India - Poland Economic and Commercial Relations

General Information

Poland has a population of about 39 million. It is the largest country in Central Europe and ranks 8^th in Europe by size of population and 9^th by area. Poland followed a centrally planned economy till 1989 and was the first country in Central and Eastern Europe to start economic reforms and transition from a command economy to market driven economy. As a result of the bold economic reforms carried out during the last decade, the foreign trade, which was a state monopoly till 1989, has been privatized and grown from US$14.9 billion in 1989 to $96.1 billion in 2002. The exports have been the main driving force for the country’s economic growth during the last few years. Poland is all set to join the European Union on 1^st May 2004.

Trade figures for the last four years is given below:

Although Poland is a much smaller country compared to India, its total trade turn-over is almost comparable to India’s. EU is the most important trading partner of Poland and dominates both Polish exports and import accounting for 66% of Poland’s trade. In 2002, 69.9% of Polish exports were directed to EU Member States and 61.1% of its imports came from EU countries. Poland’s main trading partner is Germany, which alone accounted for 24.3% of total Polish imports and 32.3% of its exports in 2002, followed by Italy, France, Russia, Great Britain, Netherlands, Belgium. China’s share in Poland’s imports has risen to 3.8% making it one of the ten largest exporting countries to Poland, while its share in imports is around 0.5% of Poland’s total exports. Except China, Poland’s trade with Asian countries is not substantial.

Motor vehicles, diesel or semi-diesel engines, machinery and transport equipment dominate both in Polish exports and imports. In exports, this is followed by furniture, ships, manufactured goods, garments, miscellaneous manufactured articles and agricultural and food products.

Indo-Polish Trade:

During Poland’s communist era, Indo Polish trade was ordered on the basis of annual trade protocols and the rupee clearing system and conducted by state trading organizations of both sides. The first Indo-Polish Rupee Trade and Payments Agreement was signed in November 1959 and was thereafter extended every 5 years until December 1990, when it was terminated at the request of the Polish side. After the termination of the clearing arrangements, a new Trade Agreement came into effect from January 1, 1990, providing for trade in convertible currency and for mutual extension of MFN status.

It has been India’s endeavour to overcome the transitional difficulties arising out of the systemic transformations in Eastern Europe and to resume trade growth with the countries of the region as quickly as possible. With Poland, several of the legal parameters necessary to provide a boost to trade and economic relations have been put into place. Both countries are members of WTO and extend MFN treatment to each other. Beside the Trade Agreement (January 1990), Agreements on Avoidance of Double Taxation (June 1989) and on Bilateral Protection of Investments (October 1996) have also been concluded. New interactions and linkages have been established following exchange of Presidential visits during the recent past as well as the visit of Poland’s P.M. Mr. Miller to India in February 2003, which included prominent business delegations. These efforts have led to a substantial revival of economic contacts with Poland.

The figures for Indo-Polish trade for the last four years are given below:

India-Poland Trade

Source: Central Statistical Agency of Poland

It is seen that Indo-Polish trade has more than doubled between 1992 and 2002, with Indian exports showing a 184% increase to US$183 million and the figures are likely to touch US$ 225 million in 2003. It may also be mentioned that these figures conceal significant under-reporting of our actual exports to Poland. As part of its Association Agreement with the EU, Poland has opened its market to, and entered into duty-free arrangements with, the EU economies since March 1992. Consequently, large quantities of Indian items are being imported into Poland by multinational companies, international corporations and hypermarket chains through their centralized buying agencies in Westen Europe. Moreover, because of the lack of direct shipping and air links between India and Poland, even smaller importers find it cheaper and easier to source Indian goods through entrepot destinations like Dubai or West Germany. The lead times for delivery are lower, delivery schedules are more flexible and freight and insurance costs are lower as compared to direct imports.

The profile of India’s export basket to Poland is fairly diversified. Our major exports have been bulk tea, coffee, unmanufactured tobacco, de-oiled cakes, black pepper, cotton yarn, cotton textiles, made-ups and apparel, jute manufactures, pharmaceutical and chemical, light engineering products like hand tools and consumer electronics and some machinery items like machine tools and textile machinery.

Imports from India are subject to MFN tariffs and Poland’s MFN rates on the industrial products are generally higher than the EU’s common import tariff rates. General System of Preferences (GSP) concession is unilateral, product-specific and, therefore, available on a limited number of products. The Free Trade Agreements, under which Poland grants substantial tariff concessions to the countries concerned, ultimately impinge on India’s exports to Poland as well as to these other European countries and erode our competitiveness in these markets. Tariffs on imports of industrial and agricultural products from other countries, including India, are high compared to those from the EU. This is a disadvantage shared by all non-European exporters to Poland. Consequent on Poland’s entry into EU in 2004, Poland will adopt EU’s common customs tariff and GSP, which are likely to benefit imports from India. Presently, there are no restrictions or quotas on imports from India.

Source: Indian High Commission, Poland