Managerial Economics

Gains From Trade

MMS-AGroup 10

Roll Number Group Members

1 Aanchal Seksaria

6 Antara Maity

21 Mandar Pawar

25 Mitali Barbhaya

35 Priyanka Mishra

54 Sunil Tiwari

INTRODUCTION

TRADING BLOC: EUROPEAN UNION

The European Union (EU) is a politico-economic union of 28 member states that are primarily located in Europe.

The EU operates through a system of supranational independent institutions and intergovernmental negotiated decisions by the member states. Institutions of the EU include the European Commission, the Council of the European Union, the European Council, the Court of Justice of the European Union, the European Central Bank, the Court of Auditors, and the European Parliament.

The European Parliament is elected every five years by EU citizen.

Indo- Italy Trade Relations

Italy comes in the fifth position in the EU when it comes to trade with India and also with regards to investment; Italy is on the 13th position.

Bilateral trade between India and Italy has registered an increase over the last many years.

India's exports to Italy deal mainly in textiles, including cotton and synthetic yarns and fabrics, readymade garments, motor vehicles, footwear, iron and steel, leather and leather goods and many other items.

Export of items between India and Italy

Wearing apparel

Motor Vehicles

Footwear

Textile Products

Refined Petroleum Products

General purpose machinery

Textile yarn and thread

Leather and leather products

Items imported from Italy by India

Basic iron and steel and ferro-alloys

Leather and leather products

Cutlery, tools and general hardware

Plastic products

TEXTILE INDUSTRY

• The textile sector is the second largest provider of employment after agriculture.

• Indian textile industry largely depends upon the textile manufacturing and export.

• The sector contributes about 14 per cent to industrial production, 4 per cent to the gross domestic product (GDP), and 27 per cent to the country's foreign exchange inflows.

TRADE AGREEMENT

• The Multi-Fiber Arrangement (MFA) has governed international trade in textiles and clothing since 1974.

• The Agreement on Textiles and Clothing provided for the gradual dismantling of the quotas that existed under the MFA.

FIRMS SELECTED:

ERMENEGILDO ZEGNA - ITALY

DONEAR - INDIA

Donear - India

• Donear was created in the significant year of 1977, promoted by Vishwanath Agarwal, Rajendra Agarwal and Ajay Agarwal. Within a short span of time it became a household name along with other Indian brands

• The company is engaged in the manufacture of fabrics like Suiting, Trouser & Shirtings created by Donear in a wide variety and range meant for Men’s wear & Women’s wear

• Fabrics created by Donear have a wider reach in the overseas markets too, with exports to over 28 countries across the globe.

• Nearly 10% of the total production is currently exported and this percentage will increase up to 25% with the underlying opportunities created by the post WTO scenario, and also due to the expansion plans for creating 100% High Value Cotton Fabrics

Exports

• Donear by catering to the textile markets all over India…simultaneously caters to the needs of the global markets too. As a result of this, Donearcurrently exports 10% of its fabrics created annually from its current production of 11 million metres.

• The Suiting, Trouser and Shirting Fabrics produced by Donear are provided to prestigious Garment Makers and Wholesalers to over 37 Countries that are located in regions like;

• It exports the woven Fabrics made of natural and manmade fibres include poly/viscose and cotton to Italy

• Approx.3 Crore turnover comes from Italy Market. It makes 10% profit from Italy market.

Ermenegildo Zegna-Italy

Founded : Trivero (1910)Founders : Ermenegildo ZegnaHeadquarters : Milan, ItalyProducts : Men's suits, fabric, accessories, shoes, small and large leather goodsRevenue : €1.2 billion (2012)Owners : Zegna family

Production

• Ermenegildo Zegna is specializing in men's clothing-fabrics, suits, neckties, knitwear, shirts, accessories and sportswear.

• Ermenegildo Zegna has a yearly output of 1.7 million textile accessories.

• Zegna employs over 7,000 workers worldwide.

• The export quota was more than 90% in 2010divided

equally between Europe, Americas and Asia.

Statement Of Profit And LossErmenegildo Zegna-Italy

METHODOLOGY

Statement Of Profit And Loss Donear-India

Cost ComparisonTotal cost of Donear(INDIA):

Rs. 4,093,276,750

Total cost of Ermenegildo Zegna(ITALY):

$120,345,146 =Rs7,321,798,683

(1$= Rs 60.84)

By comparing the total costs of both the firms, we see that the cost is low in India. So will go for Exporting of textiles.

Conclusion• India’s textile industry is one of the economy’s largest in

2000/01.

• The textile and garment industries accounted for about 4 percent of GDP.

• 14 percent of industrial output, 18 percent of industrial employment, and 27 percent of export earnings.

• India’s textile industry is also significant in a global context, ranking second to China in the production of both cotton yarn and fabric and fifth in the production of synthetic fibers and yarns.