25 India‟s Economic Foreign Policy

Dr. Suresh Dhanda

Structure of the Module

1. Introduction

2. Objectives

3. India‟s Economic Foreign Policy

3.1. Determinants of India‟s Economic Foreign Policy

3.1.1.  Domestic Determinants

3.1.2.  International Determinants

3.2. Foreign Economic Aid

3.2.1. Objectives of Foreign Aid

3.2.2. Leading Aid Donors to India

3.3. Foreign Trade

3.3.1. Features of India‟s Foreign Trade

3.3.2. Performance of India‟s Foreign Trade

3.4. Demand for New International Economic Order

3.4.1. Objectives of the NIEO

3.4.2. India‟s Role in Demand for NIEO

3.5. Role of India in International Economic Organizations

4. Conclusion

5. Important Questions

6. Suggested Readings

1.  Introduction

Economic development is one of the important objectives of India‟s economic foreign policy. Hence, it becomes imperative to study its economic policy to understand its foreign policy in detail. It is essential to execute its economic policies for India to achieve the objectives of its foreign policy. As Nehru said that finally foreign policy emerges out of economic policy. So India is focussing strongly on the issues of economic importance. As part of its development initiative, India has stopped the practice of receiving aid from other countries except from a select few. India has written off the debts of some poor countries and has decided to increase its aid to other developing countries. The new paradigm shift and economic strength needs to be translated into strategic global influence. This has become part of India‟s economic foreign policy. The Ministry of External Affairs (MEA) is projecting India as an Emerging Economic Power among media, foreign investors, businessmen, think tanks and foreign governments through regular publicity and through speeches and interactions. India is attempting to boost its economy through multilateral trade and economic negotiations and regional and bilateral trade agreements. India, like other countries of the world, is signing Free Trade Agreements and Preferential Trade Agreements with other countries and trade groups for market access and greater economic clout. As part of its economic diplomacy, India is engaging its Diaspora also. The Ministry of External Affairs and the Indian Missions are working with the Commerce ministry and export bodies in the FOCUS-Latin America, FOCUS-Africa and FOCUS-CIS programmes for export promotion.

2. Objectives

This module will apprise the readers about the various dimensions of India‟s foreign economic policy. India‟s foreign economic policy is influenced by various internal and international factors. India has adopted a multilateral approach to achieve the objectives of its foreign economic policy. This module will emphasize on the issues of Foreign Economic Aid (received and granted by India) and Foreign Trade of India with other countries. Role of India for the Demand of New International Economic Order will also be analysed in this module. The role of India in various international economic/financial institutions like GATT, WTO, World Bank, IMF etc will also be examined in this module. Finally, important questions and suggested readings are also included in the module.

3.  India’s Economic Foreign Policy

Economic foreign policy of India can be studied under the following heads: (1) Determinants of India‟s Economic Foreign Policy; (2) Foreign Economic Aid; (3) Foreign Trade; (4) Demand for New International Economic Order; and (5) Role of India in International Economic Organizations.

3.1. Determinants of India’s Economic Foreign Policy

These determinants can be classified into two categories: (1) Domestic Determinants; and (2) International Determinants.

3.1.1. Domestic Determinants

a)  Colonial Legacy: India has been influenced at conceptual, behavioural and institutional levels by the policies of England for many years after the independence due to its dependency on England in case of trade and institutional policies. This process started to reduce after the decade of 1960. But still there exist a kind of intellectual dependency as a result of colonial legacy which reflects in India‟s policies towards developing countries.

b)   Nature of Economic System: India has adopted a mixed economy. Consequently it has been willing to establish its relations with both kinds of nations (capitalists and socialists) in the fields of trade, capital investment, joint ventures etc. It has both public and private ownership of means of production.

c)   Compulsions of Economic Development of a Developing Country: India is a developing country with huge population, large size and numerous resources. Its economy is rural and traditional. India has to do various efforts to make its traditional economy modern. It needs economic, technical and industrial aid to change this traditional system. It has to conduct a foreign economic policy to remove all the hurdles coming in the way of a developing country for economic development.

d) Nature and Characteristics of Foreign Trade Policy: All exports and import-related activities are governed by the Foreign Trade Policy (FTP), which is mainly aimed at enhancing the country’s exports and use trade expansion as an effective instrument of economic growth and employment generation. As part of the FTP strategy of market expansion, India has signed various Agreements with both developed and developing countries which will give enhanced market access to Indian exports. To upgrade export sector infrastructure, „Towns of Export Excellence‟ and units located therein will be granted additional focused support and incentives. The Reserve Bank of India (RBI) has simplified the rules for credit to exporters, by which they can now get long-term advance from banks for up to 10 years to service their contracts. This measure will help exporters get into long-term contracts. It will also aid the overall export performance and help the rupee in the short to medium term.

3.1.2. International Determinants

a)   India’s Place in World Economy: India‟s share in world economy is negligible. As per the data of 1950-51, it was just 2 percent which reduced to 0.5 percent during the years 1975-76. Even in the later years, no significant change was visualized in the situation. This share was 0.4 percent in 1980; 0.5 percent in 1985; 0.6 percent in 1990; again 0.6 in 1992; and 0.7 in 1998. However, this situation is improving gradually after the adoption of open economy in 1991, yet India has to realize its full potential as a leading global economy. The rapid economic growth that India has witnessed since the mid-1990s was ushered in by much-needed reforms. After being criticized by economists for its low rate of growth, India finally earned a place among the world‟s leading emerging markets. India affects the world economy mainly in two ways: – a) India has a status of an important possible exporter for world. India has a capability to export technique, machinery and computers (both hardware and software) along with other raw and finished material; and b) India is also a large consumer market. It falls on the 2nd place after China among top 10 consumer markets in the world. Hence, India will play an important role in the world economy in the context of above two scenarios in the coming years.

b) International Economic Environment: International economic environment always influences the foreign economic policy of a country. And India is no exception to this. During the cold war period, India had to adjust its foreign economic policy according to the both the ideologies— capitalism and socialism. Consequently, it adopted a mixed economy. During that period, India had to conduct its economic policy in accordance with the international economic institutions like World Bank, IMF and GATT etc. End of the cold war led to the three important economic changes in the world— decreasing importance of political issues and increasing importance of economic issues; end of idealism and rise of realism; and liberalization, privatization and globalization of economy. Keeping in view these changes, India has also changed its foreign economic policy. It strengthened its relations with economically developed countries even after the existence of political problems. For example it developed relations with China and America. Further, India adopted the realistic approach and participated in post-cold war economic institutions like WTO, SAFTA, ASEAN etc. Hence, it may be said that India made certain changes in its foreign economic policy in accordance with internal economic environment.

c) Capital Investment and Multi-National Companies: There was a great opposition to multi-national companies (MNCs) in India before 1991. Even the laws like FERA (Foreign Exchange Regulation Act) were framed in India to stop the bad effects of multi-national companies in India. But as a result of economic reforms of 1991, the situation turned opposite. A number of multi-national companies started to show interest in the Indian market. It is obvious that foreign companies come and settle in India to earn profit. As India has a wide market for different and new goods and services due to its increasing population and varying consumer taste, MNCs find it as a resourceful nation. Besides that, India‟s foreign directive policies, labour competitive market, market competition and macro-economic stability are some of the key factors that magnetise MNCs towards India. In turn, India also derives a lot of benefits from MNCs such as higher level of investment, reduction in technological gap, optimum utilization of natural resources, reduction in foreign exchange gap and boost to basic economic structure. But roses do not come without thorns. So there are certain disadvantages of having MNCs in a developing country like India i.e., competition to small scale industries, increased pollution and environmental hazards, improper diffusion of profits and Forex imbalance, slow decision making and sometimes economic distress.

So, it is quite obvious that economic issues are gaining more importance on political issues day by day in the world affairs. There are various domestic and international factors which influence the decisions and conduct of foreign economic policy of India. India has to conduct its economic diplomacy by keeping in view all the above factors to reap the maximum benefits.

3.2. Foreign Economic Aid

Foreign aid is considered as an important ingredient for financing the developmental programs of the developing countries. Currently, it is considered as an important instrument of the foreign policy of states. It acts as a major source of foreign exchange earnings for developing countries. After World War II, developed economies have been providing hundred billions of dollars in terms of foreign aid to the developing world with a welfare motive. Even before the First World War, foreign aid was used as a profitable investment. However, it was only in the post-war period that the flow of foreign aid began in a planned way, when developed Western countries started contributing primarily for the development of infrastructure, alleviation of poverty, emergency relief, peace -keeping efforts and socioeconomic reconstruction programs of their war allies.

3.2.1. Objectives of Foreign Aid

There are a number of objectives which aid can contribute to die process of economic growth.

These may be followings:

• Aid stimulates investment in both physical and human capital.
• Aid act as a supplement to the scarce domestic resources and acts as a major source of foreign exchange earnings.
• Aid increases the capacity to import necessary capital goods and technology.
• Aid helps to raise the productivity of both capital and labour through technological transfersand also promotes indigenous technical change.
• Aid also brings other crucial resources for development such as managerial skills, organizational capability, research ideas and market access.

It also helps the underdeveloped economies in filing three major gaps; a) saving-investment gap; b) export-import gap; and c) technological knowhow gap.

At the same time huge amount of external assistance inflows may create threat for large amount of external debt burden in the long run to developing economies. The extent to which foreign aid can be a decisive factor in the economic development of developing economies remains controversial. Many countries in the world accept foreign aid and get different benefits along with a few adverse results

3.2.2. Leading Aid Donors to India

In 2012, the United Kingdom disbursed $180 million in foreign aid to India which was until recently the U.K. Department for International Development‟s second largest bilateral program. Toward the end of last year, however, U.K. Secretary of State for International Development, Justine Greening announced that the United Kingdom would be ending all grant-based assistance to India by 2015, citing the country‟s rapid growth and development progress. World Bank also disbursed $1.1 billion to India in 2012 and became India‟s largest donor. In 2012, Japan disbursed $747 million in assistance to India, maintaining its position as the South Asian country‟s largest bilateral donor. That year, the Japan International Cooperation Agency committed to financing six infrastructure projects in India, including the construction of transmission lines and substations in the state of Tamil Nadu. In 2012, Germany committed 565.8 million Euros ($736.2 million) in financial and technical assistance to India, up from 517.7 million Euros in 2011. During 2012, Asian Development Bank disbursed $726 million in lending to India, including $74.8 million to improve and upgrade roads in India‟s northeastern states. In 2012, France committed $160 million in assistance to India, including $67 million for infrastructure and livelihood support in Assam state. Among its peer donors in India, the U.S. Agency for International Development stands out for its emphasis on robust engagement with India as a strategic partner in global development, rather than an aid recipient. USAID has identified health, agriculture and energy as priority sectors for its funding of innovative development interventions in India. It has also indicated that the Obama administration will continue to allocate roughly $100 million in foreign assistance to India each year. For 2011-2013, the EU had committed a total of 210 million Euros in assistance to India. The EU set aside 100-130 million Euros of that amount for education assistance, as well as 50 million Euros for health assistance.

3.3. Foreign Trade

All exports and import-related activities are governed by the Foreign Trade Policy (FTP), which is mainly aimed at enhancing the country’s exports and use trade expansion as an effective instrument of economic growth and employment generation.

3.3.1. Features of India’s Foreign Trade

India‟s Foreign Trade policy has the following features:

• India has negative or unfavorable trade. Its exports could not keep pace with its imports.
• Great diversity has been observed in India‟s export commodities during the last few years. India now exports over 7,500 commodities. Since 1991, India has emerged as a major exporter of computer software and that too to some of the advanced countries like the USA and Japan.
• Now India has trade links with almost all the regions of the world. India exports its goods to as many as 190 countries and imports from 140 countries.
• Earlier India used to import food-grains and manufactured goods only. But now oil is the largest single commodity imported by India. Both the imports as well as exports of pearls and precious stones have increased considerably during the last few years. Its other important commodities of import are iron and steel, fertilizers, edible oils and paper.
• About 95 per cent of India‟s foreign trade is done through sea routes.
• India has only 12 major ports along the coast of India which handle about 90 per cent overseas trade of India.
• Although India has about 16 per cent of the world‟s population, its share in the world overseas trade is less than one per cent. This shows the insignificant place of India in the world‟s overseas trade.
• Most of India‟s overseas trade is done in public sector by state agencies and very little trade is done by individuals.

3.3.2. Performance of India’s Foreign Trade

India‟s merchandise exports reached a level of US $ 251.14 billion during 2010-11 registering a growth of 40.49 percent as compared to a negative growth of 3.53 percent during the previous year. India‟s export sector has exhibited remarkable resilience and dynamism in the recent years. Despite the recent setback faced by India‟s export sector due to global slowdown, merchandise exports recorded a Compound Annual Growth Rate (CAGR) of 20.0 per cent from 2004-05 to 2010-11. Exports recorded a growth of 40.49 per cent during April-March 2010-11. The Government has set an export target of US $ 300 billion for 2011-12. With merchandise exports reaching US $ 217.66 billion in 2011-12(April-December), the exports target of 300 US $ billion is expected to be achieved. Cumulative value of imports during 2011-12 (April-December) was US $ 350.94 billion as against US $ 269.18 billion during the corresponding period of the previous year registering a growth of 30.4 per cent in $ terms. Oil imports were valued at US $ 105.6 billion during 2011-12 (April-December) which was 40.39 per cent higher than oil imports valued US $ 75.2 billion in the corresponding period of previous year. Non-oil imports were valued at US $ 245.3. The Trade deficit in 2011-12 (April-December) was estimated at US $ 133.27 billion which was higher than the deficit of US $ 96.21 billion during 2010-11 (April-December).

3.4. Demand for New International Economic Order

The demand for a just and fair economic order was first made in 1973.It was later formally resolved by the sixth special session of the United Nations General Assembly,in1974,to call for the establishment of New International Economic Order (NIEO). The demand for a new international economic order is being made to correct the global economic imbalance and establish equality. NIEO seeks more favorable conditions of trade for the developing countries.

NIEO is to be based on “equity, sovereign equality, common interest and co-operation among all States, irrespective of their social and economic systems, which shall correct inequalities and redress existing injustices, make it possible to eliminate the widening gap between the developed and the developing countries and ensure steadily accelerating economic and social development and peace and justice for present and future generations.”

3.4.1. Objectives of the NIEO

• NIEO aims at social justice among the trading countries of the world.
• It seeks restructuring of existing institutions and forming new organizations to regulate the flow of trade, technology, capital funds in the common interest of the world‟s global economy and due benefits in favor of the LDCs.
• It has the spirit of a „world without borders.‟
• It suggests more equitable allocation of world‟s resources through increased flow of aid from the rich nations to the poor countries.
• It seeks to overcome world mass misery and alarming disparities between the living conditions of the rich and poor in the world as large.
• Its aim is to provide poor nations increased participation and have their say in the decision-making processes in international affairs.
• It envisages the establishment of a new international currency, the implementation of SDR aid linkage, the increased stabilization of international floating exchange system and the use of IMF funds as interest subsidy on loans to the poorest developing countries.
• Its crucial aim is to promote economic development among the poor countries through self- help and South-South co-operation.
• It intends to deal with the major problems of the South, such as balance of payments disequilibrium, debt crisis, exchange scarcity etc.

3.4.2. India’s Role in Demand for NIEO

India has always been doing efforts for the need of NIEO as a means of achieving socio-economic development and acquiring of proper rights through UN, NAM, summits of Third World Countries, Afro-Asian Solidarity Conferences and other diplomatic methods. India‟s role for demand of NIEO can be assessed in the following points:

1. The then foreign minister of India, Swaran Singh, participated in the sixth UN special session in 1974 and suggested various provisions to address the needs of developing countries. He advocated for equal rights of all the nations to cast vote their votes in IMF and other international financial institutions. He stressed on the need of foreign capital and provision of financial and technical assistance for the developing countries.
2. The then foreign minister of India, Y.B.Chavan, participated in the seventh special session of UN General Assembly in 1975 and put forward certain suggestions to establish new international economic order. He said that there should be expansion and diversification of trade, improvement of productivity and increase of the export earnings of the developing nations. He advocated for the reduction or removal of tariff and non-tariff barriers affecting the exports of the developing countries.
3. During a conference of UNCTAD-IV at Nairobi in 1976 India helped in improving the markets for international trade for the goods of developing countries. Under this programme the list of 10 goods was approved in which tea and jute were the main goods of India‟s interests.
4. The then Prime Minister of India Morarji Desai said on 11th June 1978 during a meeting of Commonwealth Club of California that “The road to NIEO may be rough, torturous and long but it must not be allowed to become a mirage. It is here that countries like the USA have a crucial role to play by giving the lead in the implementation of various decisions aimed at eradicating the poverty and want from the earth”.
5. India has been active for NIEO through the activities of GATT and WTO. India has been member of GATT since its execution on 1st January 1948. Nine rounds of talks have been completed since 1949. India has been associated with these rounds of talks from the very beginning. India has raised the voice of developing countries during these talks. India reacted even on Dunkel proposals from the angle of developing countries. But ultimately, WTO replaced the GATT after Uruguay rounds. Now, India has to fight for the rights of developing countries under the provisions of WTO.
6. Seven main summits were held under the authority of UNCTAD. These were Geneva (1964), New Delhi (1968), Santiago (1972), Nairobi (1976), Manila (1979), Paris (1981) and Geneva (1987). India, individually and collectively, played an important role during these summits for the interests of developing countries.
7. India is also playing a strong role through „North-South‟ and South-South‟ cooperation to increase the trade between developing and developed countries. For example, during Cancun summit in 1981, India demanded for improvement in the position of World Bank and IMF to improve the North-South cooperation.
8. Third world countries formed the group of 15 countries (G-15) on 1st June 1990 to put forward the demand for New International Economic Order. India is also a member of this group. Six meetings were held of this group from 1990 to 1996. These meetings were held prior the formation of WTO during the talks on “Uruguay Rounds” and “Dunkel Proposals. The main purpose of these meetings was to protect the interests of developing countries. India has been a prominent actor during these meetings.
9. Developing countries have also formed a group of 24 countries (G-24) to protect their interests in World Bank and IMF. India is also a member of this group. These countries fight to remove the anomalies prevailed in these institutions like World Bank and IMF. Besides, they advocate the economic interests of third world countries also. Indirectly, India has constantly been demanding for internal reforms in Breton wood model through G-24.

Hence, it is clear that India and other developing countries have been doing sincere efforts for NIEO since the decade of 1970. But nothing concrete could be achieved. During the cold war period, India played an important role in this direction through various organizations and fronts. This situation became more complex after 1991. The overall situation is not hopeful for developing countries. At present, India is also not in a very strong position. Rather, it is involved in the programmes of economic reforms under the pressure of World Bank and IMF.

3.5. Role of India in International Economic Organizations

To know the India‟s foreign economic policy, it is essential to understand its role in International economic/financial organizations. In this regard, India‟s role can be analyzed in the following organizations: – (1) IBRD/World Bank/IDA; (2) IMF; (3) GATT; and (4) WTO.

1.  India and IBRD/World Bank/IDA: India is a member of four of the five constituents of the World Bank Group i.e., International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA). In June 1944, India was one of the 44 countries which signed the final agreement that established the World Bank. In fact, the name “International Bank for Reconstruction and Development” (IBRD) was suggested by India and later India suggested the establishment of the International Development Association (IDA) – the World Bank‟s soft-loan (interest-free loan) affiliate. India has been accessing funds from the World Bank (mainly through IBRD and IDA) for various development projects. India is one of the founder members of IBRD, IDA and IFC. World Bank assistance in India started from 1948 when a funding for Agricultural Machinery Project was approved. World Bank resident mission was established in India in 1957. In August 1958, the first meeting of the Aid India Consortium was held at Washington DC under the aegis of the World Bank. First investment of IFC in India took place in 1959 with US$ 1.5 million. India became a member of MIGA in January 1994.

The total assistance extended by IBRD by way of loans to India was US$ 39075.96 million as on 31 December, 2010. During the period from 1 January, 2011 to 31 December, 2011, new commitments of US$ 3049 million were approved taking total assistance to US$ 42124.96 million as on 31 December, 2011. The main sectors for which IBRD assistance of US$ 3049 million has been provided are roads & highways, energy, urban infrastructure (including water & sanitation), rural credit, disaster management and the financial services sector.

The total assistance extended by IDA by way of credits to India for which agreements were signed was US$ 37,299.16 million as on 31 December, 2010. During the period from 1 January, 2011 to 31 December, 2011, new commitments of US$ 2,207.34 million were approved taking that assistance to US$ 39,506.5 million as on 31 December 2011. The major sectors of IDA assistance is provided are health, education, agriculture and poverty reduction sectors.

2. India and IMF: International Monetary Fund (IMF) is an administrative unit that is international in nature and whose objective is to regulate and administer the financial system of the world. The IMF does this by observing the payments balance and exchange rates of the world. International Monetary Fund also offers technical and financial help to the member nations. Its head office is in Washington D.C, USA.

India and the IMF have a positive relationship. The IMF has provided financial assistance to India, which has helped in boosting the country’s economy. The IMF praised the country for it was able to avoid the Asian Financial Crisis in 1999 and was also able to maintain the average rate of growth of its economy. The Managing Director of International Monetary Fund, Rodrigo De Rato, visited India in May 2005. In 2005, the IMF said that the budget of India is very positive for it points that the economy of the country will grow at the rate of 6.7%. International Monetary Fund said that the reasons behind the economy growth of India are that the RBI has been able to control inflation and has also handled its monetary policies very skillfully. The IMF has suggested that India can become a financial super power by bringing in more reforms in its economic policies that will increase its growth rate to 8%.

3.    India and GATT: GATT was established in 1947 in order to set up International Trade Organization (ITO), which was to regulate world trade. GATT was the result of an international conference held at Geneva in 1947 to consider a draft charter for the International Trade Organization (ITO). The US initiated negotiations with 22 other countries that led to commitments to regulate 45,000 tariff rates.Technically, GATT was viewed as an agreement under the provisions of US Reciprocal Trade Act of 1934, and hence did not require approval of Congress. It was considered a provisional agreement that would be replaced once the ITO became operational to take over its functions. So GATT began its provisional existence on January 1, 1948, when 23 contracting parties signed the agreement. However, US Congress refused in 1950 to ratify the treaty establishing the ITO.

India participated in all the tariff negotiations conducted at its past conferences and has been a signatory to the GAT T from .the very beginning . The concessions granted and received by India cover about one fifth of our foreign trade. Among the articles on which India received tariff concessions from other countries are jute raw, hessian cloth, mica, coir goods, lac, cashewnuts, cardamoms, ginger, tea, castor oil, linseed oil, jute bags and sacks, tobacco unmanufactured and essential oils. In return, India granted concessions on a number of articles, including canned fruits and vegetables, motor Cars and parts, ball and roller bearings, dairy products, tallow, lithopone, coaltar dyes, toilet goods, chemicals, drugs and medicines, several types of machinery, nitrate of soda, fountain pens, ribbons, cigarette paper, electric bulbs, for torches and automobiles, stoves, safety razors and blades, refrigerators, typewriters, ploughs, tractors, staple fibre, wireless apparatus, etc. Under the provisions of the Charter, India is committed to a progressive reduction of quantitative restrictions, to their non-discriminatory application and to a process of consultation with GAT T on the continued application of import restrictions. Some restrictions are, however, permissible, under certain conditions, in the interests of economic development.

4.   India and WTO: India is a founder member of the General Agreement on Tariffs and Trade (GATT) 1947 and its successor, the World Trade Organization (WTO), which came into effect on 1.1.95 after the conclusion of the Uruguay Round (UR) of Multilateral Trade Negotiations. India’s participation in an increasingly rule based system in the governance of international trade is to ensure more stability and predictability, which ultimately would lead to more trade and prosperity for itself and the 149 other nations which now comprise the WTO. India also automatically avails of MFN and national treatment for its exports to all WTO members. According to the WTO Secretariat Report, along with the policy statement by the Government of India, India is expected to snatch most of the business deals that are presently catering the developed nations which includes major service based industries like telecom, financial services, infrastructure services such as transport and power. The increase in availability and reduction in tariffs has prompted many developed nations to go for business with India especially in IT industry. If the trend continues then by 2025, India is expected to cater to the software and services demands of major giants of the business world. Analyzing the present relationship with the promising economic growth of India, one can be sure that India is going to enjoy a very candid and bright relationship with WTO and associated member nations by 2025. But at the same time, there are some issues on which India has expressed certain reservations. These are:

• During the implementation of WTO agreements, India has experienced certain imbalances and inequities in the WTO agreements. It is found that some developed countries have not fulfilled their obligations in letter and spirit of the WTO agreements, and many of the Special and Differential Treatment clauses, in favour of developing countries, added in various WTO agreements have remained in operational.
• Taking advantage of the exception clauses provided in the WTO, most industrialized countries are still enforcing various regulations on foreign producers and suppliers.
• Extending the scope of the investment regime in WTO beyond Trade Related Investment Measures and General Agreements on Trade in Services is not appropriate.

• A multilateral framework cannot guarantee an increase in FDI inflows although it threatens to adversely affect the quality of the inflows.
• There are also other asymmetries present, as the WTO does not address the responsibilities of corporations which often impose trade restrictive clauses on their subsidiaries.
• WTO has not been able to ensure abolition of non-trade barriers being imposed on labour and environmental considerations, including the linkage in certain Generalized System of Preferences (GSP) schemes to these issues.

But even after these reservations, India is an active participant in all the activities of WTO. India needs to stress and raise its concerns continuously during the negotiations of WTO on various issues to mould them in the favour of developing countries.

4. Conclusion

It is important for India to execute its economic policies with full force and utmost care to achieve the objectives of foreign policy as it is true that foreign policy comes out of economic policy. India‟s foreign economic policy is influenced by various internal and international factors. India has adopted a multilateral approach to achieve the objectives of its foreign economic policy. It is receiving Foreign Economic Aid from various developed countries including USA and World Bank. India is also seriously engaged in enhancing its Foreign Trade with various countries of the world. Simultaneously, it has always been at the forefront for the Demand of New International Economic Order for developing countries. It has raised many issues and concerns of third world countries on international fore. To strengthen its economic position, it is playing a crucial role in various international economic institutions. India is a founder member of the General Agreement on Tariffs and Trade (GATT) 1947 and its successor, the World Trade Organization (WTO), which came into effect on 1.1.95 after the conclusion of the Uruguay Round (UR) of Multilateral Trade Negotiations. It is also a member of four of the five constituents of the World Bank Group i.e., International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA). In June 1944, India was one of the 44 countries which signed the final agreement that established the World Bank. India is playing an effective role in all these international economic/financial institutions to strengthen its economic position in the world and to execute its foreign economic policy in an efficient way.