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Published by: CLAYBALL82 on Apr 16, 2008
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Before 1947 when India was a colony of the British the pattern of her foreign tradewas typically colonial, India was supplier of foodstuffs and raw materials to theindustrialized nations particularly England and an importer of manufactured goods. Thisdependence on foreign countries for manufactures did not permit industrialization athome rather as a result of the competition from British manufacturers the indigenoushandicrafts suffered a severe blow.With the dawn of independence, the colonial pattern of trade had to be changed to suitthe needs of a developing economy which decides to embark on a programme of development is required to extend its productive capacity at a fast rate. For this, importsof machinery equipment which cannot be produced in the initial stages at home areessential
Foreign trade of India during the pre-independence period
: Before the SecondWorld War India was forced to export than its imports in order to meet the unilateraltransfer of payments to Britain in the shape of salaries and pensions of British officers,interest on sterling loans and dividends on British capital invested in India. During theSecond World War there was a basic change in the nature of India’s international trade.She began exporting to Britain large quantities of goods but the engagement of Britain inthe war did not permit her to export to India adequate quantities of goods in return. Such
unrequited exports gave rise to sterling balances. Thus more exports and less Importswhich was the feature of India’s foreign trade helped the growth of a favorable trade balance. The balance of trade was so favorable with Britain—the principle customer of Indian goods—that even after paying off the sterling debt, India was able to build hugesterling balance amounting to RS.1,733crores in April 1946. Besides the wars afforded anatural umbrella of protection and this facilitated the growth of consumer goodsindustries in India. A vacuum was also created in the countries of the Middle East and Far East and consequently India was able to develop markets for her manufacturers in thesecountries and import raw materials to feed her growing consumer goods in India.
The pattern of exports:
The value of exports and imports had both been on the increaseduring 1938-39 to 1947-48 although exports were consistently higher than imports. Thecommodity structure of exports also underwent a change. Whereas the raw materialcomponent of exports declined from 45 percent of total exports in 1938-39 to 31 percentin 1947-48, the share of manufacture of articles improved from 30 percent in 1938-39 to49 percent in 1947-48. So far as food was concerned India did export in pre war yearssome wheat, floor, barley and pulses, but with a rapidly increasing population, the surplushad completely disappeared in the post independence period.Foreign trade of India during 1938-39 to 1947-48. YearExportsImportsTrade balance1938-39169152171945-46266245211946-47319288311947-4840338914
Trade development from 1757-1813:
In the mid 18
century the foreign trade of Indiaappears to have been mainly in the hands of three groups of merchants and traders. Thetrade with Europe was conducted almost exclusively by European chartered companies of which the English and Dutch east India companies were the most powerful, though theFrench company was not very far behind by this time. Most of these companies enjoyedstatutory national monopolies giving considerable protection to their domestic markets.The second group consisted of Foreign Asian merchants such as Armenians and Arabslargely engaged in the trade with Middle East. The third group was made up of nativeIndian merchants. The most active and enterprising of these were to be found in theGujarat, particularly in the great emporium of trade, Surat which was always referred toin the early years of the century as the treasure house of India. But in the 1750’s in termsof overall volume of trade, wealth, and influence the English certainly occupied acommanding position at least in Bengal, which was by now the premier trading provinceof mughal India. The immediate consequence of the recapture of Calcutta in 1756 and therevolution in the government the next year was to strengthen immensely the political position of the English East India Company. However, once the East India gained controlof the public revenues of the province, the need to import bullion from Europe lessened,
and the surplus from budgetary sources could be utilized to provide the annualinvestment. In fact Bengal was not only expected to supply the export goods to Europe but also the silver to finance the company’s purchase tea and silk in china. By the 1780’s both East India company’s servants and private British traders has succeeded inestablishing a position of dominance in the maritime trade of Bengal, madras, andBombay and had generally greatly reduced the share of the native merchants in theexports and imports trade. Other European groups did better partly because they had anindependent economic base to operate from and partly because of a special reason after the battle of Plessey there was suddenly and enormous increase in the amount of privatefortune belonging to the company’s servants who wished to send it to England at a profitable rate of remittance. In the period from 1765-1786 was the great period of  private trade by the East India Company’s and servants, such excesses were graduallychecked with the improvement in the company’s administration in India and itsincreasing control by the parliament. In 1776 Adam smith had condemned the company’smonopoly as being both detrimental to British foreign trade, as well as destructive toIndia’s economic welfare. In a lengthy memorandum written in 1792 for the board of control an attempt was made to estimate the total volume and value of India’s direct tradewith Europe. A summary of it is given in the below table it shows that the company’sshare of European exports to India was only 14.4% of the total value, while that of imports from India came to 26.8%.
Imports in toIndia(£)(%)Exports fromIndia(£)(%)Foreign companies: Dutch, French,Danish, Portuguese992,64041.52,757,76337.6Clandestine trade: English trade under foreign flags615,30025.72,000,00027.3English private trade: licensed by the EastIndia Company439,60018.4403,5655.5East India Company346,07014.41,962,09526.8Privilege goods shipped on the company'sships208,1462.8Total 2,393,6101007,331,569100
Trends and fluctuations: total exports and imports, 1814-1947. 
With the charter act of 1813 which removed some the chief institutional restrictionsand anomalies, India overseas trade began to take on a more recognizably moderncharacter. The immediate effect of the opening of trade was a spectacular expansion, andthe long term trends through out the 19
century were in an upward direction. Thegeneral progress however, occurred in a series of uneven spurts and the whole period was punctuated by short fluctuations it is well known as the change in the techniques of 

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