade Minister Chen Deming said that the "rise [in the price] of

crude oil has impacted all countries. The Iran issue has become an issue for all. We need to continue with normal relations with Iran, but, at the same time, we respect UN resolution. We hope that unilateral movement by one country will not affect other countries." The group warned against any military intervention in Syria by the West or by Israel in Iran. They added that a war with Iran would have "disastrous consequences."

Landmass of BRICS vs EU, Click to Enlarge

Out of five BRICS nations, three of them have remained or are super power. India before 14th century, Russia in the 20th century and China almost in 21st century. No matter these countries possess power and wealth, but they may not share good relations with each other. Brazil and South Africa being geographically isolated from these nations share good relations with all. The best example is China and India, both of them have faced each other in the war in 1965 and China is still occupying a large part of North India and claims some part of Indian territory in North East India. China was also about to open the front in Indo Pakistani war in 1971 but didn't do so, fearing Pro Indian Soviet Union might take action against them. Russia and China have also shared cold relations following the illegal migration of Chinese in Russia's far east and border dispute which was recently resolved. Russia and India have been sharing good relations from the Soviet times. India also shares good relations with South Africa, one of the major reason being Mahatma Gandhi, whose work in South Africa promoted equality between blacks and whites. In South Africa, Mahatma Gandhi is equally respected as in India. Brazil has also been close to all the countries. Leaving aside all these solid claims about BRICS, there are critics as well who discuss why BRICS might fail with some genuine facts. One of the reason is all these countries come from different continents, different social, economical and

political systems and some of these countries do not share good relations as well as common ground. One of the best example of this claim is that after the declaration of setting up of an International bank, these countries fear that China will be the most benefited country out of all and will enjoy the most. However, just after the summit was over, India and China declared that they will keep their border issue aside for now and will take more steps to increase trade between the two neighbors. Indian government also expressed their interest in inviting Chinese investment in India's manufacturing sector. Both the countries have together declared this year as Indo Chinese year of friendship and cooperation. After the summit, Brazil and India also took the opportunity of exploring their way of cooperation. The two countries signed six pacts in areas ranging from closer cooperation in science and biotechnology to cultural exchanges. Under a signature, Brazilian initiative Science Without Borders, the two sides inked a pact that envisages placement of Brazilian students and young researchers in India. It will be funded by Brazil. US State Department spokesman Mark Toner said, "We reviewed the leaders' Delhi declaration and believe that their efforts to engage in global multilateral institutions productively can only strengthen the international system. United States welcomed the efforts by the so-called BRICS -- Brazil, Russia, India, China and South Africa -- to support the recovery of the global economy as well as " Multilateral financial institutions All five countries called for an urgent need to implement the 2010 Governance and Quota Reform before the 2012 International Monetary Fund World Bank Annual Meeting. The countries also want the comprehensive review of the quota formula to reflect economic weights and enhance the voice and representation of emerging market and developing countries by January 2013. All five countries also called for candidatures from developing world for the position of the President of the World Bank reiterating that the heads of IMF and the World Bank should be selected through an open and merit-based process. The call came weeks before the World Bank's presidential election which would, for the first time, feature non-United States candidates. China's Hu said: "We are committed to stepping up exchanges with other countries on global economic governance reforms and increasing representation of developing countries." Manmohan Singh added that "while some progress has been made in international financial institutions, there is lack of movement on the political side. BRICS should speak with one voice on important issues such as the reform of the UN Security Council." Trade and currency To promote trade in local currencies, the BRICS countries signed the Master Agreement on Extending Credit Facility in Local Currency and the Multilateral Letter of Credit Confirmation Facility Agreement to replace the United States dollar as the main unit of trade between them.The trade ministers also said that tightening intra-BRICS trade would help as an antidote to the European

sovereign debt crisis. The trade ministers also called for collective action to fight the European and United States economic downturns. At the BRICS Business Forum, India's Commerce and Industry Minister Anand Sharma said that the "adversity of financial crisis is being faced by all. There is a need to work together to overcome this problem." His Chinese counterpart Chen Deming added that both economic problems were affecting all states and decreased Chinese exports: "I am sure they will recover. There is a need to prevent the EU crisis quickly before it gets worse. There has been a decline in demand in the European markets. Despite this we have to sustain a high level of growth." Russian Minister for Economic Development and Trade Elvira Nabioullina added that "the world has to stop accumulating risks. There is a need to work closer." In order to bring the economies of BRICS closer, all members agreed to launch a benchmark equity index derivative allowing investors in one BRICS country to bet on the performance of stock markets in the other four members without currency risk. The indices will be cross-listed in BRICS' flagship stock exchanges from 30 March. Foreign policy issues All five countries called for the international community to continue development projects in Afghanistan for 10 years after the ISAF withdraws most of its combat troops by the end of 2014. They also condemned the Western worlds pressure tactics on Iran to make other countries adhere to their restrictions on trade ties and said dialogue alone could resolve the nuclear issues. The group added that the 2011-2012 Syrian uprising could also only be resolved through dialogue. They warned against any military intervention in Syria by the West or by Israel in Iran. They added that a war with Iran would have "disastrous consequences." China's Trade Minister Chen Deming said that the "rise [in the price] of crude oil has impacted all countries. The Iran issue has become an issue for all. We need to continue with normal relations with Iran, but, at the same time, we respect UN resolution. We hope that unilateral movement by one country will not affect other countries."

CASE STUDY OF THE STEEL INDUSTRY OF INDIA

World Steel industry: An overview Steel, the recycled material is one of the top products in the manufacturing sector of the world. The Asian countries have their respective dominance in the production of the steel all over the world. India being one among the fastest growing economies of the world has been considered as one of the potential global steel hub internationally. Over the years, particularly after the adoption of the liberalization policies all over the world, the World steel industry is growing very fast. Steel Industry is a booming industry in the whole world. The increasing demand for it was mainly generated by the development projects that have been going on a long the world, especially the infrastructural works and real estate projects that has been on the boom around the developing countries. Steel Industry was till recently dominated by the United Sates of America but this scenario is changing with a rapid pace with the Indian steel companies on an acquisition spree. In the last one year, the world has seen two big Mergers & Acquisitions deals to take place: The Mittal Steel, listed in Holland, has acquired the world's largest steel company called Arcelor Steel to become the world's largest producer of Steel named Arcelor-Mittal. Tata Steel of India or TISCO (as listed in BSE) has acquired the world's fifth largest steel company, Corus, with the highest ever stock price. The iron and steel sector also contributes around 6.2% of Indias manufactured goods exports and 4.6% of total exports by value. Structural Characteristics of Indian Steel Industry The industry is dominated by large integrated players like SAIL and Tata Steel in steel. The Public sector has a significant presence in this industry, Steel Authority of India Ltd. (SAIL) has 32% of Indias installed capacity of crude steel. Tata Steel and Essar Steel are the major private players in the industry. The industrys fortunes depend on general global economic conditions but it is particularly sensitive to the performance of the automotive, construction , durable equipment, and other industrial products industries. The trend in the last few years in steel prices shows that the steel industry is cyclical. The global (and Indian) steel industry also suffers from cycles of over capacity and shortages. This too leads to cyclically falling/rising prices and industry losses/profits. Integrated steel producers (ISPs)Tata Steel and SAILface high fixed costs, and thus in a downturn, the percentage profit margins come down significantly.

The downturn phases have witnessed depressed prices at the firm level and widespread operating losses. Economic logic differs for mini mills that can vary output more quickly when prices fall. What is Private Limited and Public limited? Now lets first understand the meaning and difference between Public Sector Company and Private Sector Company. The term Private Company refers to ownership of a business company in two different ways First, referring to ownership by non-governmental organizations; and second, referring to ownership of the company's stock by a relatively small number of holders who do not trade the stock publicly on the stock market. In countries with public trading markets, a privately held business company is generally taken to mean one whose ownership shares or interests are not publicly traded. Often, privately held companies are owned by the company founders and/or their families and heirs or by a small group of investors. Sometimes employees also hold shares of private companies. Most small businesses are privately held. Private companies may be called corporations, limited liability companies, partnerships, sole proprietorships , business trusts, or other names, depending on where and how they are organized. The term "Public Company" thus refers to a government-owned corporation s. and the ownership of assets and interest is shared by people. Normally, the shares of a public company are owned by many investors. However, a company with many share holders is not necessarily a public company. The shares of a public company are often traded on a stock exchange. The value or "size" of a public company is called its market capitalization It is able to raise funds and capital through the sale of its securities. This is there as on why public corporations are so important: prior to their existence, it was very difficult to obtain large amounts of capital for private enterprises. In addition to being able to easily raise capital, public companies may issue their securities as compensation for those that provide services to the company, such as their directors, officers, and employees. Private Sector companies in India The private sector of the Steel Industry is currently playing an important and dominant role in production and growth of steel industry in the country. During the period (April-December 2006), 20.5 million tone of steel was produced by Private Sector steel units, out of the total production of 33.15 million tone in the country. The private sector units consist of major steel producers in one hand and relatively smaller & medium units such as Sponge iron plants, Re-rolling mills, Electric Arc Furnaces and Induction Furnaces on the other. They not only play an important role in production of primary and secondary steel, but also contribute substantial value addition in terms of quality, innovation and cost effectiveness. TATA Steel:

Tata Steel is India's largest integrated private sector steel company. Established in 1907, The Company is backward integrated with owned iron ore mines and collieries. Tata Steel has an integrated steel plant, with an annual crude steel making capacity of 5 million tone, located at Jamshedpur, Jharkhand. The steel works is situated at Jamshedpur in the state of Jharkhand, India. The factory covers 800 hectares of land. West Bokaro sub division in Hazaribagh district over 2000 hectares of land in which mining and coal beneficiation activities are performed. Jharia Division occupies 2500 hectares of land for its industrial, mining and domestic activities in the district of Dhanbad both in the state of Jharkhand. The iron ore and dolomite mines are located at Noamundi in the state of Jharkhand and at Joda, Kalamati, Khondbond and Gomardih in the state of Orissa. Over the years, Tata Steel has emerged as a thriving, nimble steel enterprise due to its ability to transform itself rapidly to meet the challenges of a highly competitive global economy and commitment to become a supplier of choice .Constant modernization and introduction of state-of-the-art technology at Tata Steel has enabled it to stay ahead in the industry. Tata Steel has completed the first nine months of fiscal 2006-07 with impressive increase in its production and sales volumes. The hot metal production at 4.1 million tone is 8.2% more compared to the last year in the corresponding period and crude steel production at 3.7 million tone is higher by 7.9% compared to the last year in first three quarters. The saleable steel production at 3.7 million tone registered a significant increase of 11%. The total sales of 3.53 million tone has grown by 11.7% over last financial year in the corresponding period. The domestic sale of long products has increased by 30%. Tata Steel is continuing with its programme of expansion of steel making capacity by 1.8 million tone to reach the rated capacity of 6.8 million tone in fiscal2007-08 and thereafter to 10 million tone by fiscal 2010.Tata Steels green field projects in Orissa and Chhattisgarh are progressing on schedule with placement of equipment order for Kalinganagar project in Orissa and commencement of the land acquisition process. Jharkhand project is waiting announcement of R & R policy of the state Government. The construction work of ferrochrome project in South Africa is in full swing. Acquisition of Corus: Recently Tata Steel acquired the Anglo-Dutch steel maker Corus, thus emerging as the fifth largest steel producer in the world. The steel major has won the Prime Minister's Trophy four times. This award is instituted by the Indian ministry of steel and awarded to the country's best integrated steel plant. In 2000, it became the first Tata company to win the JRD Tata QV award, given to the company with 'world class' operations under the Group' JINDAL STEEL AND POWER LTD (JSPL) Jindal Steel and Power Ltd. (JSPL), part of the $4 billion Jindal Organisation, has business interests in steel, power generation, mining iron ore, coal and diamond exploration/mining. The current turnover of the company is over Rs. 3,000 crore. JSPL is the worlds largest producer of coal based sponge iron. The product rangeen compasses 27 steel slabs, rounds, blooms and beam blanks. JSPL is producing rails and H beams and columns in technical collaboration with JFE Corporation, Japan. These H-beams are the most desired option of structural engineers worldwide. JSPL is the largest private sector investor in the state of Chhattisgarh with a total investment commitment of more than Rs. 10,000 crore. The company is also setting up a 6 million tone steel plant in Orissa with

an investment of Rs. 13,500 crore and a5 million tone steel plant in Jharkhand with an investment of Rs 11,500 crore. Jindal Power Ltd., wholly-owned subsidiary of JSPL, is setting up a 1000 megawatt O.P. Jindal super thermal power plant at Raigarh, with an investment of over Rs.4,500 crore. JSPL has been rated as one of the best environmentally managed companies in India and committed to environment protection as an integral part of their business activities. ISPAT INDUSTRIES LTD. (IIL) Ispat Industries Ltd. (IIL) has set up integrated steel plants at Dolvi (district Raigad), a backward region of Maharashtra, with a capacity of 3 million tone of hot rolled coils per annum. The plant has got a 2.24 million tone per annum sintering plant, 2 million tone per annum blast furnace and 1.6 million tone per annum gas based sponge iron plant. IIL have uniquely combined the usage of hot metal and sponge iron in the electric arc furnace for production of liquid steel for the first time in India. IIL have also adopted the state-of-art technology called Compact Strip Production (CSP) process, which has been installed for the first time in India and produces high quality and very thin gauges of Hot Rolled Coils (HRC). The IILs products are accepted in the domestic and international market. The production performance of IIL during last three years has been as follows: (in million tone) Items 2003-04 Hot metal Sponge Iron Hot Rolled Coils 1.29 1.06 1.62 2004-05 1.40 1.05 1.97 2005-06 1.42 0.89 2.15 2006-07 (Up to Dec06) 1.14 0.85 1.97

The two thin slab casters each with designed capacity to cast 55 and 60 mm slabs with Iiquid Core Reduction (LCR) features available. Ispats casters have achieved global benchmark in annual production, as confirmed by Steel Melting Shop (SMS)Demag, the technology supplier. The other major Private steel companies are JISCO. Saw Pipes. Uttam Steels Ltd. Mukand Ltd. Mahindra Ugine Steel Company Ltd. Usha Ispat Ltd. Kalyani Steel Ltd Electro Steel Castings Ltd. Sesa Goa Ltd. NMDC. Lloyds SteeI Industries Ltd.

Public Sector companies in India

Steel Authority of India Limited (SAIL) Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defence industries and for sale in export markets. The Government of India owns about 86% of SAIL's equity and retains voting control of the Company. However, SAIL, by virtue of its Navratna status, enjoys significant operational and financial autonomy. Ranked amongst the top ten public sector companies in India in terms of turnover, SAIL manufactures and sells a broad range of steel products, including hot and cold rolled sheets and coils, galvanised sheets, electrical sheets, structurals, railway products, plates, bars and rods, stainless steel and other alloy steels. SAIL produces iron and steel at five integrated plants and three special steel plants, located principally in the eastern and central regions of India and situated close to domestic sources of raw materials, including the Company's iron ore, limestone and dolomitemines. The company has the distinction of being Indias largest producer of iron oreand of having the countrys second largest mines network. This gives SAIL acompetitive edge in terms of captive availability of iron ore, limestone, and dolomitewhich are inputs for steel making. SAIL's wide range of long and flat steel products is much in demand in the domestic as well as the international market. This vital responsibility is carried out by SAIL's own Central Marketing Organisation (CMO) and the International Trade Division. CMO encompasses a wide network of 34 branch offices and 54 stock yards located in major cities and towns throughout India. MAHARASHTRA ELEKTROSMELT LTD. (A Subsidary of SAIL) Maharashtra Electros melt Ltd. is situated in Chandrapur, Maharashtra and is a major producer of ferro manganese and silico manganese for captive use of SAIL plants. The authorised and paid-up share capital of the company as on 31.3.2006 was Rs. 30crore and Rs. 24 crore respectively. SAILs holding is approximately 99.12% of the paid-up capital. Financial Performance During the year 2005-06 the company recorded a turnover of Rs. 247.33 crore(including conversion income of Rs. 171.10 crore) and made a net profit after tax of Rs. 20.97 crore. The turnover and net profit after tax of the company during April,2006 to December, 2006 were Rs. 220.26 crore (provisional) and Rs. 17.48 crore(provisional) respectively . Production Performance The production of all grades of ferro alloys during 2005-06 is as under: (in tone) Materials 2005-06 April- Dec 2006

High Carbon Ferro Manganese Silco Manganese Medium Carbon Ferro Manganse

51525 46712 2344

49493 32921 164

RASHTRIYA ISPAT NIGAM LTD. (RINL) Visakhapatnam Steel Plant (VSP) is the first shore based integrated steel plant located at Visakhapatnam in Andhra Pradesh. The plant was commissioned in August1992 with a capacity to produce 3 million tone per annum of liquid steel. The plant has been built to matching international standards in design and engineering with the state-of-the-art technology, incorporating extensive energy saving and pollution control measures. VSP has an excellent layout, which can be expanded to over 10 million tone per annum capacity. Right from the year of its integrated operation, VSP established its presence both in the domestic and international markets with it superior quality of products. VSP has been awarded all the three International Standards Certificates, namely, ISO 9001:2000, ISO 14001:1996 and OHSAS18001:1999. The company has taken significant strides in the area of Corporate Social Responsibility. Production Performance (in million tonn) Items Hot Metal Liquid Steel Saleable Steel3 2004-05 3.920 3.560 3.173 2005-06 4.153 3.603 3.237 2006-07 (AprilDec06) 3.040 2.676 2.419

NATIONAL MINERAL DEVELOPMENT CORPORATION LTD. (NMDC) Incorporated on November 15, 1958, the National Mineral Development Corporation Ltd (NMDC) a Government of India Enterprise, is engaged in the business of developing and exploiting mineral resources of the country (other than coal, oil, natural gas and atomic minerals). At present, its activities are concentrated on mining of iron ore, diamonds and silica sand. NMDC operates the largest mechanized iron ore mines in the country at Bailadila(Chhattisgarh) and Donimalai (Karnataka). The silica sand project is at Lallapur,Allahabad and the diamond mine is situated at Panna (Madhya Pradesh). Mining activities at DMP, Panna were stopped with effect from 22.08.2005 on receipt of notice from Madhya Pradesh Pollution Control Board. The case is pending with Honble Supreme Court of India. NMDC is following up the case for early hearing. All the iron ore production units have been accredited with ISO 9001:2000 and ISO14001:2004 certifications. R&D Centre of NMDC was also accredited with ISO9001:2000 certification.

Iron Ore NMDC produced 17.27 million tone of iron ore during the year 2006-07 (up to December 2006). Domestic sales of iron ore was 15.50 million tone during the year (up to December 2006). Exports of iron ore produced by NMDC is canalised through MMTC Ltd. Iron ore is exported to Japan, South Korea and China. In 2006-07, NMDC exported 1.78 million tone of iron ore valued at approximately Rs. 429.80 crore . Capital Structure The authorised share capital of the company is Rs. 150 crore. The paid up equity share capital was Rs. 132.16 crore. Outstanding loans from Government of India are nil. Financial Performance The financial performance of the company for the year 2005-06 and 2006-07 (April-Dec. 06) are given below: Particulars Sales/Turnover Gross Margin Profit Before Tax MSTC LTD. MSTC Ltd. (formerly Metal Scrap Trade Corporation Ltd.), a Government of India Enterprise, was set up on September 9, 1964 as a canalising agency for the export of scrap from the country. With the passage of time, the Company emerged as the canalising agency for the import of scrap into the country. Import of scrap was de-canalised by the Government in 1991-92 and MSTC has since then moved on to marketing ferrous and miscellaneous scrap arising out of steel plants and other industries and importing coal, coke, petroleum products, semi finished steel products like HR coils and export of primarily iron ore. The company has also established an e-auction portal and undertakes e-auction of coal, diamonds and steel scrap and has developed an e-procurement portal in house. Capital Structure The company has an authorised capital of Rs. 5 crore and paid up capital was Rs.2.20 crore as on 31.12.2006 of which approximately 90% is held by Government of India and balance 10% by members of Steel Furnace Association 16 of India, Iron and Steel Scrap Association of India and others. Paid up capital of Rs. 2.20 crore includes bonus shares issued in the year 1993-94 in the ratio 1:1. 2004-05 2,226.55 1,287.49 1,223.65 2005-06 3,710.92 2,889 2,770 2006-07 (AprilDec.06) 2,790 2,455

FERRO SCRAP NIGAM LTD. (FSNL) Ferro Scrap Nigam Ltd. (FSNL) is a wholly owned subsidiary of MSTC Ltd. with a paid up capital of Rs. 2 lakh. The company undertakes the recovery and processing of scrap from slag and refuse dumps in the nine steel plants at Rourkela, Burnpur, Bhilai,Bokaro, Visakhapatnam, Durgapur, Dolvi, Duburi and Raigarh. The scrap recovered is returned to the steel plants for recycling/disposal and the company is paid processing charges on the quantity recovered at varying rates depending on the category of scrap. Scrap is generated during iron and steel making and also in the rolling mills. In addition, the company is also providing steel mill services such as scarfing of slabs, handling of BOF slag, etc. Financial Performance Particulars Total Turnover i.e, Service charges realized including miscellaneous Income, etc Gross Margin before Interest & Depreciation Interest & Depreciation Profit before Tax 2004-05 9,818.22 2005-2006 10,679.37 2006-07 (AprDec.2006) 7,655.57

1,678.79 830.14 848.65

1,865.14 1,009.70 855.44

1,052.84 847.28 205.56

MANGANESE ORE (INDIA) LTD. (MOIL) Manganese Ore (India) Ltd. (MOIL) was established in 1962. It is the largest producer of manganese ore in India. At the time of inception, 49% of its shares were held by the Central Province Manganese Ore Co Ltd. (CPMO) and the remaining 51% in equal proportion by Government of India and the State Governments of Madhya Pradesh 17and Maharashtra. Subsequently, in 1977, the Government of India acquired the shares held by C.P.M.O. in MOIL and MOIL became a wholly owned Government company with effect from October, 1977. As on 30.11.2006, Government of India held81.57% shares in MOIL with State Governments of Maharashtra and Madhya Pradesh holding 9.61% and 8.82% shares respectively. MOIL Produces and Sells following Grades of Manganese Ore High grade ores for production of ferro manganese . Medium grade ores for production of silico manganese. Blast furnace grade ore required for production of hot metal Dioxide ore for dry battery cells and chemical industries. Production and Financial Performance

The physical and financial performance of the Company during 2004-05, 200506 and2006-07 (April-Dec. 2006) are given below in the table

Items 1. Production a) Manganese Ore (thousand tone) b) Electrolytic Manganese Dioxide(tone) c) Ferro Manganese (tone) 2. Turnover (Rupees in crore) 3. Profit before Tax (Rupees in crore)

2004-05

2005-06

2006-07 (up toDec.2006) 825.33 460.00 8,294.00 294.63 120.87

943.00 1,123.00 10,325.00 378.78 202.27

865.00 1,301.00 6,170.00 334.09 169.00

KUDREMUKH IRON ORE COMPANY LTD. (KIOCL) Kudremukh Iron Ore Company Ltd (KIOCL), an 100% Export Oriented Unit, ISO9001:2000 and ISO 14001 company was established in April, 1976 to meet the long term requirements of Iran. An iron ore concentrate plant of 7.5 million tone capacity was set up at Kudremukh. This project was to be financed in full by Iran. However, as Iran stopped further loan disbursements after paying US $ 255 million, the project was completed as per schedule with the funds provided by Government of India. While the project was commissioned on schedule, consequent upon the political developments in Iran, they did not lift any quantity of concentrate. As a diversification measure, the Government approved the construction of a 3 million tone per year capacity pellet plant in Mangalore in May, 1981. The capacity of the pellet plant was increased to 3.5million tone with additions/modifications. The plant went into commercial production in 1987 and is now exporting blast furnace grade pellets to China and also to domestic units such as Ispat Industries Ltd. and Rastriya Ispat Nigam Ltd. Aerial view of Pellet Plant, Mangalore. Production A target of 3.1 million tone and 3.05 million tone was set for production of iron ore concentrate and iron oxide pellets respectively during the year 2005-06. Actual production was 2.922 million tone of concentrate and 2.834 million tone of pellets.The target set for production during the year 2006-07 is 3.05 million tone of pellets.In pursuance of directive of Honble Supreme Court dated 30-092005, the mining activities at Kudremukh were stopped on 31-12-2005. Therefore, there is no production of iron ore concentrate during the year 200607. As against a target of 1.88million tone of pellets fixed for the period April to November, 2006, the actual production was 0.275 million tone which represents 15% target fulfilment. There is shortfall in production of pellets up to November, 2006 during 2006-07. The shortfall in production of pellets is on account of operational problems being encountered in the pellet plant after switching over

to usage of 100% hematite ore from magnetite ore. There was excessive generation of ser fines (slimes) affecting filtration, clogging of filters, overflow and contamination of process water due to filling of cooling pond affecting production. While efforts are continuing to rectify the problems, the operation of pellet plant is yet to stabilize and normal production is yet to commence. The sales revenue during the last five years and up to November, 2006, during 2006-07 is detailed below: (Rs. in lakh) Years 2006-07 (up to December, 2006) 2005-06 2004-05 2003-04 2002-03 2001-02 Financial Performance An overview of the performance of KIOCL during the year 2006-07 (up to November,2006) together with actuals for the previous three years, is indicated below: (Rs. in lakh) Particulars total value of sales Gross Margin Profit after Tax Inventories(excluding finished stock) 2006-07(up to December,2006) 12,427 2,620 1,029 20,417 2005-06 1,23,228 68,706 35,630 15,843 2004-05 1,85,377 1,20,863 64,984 8,720 2003-04 1,02,938 45,945 30,070 7,616 Concentrate 12,091 16,050 20,209 21,135 21,571 Pellets 12,427 1,11,137 1,69,327 82,729 51,579 50,598 Total 12,427 1,23,228 1,85,377 1,02,938 72,714 72,169

BIRD GROUP OF COMPANIES Consequent upon nationalisation of the undertaking of Bird and Company Ltd in 1980,the following seven companies came under the administrative control of the Ministry of Steel, Government of India: (a) The Orissa Minerals Development Company Limited (OMDC) (b) The Bisra Stone Lime Company Limited (BSLC) (c) The Karanpura Development Company Limited (KDCL) (d) Scott & Saxby Limited (SSL) (e) Eastern Investments Limited (EIL) (f) Burrakar Coal Company Limited (Burrakar) (g) Borrea Coal Company Limited (Borrea)The status of the companies is as under:

1) Burrakar and Borrea coal companies became non-operational after nationalization of coal mines. The two companies are in the process of liquidation. The official liquidator has already taken over the assets and liabilities of these two companies. 2) EIL being an investment company is having a major stake in the equity shares of operating companies under the Bird Group. 3) OMDC, BSLC, KDCL & SSL are operating companies under the Group. Status of the Companies at the Time of Nationalisation At the time when the Bird Group of Companies came under the administrative control of the Ministry of Steel, Government of India, all of them were financially sick and burdened with various problems. With the financial support from the Government of India, problems relating mainly to excessive manpower, erosion of working capital and outstanding liabilities could be settled to a considerable extent.

Measures taken by Indian government to improve the industry

Now lets have a look over what government has done to make the industry competitive in world market. Government has taken several initiatives in last decade to improve the steel industry. The main steps taken for this are as follows In the new Industrial Policy announced in July, 1991 Iron and Steel industry, among others, was removed from the list of industries reserved for the public sector and also exempted from the provisions of compulsory licensing under the Industries (Development and Regulation) Act, 1951. With effect from 24th May 1992, Iron and Steel industry has been included in the list of `high priority' industries for automatic approval for foreign equity investment up to 51%. This limit has been recently increased to 100%. Price and distribution of steel were deregulated from January 1992. At the same time, it was ensured that priority continued to be accorded for meeting the requirements of small scale industries, exporters of engineering goods and North Eastern Region of the country, besides strategic sectors such as Defence and Railways. The trade policy has been liberalised and import and export of iron and steel is freely allowed. There are no quantitative restrictions on import of iron and steel items, covered under Chapter No. 72 of the ITC(HS) Code. The only mechanism regulating the imports is the tariff mechanism. Tariffs on various items of iron and steel have drastically come down since 1991-92 levels and the government is committed to bring them down to the international levels. In Chapter 72 there are two items viz. 72042110 and 72042910, which fall in the restricted list of imports. Iron & Steel are freely importable as per the Extant Policy. Iron & Steel are freely exportable. Advance Licensing Scheme allows duty free import of raw materials for exports. The floor price for seconds and defectives continues till date. Imports of seconds and defectives of steel are allowed only through three designated ports of Mumbai, Calcutta and Chennai. Mandatory pre inspection certificate by a reputed international agency for every import consignment of seconds and defectives. In budget 2004-05, the customs duty on non alloy steel was reduced from 15 % to10 per cent and on alloy steel from 20 per cent to 15 per cent. In August 2004,the customs duty on non-alloy steel was further reduced from 10 per cent to 5per cent; on melting scrap from 5 per cent to 'zero' and on ships for breaking from15 per cent to 5 per cent. Further, customs duty on several raw materials used by the steel sector liken on coking coal, met coke and nickel has been reduced to 5 per cent and on coking coal to 'zero'. To bring down the prices of steel, the excise duty on steel products was reduced from 16 per cent to 8 per cent with effect from February 28, 2004

with a caveat that the duty regime will be reviewed. Budget 2004-05 revised this partially by increasing the duty from 8 per cent to 12 per cent, as the intended impact of duty cut on moderating prices was not achieved. The union Budget 2007-08 the import duty on seconds and defective has been further reduced from 20% to 10%.

Special assistance being provided by Ministry of Steel to Private Sector Ministry of Steel is extending all possible support, as detailed below, for the development of Iron and Steel Sector in the country: The Ministry is providing linkage for raw materials, rail movement clearance etc. for new plants and expansion of existing ones, wherever applied for. To ensure an un-interrupted supply of raw materials to the producers. The Ministry has been interacting with All India Financial institutions to expedite clearance of projects. Regular interactions with Entrepreneurs, who are proposing to setup Iron and Steel Plants, are held at the level of Secretary. Ministry of Steel identifies infra-structural and related facilities required by steel industry so that their absence does not lead to bottlenecks in the future growth of the Iron and Steel Sector, and takes up these issues with the concerned ministries. The Ministry has encouraged the setting up of "Institute for Steel Development and Growth (INSDAG)" in Calcutta in August, 1996. The leading steel producers in the country are members of this Institute, which has been set up with the objective of promoting, developing and propagating the proper and effective use of steel. In order to resolve the problems faced by existing & new steel plants & to assist major steel plants being implemented, Govt. has setup a Project Coordination Group under the Chairmanship of Steel Minister.

NATIONAL STEEL POLICY, 2005

The progress of the steel industry has a critical influence on the pace of Indias development and, as such, great importance is attached to capacity expansion in line with expected demand at cost and prices which make Indian steel internationally competitive. The existing regime of liberalization, decontrol and deregulation of industry in the country has opened up new opportunities for the expansion of the steel industry. With a view to accelerating the growth of the steel sector and attaining the vision of India becoming a developed economy by 2020, the Ministry of Steel formulated a National Steel Policy (NSP) in 2005. The following salient features can be derived after analysing the NSP 2005: The NSP sets out a broad roadmap for the Indian Steel Industry in its journeytowards reform, restructuring and globalisation. The long-term goal of the NSP is that India should have a modern and efficient steel industry of world standards, catering to diversified steel demand. The focus of the policy is to achieve global competitiveness not only in terms of cost, quality andproduct-mix but also in terms of global benchmarks of efficiency and productivity. In order to achieve the goal of 110 million tones of steel production by 2019-20,the NSP seeks to remove the supply-side constraints to the growth of this industry in an open, globally integrated and competitive environment. The NSP seeks to adopt a multi-pronged strategy to move towards the long-term policy goal. On the demand side, the strategy would be to create incremental demand through promotional efforts, creation of awareness and strengthening the delivery chain, particularly in rural areas. On the supply side, the strategy would be to facilitate creation of additional capacity, remove procedural and policy bottlenecks in the availability of inputs such as iron ore and coal, make higher investments in R&D and encourage the creation of infrastructure such as roads, railways and ports. The NSP acknowledges the low per capita consumption of steel in the country, especially in the rural areas and the need to boost steel consumption to improve quality of life and help in meeting the growing aspirations of masses. In order to achieve the strategic goal of 110 MT of steel production by 2019-20,the industry would need additional capital. In addition, funds would be required for technological upgrade of existing facilities. In order to mobilize such vast resources NSP seeks to encourage foreign direct investment. In addition, the policy also seeks to make the fiscal incentives, available to infrastructure projects, accessible to the steel industry. The NSP seeks to support developing of risk-hedging instruments like futures and derivatives to contain price volatility in the steel market. The NSP seeks to strengthen the existing training and research facilities available to the domestic steel industry so as to provide suitable training

programmes especially for the secondary small-scale units and also to collect and analyse data on important parameters of the industry. The NSP seeks to mount aggressive R&D efforts to create manufacturing capability for special types of steel, substitute coking coal, use iron ore fines, develop new products suited to rural needs, enhance material and energy efficiency, utilize waste, and arrest environmental degradation. The NSP acknowledges the important role played by the secondary steel sector in providing employment, meeting local demand of steel in rural and semi-urban areas, and meeting the countrys demand of some special products and seeks to Endeavour to provide the necessary feedstock to these units at reasonable prices from major plants through the existing mechanism of State Small Industries Corporations. The NSP recognizes the fact that integration of the Indian steel industry with the global economy requires that the industry should be protected from unfair trade practices. The NSP, therefore, envisages institution of mechanisms for import surveillance, and monitoring export subsidies in other countries.

The present per capita consumption of steel in the country is very low compared to the world average. As mentioned above, one of the objectives of the NSP is to augment the demand and consumption of steel in the country by conscious promotion of steel usage. With a view to create a mass awareness campaign on conscious promotion of steel usage a Steel Promotion Coordination Committee has been formed under the Chairmanship of Secretary, Ministry of Steel, consisting of major steel producers. The Committee is being serviced by Institute for Steel Development and Growth(INSDAG). The objective of the Committee is to promote steel usage in the country byway of an awareness campaign with particular emphasis on rural sectors. The Committee also aims at educating the designers, architects, builders and planners regarding the qualitative and cost effective applications of steel in various structures including buildings, bridges, flyovers and airports.

FUTURE OF INDIAN STEEL INDUSTRY

India is amongst a few countries in the world having the dual advantage of fast growing domestic demand coupled with access to raw materials. Further, the trend that is already discernible is that the axis of global steel production / consumption is shifting towards Asia. With their large populations, China and India already account for 35 % of the total world steel production - more than double of Europe. Asia is expected to outpace other regions of the world to an even greater extent in the coming years .Amongst the Asian nations, China has established a huge, unbridgeable lead. It is accepted that China will continue to be the leader. However, India is slated to emerge as the second Asian giant in the next eight years. Figuratively speaking, while the "Dragon" has reached maturity; the "Lotus" is about to bloom in resplendent splendor. In 2005 Chinese steel consumption was around 320 million tones; i.e China swallowed almost 32% of global steel. It is unlikely that future production and consumption would continue to flourish at growth rates of 8% and 18% respectively as has been the case over the last few years. On the other hand, it is sun-rise time for India where the demand has increased by 7-8% in the last couple of years. In the long run, Indian steel is likely to be more cost-effective since unlike China, India has relatively large reserves of iron ore (14 billion tones), which if strategically exploited, can sustain domestic production of 120-130 million tones for at least 25-30 years. However, the position with coal is not so favourable. Though thermal coal reserves of over 92 billion tones can fuel industry, largescale iron making using the traditional blast furnace route would require coking coal. India does not have adequate reserves of coking coal; nor is the meager amount available of appropriate quality. Thus, the steel industry always had to contend with the dual problems of inadequate availability and poor quality of Indian coking coal. This has been partly addressed by adopting alternative iron making processes that are not dependent on coking coal; it can not be denied that coal is the biggest cause for concern for bulk steel production in India. Because of the shortage of indigenous coal, attempts have been made by steel producers to ensure long-term supplies by tying up with global majors or by acquiring mines in other countries. This is the only long-term solution, but with a global shortage of coal it may not remain cost-effective in the long run. India is the seventh largest producer of steel and may further improve its position going by the current trends. A series of investment decisions by major domestic players and international steel giants such as Steel Authority of India Ltd, Tata Steel, POSCO, the LN Mittal Group etc. clearly establish that such hopes are well founded. The keen interest shown by various prospective investors is not only due to expectations of strong growth in domestic demand but also due to indigenous availability of key resources like iron ore and skilled

work force. After deregulation (from 1991-92 to 2004-05) domestic consumption of finished steel has grown at a CAGR of 6.7 per cent. In absolute terms the consumption of finished steel expanded from 14.8 million tones in 1991-92 to 34.4 million tones in2004-05. During the recent upturn (from 2002-03 to 2005-06) the growth in consumption has accelerated to 9.1 per cent. With the likely growth of Indian economy at around 7 per cent per annum, demand for steel is expected to remain strong and is projected to reach a level of 90million tones by 2019-20 as envisaged in the National Steel Policy. This growth in demand is sustainable considering the fact that India's per capita consumption of steel is still very low at 31 kgs per head compared to the world average of 145 kgs. The very low level of per capita consumption of steel in India is highlighted further when compared with the consumption levels of its peer group consisting of countries like China, Brazil, Mexico and Republic of Korea as also with selected developed countries. Though there are realistic constraints in India to achieving as rapid a growth as in China, there seems to be consensus among analysts that India is likely to witness a growth rate in steel consumption higher than the historically observed rate of 6 to 7percent. If the growth rate (9 per cent) of last three years is maintained then we will achieve the 110 million tones landmark even by 2018. Though some analysts are more conservative due to cyclicity of steel business, it may be mentioned that in a country like India cyclicity is more in terms of prices rather than volumes of production.

Conclusions about Exports of steel industry

Similar optimism prevails with regard to export of iron and steel. Export of steel starting from a negligible amount in 1991-92 has increased to 5.5 million tones in2003-04. Exports in 2004-05 were lower at 4.6 million tones, primarily because of rising domestic demand and low capacity additions. Exports now constitute around 17per cent of total production and India's presence in the developing and developed world is being increasingly felt. Indian steel producers have recently been able to supply specialized grades and products used for sophisticated applications like automobiles. On the cost front, some of our producers are counted amongst the least cost producers of the world. For an average reference plant, India is competitively placed in the middle of the hierarchy of steel producing nations. However, we have a long way to go to catch up with the leading exporters of the world such as Japan, the CIS countries, Brazil etc. It is, however, expected that by 2019-20 India will be able to export around 26 million tones of steel representing 24per cent of total projected production. The projected export ratio compares well with the current worldwide export ratio of 27 per cent (excluding intra-regional trade).The projected production of steel by 2019-20, to meet the domestic and export demand will be around 110 million tones. Management of resources and infrastructural growth is going to be critical in achievement of the production level envisaged. The broad requirements of various resources will increase manifold from the current level. The bottlenecks in availability of critical inputs and various facilities need to be removed through concerted efforts of Government and industry. The broad strategy to overcome these constraints as well as meet the strategic goals of the steel sector has been discussed in the National Steel Policy, which has been recently approved by the Government. As stated earlier, the long-term goal of the National Steel Policy is that India should have a modern and efficient steel industry of world standards, catering to a diversified steel demand. The focus of the policy is to achieve global competitiveness not only in terms of cost, quality and product mix but also in terms of global benchmarks of efficiency and productivity. The policy envisages adopting a multi-pronged strategy to achieve these goals. On the demand side, the strategy would be to create incremental demand through promotional efforts, creation of awareness and strengthening the delivery chain, particularly in rural areas. On the supply side, the strategy would be to facilitate creation of additional capacity, remove procedural and policy bottlenecks in the availability of inputs such as iron ore and coal, make higher investments in R&D and HRD and encourage the creation of infrastructure such as roads, railways, and ports. The production figures, exports and imports of finished carbon steel and pig iron, and apparent consumption patterns of finished carbon steel as indicated by TATA Steel and SAIL attest to the continuing growth for both the sectors.

CONTRIBUTION OF STEEL INDUSTRY ON INDIAN GDP

The Role of Iron and Steel Industry in India GDP is very important for the development of the country. In India the visionary Shri Jamshedji Tata set up the first Iron and Steel manufacturing unit called Tata Iron and Steel Company, at Jamshedpur in Jharkhand. Iron and steel are among the most important components required for the infrastructure development in the country. Role of Iron and Steel Industry in India GDP-Facts The Iron and Steel Industry in India is one of the fastest growing sectors The demand drivers for the Indian Iron and Steel industry are increase in the activities of the automobiles industry, real estates industry, transportation system, aircraft industry, ship building industry, etc. India ranks 5th in the world in terms of production of steel The amount of crude steel produced in 2006-07 was 50.71 million tonnes The amount of finished steel produced in 2006-07 was 51.9 million tonnes The production of finished steel was increased by 16.52% The production of finished carbon steel was 24.8 million tonnes in the year 2006-07 It is expected that India would become the second biggest producer of steel within the year 2016 and the production per year would be 137 million tonnes The exports pertaining to the steel industry was 6.26 % during the period 2006-07

Role of Iron and Steel Industry in India GDP-Consumption The domestic consumption of steel has grown by12.5% in the past three years The domestic steel consumption in the year 2006-07 was 41.14 million tonnes The average growth rate of the Indian Iron and Steel Industry is 11.36% The construction projects all over India are major consumer of steel The per capita consumption of steel in India is 35kgs As the per capita consumption of steel is lower than other countries, so the steel industry has huge opportunities in the future

Role of Iron and Steel Industry in India GDP-Growth in Future The Arcelor Mittal, which is the largest steelmaker in the world, has plans of establishing two Greenfield steel projects with capacity of 12 million tonnes annually, in India Acerinox SA, one of the important stainless steel manufacturers in collaboration with Nisshin Steel, Japan is setting up a steel plant in India The Tata Steel ranks 5th in the world steel production and the company have plans of expanding its capacity by the year 2015 SAIL, India's biggest producer of steel has plans of increasing the production to 24.98 million tonnes annually Sinosteel Corp, China are planning to invest US$ 4 billion to set up a 5 million tonnes capacity Greenfield steel plant The acquisition of the Corus, the Anglo-Dutch steel manufacturer by the Tata Steel The Algoma Steel, Canada was acquired by Essar Global for US$ 1.63 billion

WORLD STEEL PRODUCTION AND EXPORTS

In 2010, total world crude steel production was 1,413.6 million metric tonnes (mmt). The biggest steel producing country is currently China, which accounted for 44.3% of world steel production in 2010. In 2008 and 2009, output fell in the majority of steel producing countries as a result of the global recession, in 2010 started to rise again.

Crude steel production (million tonnes):

Rank

Country/Region

2007

2008

2009

2010

2011

World

1,351.3

1326.5

1,219.7

1,413.6

1,490.1

People's Republic of China

494.9

500.3

573.6

626.7

683.3

Japan

120.2

118.7

87.5

109.6

107.6

United States

98.1

91.4

58.2

80.6

86.2

India

53.5

57.8

62.8

68.3

72.2

Russia

72.4

68.5

60.0

66.9

68.7

South Korea

51.5

53.6

48.6

58.5

68.5

Germany

48.6

45.8

32.7

43.8

44.3

Crude steel production (million tonnes):

Rank

Country/Region

2007

2008

2009

2010

2011

Ukraine

42.8

37.3

29.9

33.6

35.3

Brazil

33.8

33.7

26.5

32.8

35.2

10

Turkey

25.8

26.8

25.3

29.0

34.1

11

Italy

31.6

30.6

19.7

25.8

28.7

12

Taiwan

20.9

19.9

15.7

19.6

22.7

13

Mexico

17.6

17.2

14.2

17.0

18.1

14

France

19.3

17.9

12.8

15.4

15.8

15

Spain

19.0

18.6

14.3

16.3

15.6

16

Canada

15.6

14.8

9.0

13.0

13.1

17

Iran

10.1

10.0

10.9

12.0

13.0

18

United Kingdom

14.3

13.5

10.1

9.7

9.5

19

Poland

10.6

9.7

7.2

8.0

8.8

20

Belgium

10.7

10.7

5.6

8.1

8.1

Crude steel production (million tonnes):

Rank

Country/Region

2007

2008

2009

2010

2011

21

Austria

7.6

7.6

5.7

7.2

7.5

22

Netherlands

7.4

6.8

5.2

6.7

6.9

23

South Africa

9.1

8.3

7.5

8.5

6.7

24

Egypt

6.2

6.2

5.5

6.7

6.5

25

Australia

7.9

7.6

5.2

7.3

6.4

26

Argentina

5.4

5.5

4.0

5.1

5.7

27

Czech Republic

7.1

6.4

4.6

5.2

5.6

28

Saudi Arabia

4.6

4.7

4.7

5.0

5.3

29

Sweden

5.7

5.2

2.8

4.8

4.9

30

Kazakhstan

4.8

4.3

4.1

4.3

4.7

31

Slovakia

5.1

4.5

3.7

4.6

4.2

Crude steel production (million tonnes):

Rank

Country/Region

2007

2008

2009

2010

2011

Malaysia

6.9

6.4

4.0

4.1

N/A

32

Finland

4.4

4.4

3.1

4.0

4.0

Others[4]

29.8 (est.)

28.3 (est.)

23.3 (est.)

25.6 (est.)

Exports
Top steel exporter in 2011 Rank 1 2 China Japan Country 56.3 36.9 Volume

3 4 5 6 7 8 9 10 11 12 13 14 15

Ukraine Germany Russia Belgium South Korea Turkey Italy France United States Taiwan Netherlands Portugal Brazil

28.6 28.6 28.4 21.2 19.7 18.5 18.0 17.1 11.9 10.0 10.0 9.4 9.1

Share of world crude steel production 2011, 2010

STEEL PRODUCTION IN CHINA

Chinas 12th five year plan (5YP) emphasizes environmental issues and clean technology. The 5YPs environmental targets pose a challenge to the iron and steel sector regarding energy usage and pollution , however this is counter balanced by Chinas need to continue building infrastructure and manufacturing high-end equipment. China intends to restructure the iron and steel sector under the 5YP: Over the next 5 years (2011-2015), the sector is expected to see the following changes: I. Increased M&A activity as the government seeks to create larger, more efficient steel companies II. Restrictions on steel capacity expansion III. Upgrading of steel industry technology IV. Greater emphasis on high-end steel products V. Relocation of iron and steel products to coastal areas The steel sectors growth rate is set to slow during the 5YP period, with forecasts ranging from 5% to 6%. This contrasts with double-digit rates seen during the 10th and 11th 5YPs.
35% 30% 25% 20% forecast 15% 10% 5% 0% 10th 5YP(2001-05) 11th 5YP(2006-10) 12th 5YP(2011-15) real

The steel sector is facing problems created by rapid expansion Rapid growth of Chinas steel sector in the past 10 years has led to over capacity heavy pollution , and a fragmented industry structure. In the

last decade, the steel industry grew at an average annual rate of 17% , reaching around 600 million tons of crude steel output in 2010. Total steel capacity in china is estimated at 720-750 million tons per year. According to one estimate , around 100 million tons of steel capacity is unnecessary.

Reducing capacity expansion is one of the goals of the 5YP China will primarily target low end steel manufacturers, which have contributed to declining industry profit margins and undermined the governments goal of more orderly industry development. Small steel players will be forced to close or agree to M&A. Small players also impede progress on 5YP environmental targets. According to industry analysts, small steel mills are less energy-efficient and cause more pollution (per unit of production) than larger companies. Steel industry consolidation is a key initiative in the 5YP Chinas top 10 steel producers are expected to expand through M&A, will represent 60% of the countrys total steel output by 2015, up from 48%in 2010. A higher industry concentration is expected to I. Reduce over capacity II. Decrease pollution III. Strengthen bargaining position of Chinese steel companies in price negotiations for iron ore. The governments 5YP initiatives are consistent with the development policies for thr iron and steel industry released in 2005. This law already set in motion a wave of M&A, and aims to increase the output of the top 10 steel groups to 70% of the nations total by 2020. China plans to relocate steel companies to coastal regions, motivated largely by logistics costs

In the 5YP, the government intends to move its steel production to the coast and interior waterways; production based in these areas will represent 40% of the total output by 2015. Such regions include: 1. Caofeidian port in Hebei province. 2. Zhanjiang in Guangdong province. Cited reasons for altering the geographical distribution include: 1. Reducing logistics costs. 2. Environmental reasons.

Steel demand during the 5YP will be supported by housing construction and high end equipment manufacturing Steel sector growth is expected to slow to 5% to 6% annual growth, but steel is still an important part of the 5YP. The governments 5YP target of building 36 million units of affordable housing will help contribute to steel demand. Property and infrastructure are Chinas dominant steel users, accounting for over 50% of steel use.

Challenges and risks: In the event of energy shortages, heavily polluting and energy-incentive industries such as steel will be the first targets of energy rationing and shutdowns Steel company profit margins could remain under pressure, especially in the low-end steel segment. Annual growth forecasts ranging from 5% to 6% indicate a more challenging business environment for steel companies. Chinese companies seeking overseas acquisitions potentially face a politicized environment, underscoring the need to seek help from skilled advisers who can offer guidance concerning acquisitions. Government imposed mergers may result in M&A on paper, as companies try to appease government officials; but the lack of true consolidation means that planned efficiencies do not arise. Local governments may resist shutting down smaller steel companies as a means of eliminating overcapacity, especially since such companies are a source of tax revenue.

STEEL PRODUCTION IN JAPAN

Country Snapshot Japan is the worlds second largest steel producing country. Its production totaled 109 million metric tons of steel in 2010. Japan is among the worlds top three iron ore importers. The country accounted for about 12.8% of global iron ore shipments in 2010. Japan was the second largest exporter of steel in Asia in 2010. It exported 43 million metric tons of steel. Japans five major steel producers account for about 80% of the countrys steel production capacity. Most of their production bases are located near the Tokyo Bay, Osaka Bay, and Hakata Bay. Japan is home to the worlds second largest and sixth largest steelmakers and has an installed capacity of 132.4 million tons. International Market The significance of the Japanese steel industry is reflected by the steel imports of South Korea, China, Thailand, Taiwan, Indonesia, Singapore, and Malaysia. These seven countries imported 78 million metric tons of steel products in 2010, out of which steel products from Japan made up 31 million metric tons (about 40% of their total imports). Country South Korea China Thailand Taiwan Indonesia Japanese Steel Market Statistics (2010) Production: 109.6 million metric tons Exports: 43 million metric tons Consumption: 60 million metric tons The reconstruction of infrastructure in Japan will require a huge quantity of steel. Once the reconstruction process begins, much of the steel produced in Japan is expected to be directed towards reconstruction efforts. As a direct consequence, steel exports from Japan will decrease. The void which is expected to be left by the decrease in Japanese steel exports is likely to be filled by South Korean and Chinese steelmakers. South Koreas POSCO has already been requested by South Koreas leading ship makers to increase its production of steel by 600,000 metric tons to mitigate the risk of supply disruptions from Japan. Percentage of Imports from Japan 45% 47% 40% 44% 24%

Japan Raw Steel Output Decreases by 1.8% in 2011 Jan.23,2012 - Iron and steel Japanese raw steel output decreased by 1.8% to 107.6 million tonnes in 2011 from 2010, announced by Japan Iron and Steel Federation on Friday. The production decreased for the first time in 2 years while the production kept 100 million tonnes for 2 years in a row. Domestic integrated steel makers reduced the output under the major earthquake, historical high yen rate and Thai flood. Domestic electric furnace steel makers increased the output thanks to higher domestic demand. The converter steel output decreased by 3.5% to 82.74 million tonnes in 2011 from 2010. The electric furnace steel output decreased by 4.2% to 24.85 million tonnes. The electric furnace steel represented 23.1% of total output, which was 1.3 percentage points higher than 2010. The carbon steel output decreased by 2.0% to 83.2 million tonnes. The special steel output decreased by 1.1% to 24.39 million tonnes. The output of hot rolled steel products decreased by 3.0% to 94.82 million tonnes in 2011 from 2010. The output decreased by 3.6% to 74.5 million tonnes for carbon steel and by 0.9% to 20.32 million tonnes for special steel. The carbon steel hot rolled wide strip decreased by 6.8% to 42.66 million tonnes in 2011 from 2010. The output decreased by 0.9% to 12.31 million tonnes for plate while the output increased by 4.0% to 8.7 million tonnes for small bar and by 5.7% to 3.36 million tonnes for H-beam. The raw steel output decreased by 8.4% to 8.4 million tonnes in December from a year earlier. The daily output was 270,900 tonnes, which was 6.6% lower than November level. The monthly output decreased by 11.2% to 6.32 million tonnes for converter steel in December from a year earlier, which decreased for 4 months in a row, while the electric furnace steel output increased by 1.2% to 2.08 million tonnes, which increased for 6 months in a row. The monthly output decreased by 8.4% to 6.38 million tonnes for carbon steel in December from a year earlier, which decreased for 5 months in a row. The special steel output decreased by 8.6% to 2.01 million tonnes, which decreased for 2 months in a row. The monthly output of hot rolled steel products decreased by 9.7% to 7.38 million tonnes in December from a year earlier, which decreased for 10 months in a row. The output decreased by 9.9% to 5.73 million tonnes for carbon steel, which decreased for 10 months in a row. The special steel output decreased by 9.1% to 1.65 million tonnes, which decreased for the first time in 3 months. The output of carbon steel hot rolled wide strip decreased by 12.8% to 3.23 million tonnes in December from a year earlier, which decreased for 11 months in a row. The plate output decreased by 18.1% to 850,000 tonnes, which decreased for 6 months in a row. The small bar output increased by 4.0% to 740,000 tonnes, which increased for 6 months in a row. The H-beam output increased by 3.3% to 290,000 tonnes, which increased for 3 months in a row.

The quarterly raw steel output decreased by 3.9% to 26.57 million tonnes in October-December from same period of 2010. The output decreased by 6.3% to 20.01 million tonnes for converter steel while the electric furnace steel output increased by 3.9% to 6.56b million tonnes. Conclusion The substantial overcapacity in the Chinese steel industry, which has a surplus of 100 million metric tons, along with the excess capacity of South Korea will compensate for the potential decline in Japanese steel exports. In the short term, the import of steel products for the reconstruction of infrastructure is expected to increase in Japan. However, Japans steel capacity is expected to suffice and meet domestic demand in the medium term.

STEEL PRODUCTION IN USA

Early estimates from the American Iron and Steel Institute show that U.S. steel production rose 7.9 percent in 2011 compared to last year. In 2011, domestic steel mills produced an estimated 95.6 million tons of raw steel, compared to about 88.6 million tons in 2010, the Washington-based trade association for the North American steel industry said Tuesday. The group is expected to release final data later this month. Raw steel production in Indiana and the Chicago area, the nation's secondlargest steel-producing region, was 508,000 tons in the week that ended Saturday. Production was up from 494,000 tons the prior week. Although final calculations haven't been made, region steel mills typically produce more than a quarter of the country's total raw steel output. Production in the Southern District, the nation's largest steel-producing region, was estimated at 634,000 tons during the period that ended Saturday, up from 625,000 tons produced a week earlier. Domestic mills produced about 1.9 million tons of steel last week, up 12.8 percent from the same period in 2010. U.S. steel mills operated at 75.3 percent of the available production capacity last week, which is down from a 76.7 percent production rate a week earlier. Yearto-date estimates for 2011 said the industry had a 75 percent capacity utilization rate, which is up from slightly more than 70 percent in 2010. The American Iron and Steel Institute represents interests of the North American steel industry and its member companies represent about 80 percent of U.S. and North American steel production capacity.