PROJECT ON:ON:-

TRENDS IN FOREIGN TRADE IN INDIA AFTER 1991

MADE BY:BY:ANSHUL,DEEPAK,SIMRAN,EKTA,GEETIKA,DEVIKA

INDEX
Overview of before 1991 Indias exports and imports before 1991 Restrictions on foreign trade Conditions of Indian Economy in 1991 Important reform measures Changes in exports Changes in imports Changes in trade deficits Foreign collaboration policies Foreign investment policies Indian Joint Ventures Abroad Impact of New Policy and Future Direction measures taken for export promotion conclusion

ACKNOWLEDGEMENT

We would like to convey our heart felt thanks to Mr D. K. Das who always gave valuable suggestions and guidance for completion of the project . He helped us in understanding and remembering important details of the project that would have otherwise been lost . This project has been a success only because of his guidance .

OVERVIEW OF BEFORE 1991

The country was under socialist-based policies for an entire generation from the 1950s until the 1980s. The economy suffered from extensive regulation, protectionism, and public ownership, leading to pervasive corruption and slow growth. Elaborate licenses, regulations and the accompanying red tape, commonly referred to as License Raj, were required to set up business in India between 1947 and 1990.

Indias exports & imports before 1991

YEAR 1 1970-71 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 EXPORTS 2 1535 6711 7806 8803 9771 11744 10895 12452 15674 20232 27658 32553 Growth Rate% 3 8.6 4.6 16.3 12.8 11.0 20.2 -7.2 14.3 25.9 29.1 36.7 17.7 IMPORTS 4 1634 12549 13608 14293 15831 17134 19658 20096 22244 28235 35328 43198 Growth Rate% 5 3.3 37.3 8.4 5.0 10.8 8.2 14.7 2.2 10.7 26.9 25.1 22.3 Trade Balance 6 -99 -5838 -5802 -5490 -6060 -5390 -8763 -7644 -6570 -8003 -7670 -10645

Restrictions on foreign trade: India was largely and intentionally isolated from the world markets, to protect its fledging economy and to achieve self-reliance.  Foreign trade was subject to:import tariff export taxes quantitative restrictions foreign direct investment was restricted by upper-limit equity participation restrictions on technology transfer export obligations government approvals (these approvals were needed for nearly 60% of new FDI in the industrial sector).

Conditions of Indian economy in 1991

Foreign currency reserves plummeted to almost $1billion Inflation was at a rate of 17% High fiscal deficits Foreign investors and NRIs had lost confidence in Indian Economy Capital was flying out of economy Defaulting of loans

IMPORTANT REFORM MEASRES

Major measures initiated were as follows: Devaluation Disinvestment Dismantling of the industrial licensing regime Allowing foreign direct investment Privatization Abolition of the MRTP Act Removal of import restrictions Reduction of the peak customs tariff New financial sector reforms

Changes in exports
 As a proportion of GDP, the share of exports, which had grown from 5.8 per cent in 199091 to 12.2 per cent in 2004-05, grew further to 13.1 per cent in 2005-06.  However, from 1980 onwards, Indian exports have been rising at one and a half times the pace of growth in world exports. In 1993, India ranked 33rd in top exporting countries and 32nd in top importing countries.  The government has slashed down its export growth target to 3 per cent for the current fiscal

Changes In Imports
 The corresponding rise in imports was from 8.8 per cent in 1990-91 to 17.1 per cent in 2004-05 and further to 19.5 per cent in 2005-06.  Out of 21 major items, nearly 50 per cent have a relative unit value of one or more, that is the increase in the value of imports is more than the increase in volumes.  Many items have shown an increase in the relative unit value payments from pre reform to post reform period.

CHANGES IN TRADE DEFICIT

 Thus, trade deficit as a proportion of GDP, which had declined from 3.0 per cent in 1990-91 to 2.1 per cent in 2002-03, widened to 4.9 per cent in 2004-05 and further to 6.4 per cent in 2005-06.  Previously a closed economy, India's trade has grown fast. India currently accounts for 1.5% of World trade as of 2007 according to the WTO.  According to the World Trade Statistics of the WTO in 2006, India's total merchandise trade (counting exports and imports) was valued at $294 billion in 2006 and India's services trade inclusive of export and import was $143 billion.  Thus, India's global economic engagement in 2006 covering both merchandise and services trade was of the order of $437 billion, up by a record 72 percent from a level of $253 billion in 2004.  India's trade has reached a still relatively moderate share 24% of GDP in 2006, up from 6% in 1985.

Foreign Collaboration Policies

India's effort to accelerate industrialisation & improve international competitiveness received a boost with the announcement of the New Industrial Policy in July 1991. A key element of the Industrial Policy & an important component of the reform program is the fresh approach towards foreign investment & technological tie-ups. The Policy changes were designed to attract significant & sustained capital inflows into India, while encouraging technological collaboration between Indian & foreign companies.

Foreign Investment Policies

 Majority foreign equity, even upto 100%, is allowed in several sectors .  Foreign investment upto 51% in 35 high priority areas is eligible for automatic approval, provided by Reserve Bank of India, within 2 weeks of application.  Use of foreign brand names & trademarks for sale of goods in India is allowed.  Foreign companies are allowed to open branch offices in India.  Hotels & tourism related industries are also eligible for automatic approval for direct foreign investment with upto 51% equity.  Foreign Institutional Investors (FIIs) have been allowed to invest in the Indian capital market. Foreign investment has been allowed in off-shore funds promoted by Indian Financial Institutions.  Indian companies have been allowed to float Global Depository receipts (GDRs), which are traded in major international stock exchanges.  There is now a market determined exchange rate for the rupee. Foreign exchange is freely available for a number of purposes like payment of royalties, lump sum fees, dividends, business travel abroad etc.  Other proposals for foreign equity investment shall also be considered on case-to case basis for clearance by Secretariat for Industrial Approvals.

Indian Joint Ventures Abroad

Indian joint ventures (Jvs) & wholly owned subsidiaries are an important instrument for promoting exports, trade expansion & economic cooperation. India's foreign investment is the highest amongst 3rd world countries & is dispersed over 70 countries. As on 31st December 1994, there were 524 joint ventures, of which 177 were in operation & 347 at different stages of implementation. The Indian equity in the 177 Jvs was Rs. 1,817 million in Dec 1994 & the approved Indian equity in the 347 Jvs was Rs 13,952 million.

Impact of New Policy and Future Direction

 Dramatic change in the foreign currency reserves of the Government of India taking it to US$ 20.8 billion at end-March 1995.  7,200 foreign collaboration proposals were approved in the post-policy period from August 1991 to September 1995.

Some of the measures taken for export promotion are : Rupee has been made convertible on the current account  Exporters & units in Export Processing Zones, Software Technology Parks, are now allowed to retain a higher percentage of their forex earnings  National Centre for Trade Information has been launched to facilitate greater access to trade information  The World Trade Organization (WTO) agreement has been signed  Pass Book Scheme has been introduced for all Export Houses/Trading Houses/Star Trading Houses/Super Star Trading Houses.  A harmonized system of commodity classification known as Indian Trade Classification has been introduced.

CONCLUSION
India currently accounts for 1.2% of World trade as of 2006 according to the WTO. International trade as a proportion of GDP reached 24% by 2006, up from 6% in 1985 and still relatively moderate. India was evaluated by the World Trade Organization in 2008 as more restrictive than similar developing economies, such as Brazil, China, and Russia. The WTO also identified electricity shortages and inadequate transportation infrastructure as significant constraints on trade. India still has a long way to go - it's share in world exports was a mere 0.65% in 1994-95. India imported Rs.887 billion of goods in 1994-95, and exported Rs.823 billion.

INDIAS GDP GROWTH RATE

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