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IJM
IAEME

INDIA TRADE AFTER LIBERALIZATION- AUTO AND AUTO COMPONENTS- AN OVERVIEW

Dr.C.Chitra, Assistant Professor of Economics, Chellammal Womens College, Guindy, Chennai- 600032, email: chandrasekarchitra52@gmail.com

Abstract
The automotive sector, comprising of the automobile and auto component sub sectors, is one of the key segments of the economy having extensive forward and backward linkages with other key segments of the economy. Under a free trade policy,
prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from those which would emerge under deregulation. These governed prices are the result of government intervention in the market through price adjustments or supply restrictions, including protectionist policies. Such government interventions can increase as well as decrease the cost of goods and services to both consumers and producers. This paper studies an over view of challenges and their findings.

Keywords: free trade, trade liberalization, fair trade, WTO

1.0 Introduction
The automotive sector contributes about 4 per cent in India's Gross Domestic Product (GDP) and 5 per cent in India's industrial production. The well-developed Indian automotive industry ably fulfils this catalytic role by producing a wide variety of vehicles like passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc. The auto component industry, which is an important part of automotive sector, comprises about 500 firms in the organized sector and more than 10,000 firms in the small and unorganized sector has been one of the fastest growing segments of Indian manufacturing. It has the capability to manufacture the entire range of auto parts and has
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rapidly added to its capacity base. Indian auto components industry has an important place at the global level. Trade Liberalization The removal or reduction of restrictions or barriers on the free exchange of goods between nations. This includes the removal or reduction of both tariff (duties and surcharges) and non-tariff obstacles (like licensing rules, quotas and other requirements). The easing or eradication of these restrictions is often referred to as promoting "free trade."Free trade is a policy by which a government does not discriminate against imports or
interfere with exports by applying tariffs (to imports) or subsidies (to exports). According to the law of comparative advantage policy permits trading partners mutual gains from trade of goods and services.

Since the mid-20th century, nations have increasingly reduced tariff barriers and currency restrictions on international trade. Other barriers, however, that may be equally effective in hindering trade include import quotas, taxes, and diverse means of subsidizing domestic industries. Interventions include subsidies, taxes and tariffs, non tariffs barriers, such as regulatory legislation and quotas, and even inter-government managed trade agreements such as the North American Free Trade Agreement (NAFTA) and Central America Free Trade Agreement (CAFTA) (contrary to their formal titles) and any governmental market intervention resulting in artificial prices. A trade restriction is an artificial restriction on the trade of goods between two countries. It is the result of protectionism. However, the term is not uncontroversial since what one part may see as a trade restriction another may see as a way to protect consumers from inferior, harmful or dangerous products. For instance Germany required the production of beer to adhere to its purity law. The law, originally implemented in Bavaria in 1516 and eventually becoming law for newly unified Germany in 1871, made many foreign beers unable to be sold in Germany as "beer". This law was struck down in 1987 by the European Court of Justice, but is still voluntarily followed by many German breweries. The World Trade Organization (WTO) is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments. Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries to make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards. Exports from developing countries to developed countries, most
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notably handicrafts, coffee, cocoa, sugar, tea, bananas, honey, cotton, wine, fresh fruit, ch ocolate, flowers and gold.

2.0 The Future Challenges

1. The future challenges for Indian automobile industry would be to develop a supply base with emphasis on lower costs and economics of scale, develop technical and human capabilities, overcome infrastructural bottlenecks, stimuli domestic demand and exploit export and international business opportunities. The key to success is to achieve the critical mass that would make India competitive ad profitable for sustained investments. Keeping these in view the indentified challenges and interventions are in the areas of competiveness in manufacturing and flow of technology, demand, brand building and infrastructure, export and intentional business, environmental and safety standards, and human resources development. 1. In 2008, products certified with FLO International's Fair-trade certification amounted to approximately US$4.98 billion worldwide, a 22% yearto-year increase. While this represents a tiny fraction of world trade in physical merchandise, some fair trade products account for 20-50% of all sales in their product categories in individual countries. 2. In June 2008, Fair-trade Labeling Organizations International estimated that over 7.5 million producers and their families were benefiting from fair trade funded infrastructure, technical assistance and community development projects.

2. 3.

3.0 Findings

4.0 Conclusion
The automotive industry also promises significant employment opportunities. Large no of workers, both skilled and unskilled will be required to sustain increased level of production.

5.0 References
1. Stearns, Peter N.; William L. Langer (24 September 2001). The Encyclopedia of World History: Ancient, Medieval, and Modern, Chronologically Arranged. Houghton Mifflin Company. ISBN 0-395-65237-5. 2. Rawlinson, Hugh George (2001). Intercourse between India and the Western World: From the Earliest Times of the fall of Rome. Asian Educational Services. ISBN 8120615492. 3. Shaw, Ian (2003). The Oxford History of Ancient Egypt. Oxford University Press. ISBN 0192804588. 4. Languages, Documentation and Information Management Division at WTO official site. 5. "WTO Secretariat budget for 2011". WTO official site. Retrieved 2008-08-25.

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6. Overview of the WTO Secretariat (2011) at WTO official site. All WTO staff is based in Geneva. 7. Understanding the WTO what is the World Trade Organization?, WTO official site 8. Malanczuk, P. (1999). "World Trade Organization".Encyclopaedia Britannica. 442. 305. Bibcode1999ESASP.442.305M. 9. P. van den Bossche, The Law and Policy of the World Trade Organization, 80 10. Palmeter-Mavroidis, Dispute Settlement, 2 11. Jacquiau, C. (2006). Les Coulisees du Commerce quitable. Paris: Mille et Une Nuits: Jacquiau, C. (2007, September). Max Havelaar ou les ambiguts du commerce quitable: Pourquoi le Sud rue dans les brancards. Monde Diplomatique .
12. Krishna, Pravin & Mitra, Devashish, 1998. "Trade liberalization, market discipline and productivity growth: new evidence from India," Journal of Development Economics, Elsevier, vol. 56(2), pages 447-462, August. 13. Pravin Krishna & Devashish Mitra,. "Trade Liberalization, Market Discipline and Productivity Growth: New Evidence from India," Working Papers 96-8, Brown University, Department of Economics.

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