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FOREIGN TRADE IN INDIA

INTRODUCTION: Post-World War II period most of the developing countries adopted inward-oriented policies that emphasized import substitution. Poor growth resulting from such a strategy led to policy reforms in the early 1960s : countries started giving more incentives to the export sector even as they pursued second-stage import substitution (for instance, Brazil, Argentina and Mexico) Some countries made a more fundamental shift towards a relatively outward-looking strategy (based on vigorous export promotion) in the early 1960s (for instance, Korea, Singapore and Taiwan). INTRODUCTION: Fast growth registered by these countries India has opted for a policy of trade liberalization in recent years. Massive trade policy reforms were announced in 1991 Open up the economy to foreign trade and to 'integrate' the Indian economy into the global economy in the new international order taking shape with the setting up of the WTO (World Trade Organization) in 1995. VALUE OF EXPORTS AND IMPORTS IN THE PLANNING PERIOD : Value of India's exports and imports has increased considerably over the period of planning. From $ 1,269 million in 1950-51, exports rose to $ 8,486 million in 1980-81 and further to $ 1,68,704 million in 2008-09. Imports during this period rose from $ 1,273 million to $ 15,869 million and further to $ 2,87,759 million. Country has faced substantial trade deficits during the period of planning. Trade balance was positive in only two years (1972-73 and 1976-77) during the entire period 1949-50 to 2008-09. INDIA’S EXPORTS AND IMPORTS: The year 1990-91 saw a trade deficit of $ 5,932 million as imports rose by 13.5 per cent, rise of 9.2 per cent in exports in 1989-90. Strict import restrictions were imposed in 1991-92 and the trade deficit declined to $ 1,546 million. Next three years ( 1993-94 to 1995-96 ) saw a strong resurgence in export earnings. INDIA’S EXPORTS AND IMPORTS: Average trade deficit during the Eighth Plan period (1992-97) was $ 3,456 million per annum — less than the trade deficit recorded in the Sixth and Seventh Plan periods Ninth Five Year Plan (19972002), there was deterioration. Average trade deficit in this Plan was as high as $ 8,412 million. INDIA’S EXPORTS AND IMPORTS: Tenth Plan - considerable revival of foreign trade . The rate of growth of exports in this Plan - above 20 per cent per annum Both external and domestic factors contributed to this satisfactory performance. Improved global growth and recovery in world trade Opening up of the economy enhanced the competitiveness of Indian industry. There is a far greater export- orientation of domestic manufacturers & economic reforms. INDIA’S EXPORTS AND IMPORTS: Tenth Plan, imports increased from $ 61,412 million in 2002-03 to $ 1,85,735 million in 2006-07. Because of substantial increase in imports, the trade deficit rose considerably. The first year of the Eleventh Plan, 2007-08, saw a large trade deficit of $ 88.52 billion. The main reason for this was increase in oil import bill - a staggering 39.4 per cent rise in a single year due to a hike in global crude oil prices by nearly 53 per cent during 2007-08 (India meets more than 75 per cent of its crude oil requirement from imports). The situation deteriorated considerably in 2008-09 because of global recession . Exports could register a growth of only 3.4 per cent in this year while imports increased by 14.3 per cent. As a result, trade deficit rose to the unprecedented level of $119 billion.

COMPOSITION OF IMPORTS: The Second Plan introduced a program of industrialization with heavy emphasis on the development of capital goods and basic industries. Necessary to import capital equipment in large quantities. per board and stationery. brought about a considerable change in the composition of imports. raw and waste. Since then its share has continuously declined to 0. These imports together constituted more than 70 per cent of all imports.61 to 11.e. Imports of food and live animals have declined sharply. grains. a little less than one-third of total import expenditure. primary goods dependent economy to a more vibrant industrial economy. . fertilizers and pearls and precious stones.3 per cent in 2007. the share of capital goods in total imports was 28. materials and machinery had to be imported Thus. cotton. vehicles (excluding locomotives).645 million which was 31. 'maintenance imports' entered into the import structure of the country in a big.a decline in the importance of agriculture and allied products . Share of raw materials and intermediate manufactures has increased considerably primarily due to a sharp rise in the import of petroleum oil and lubricants. the main items of imports in India (in order of importance were : machinery of all kinds.1 per cent of import expenditure in 1960-61 and 8.. POL imports accounted for only 6. and metals other than iron and steel and manufactured. This sharp increase was due to two hikes in oil prices in 1970s . The initiation of the planning process in the country in 1951-52.1 %.00 per barrel In 2007-08. mineral and animal).3 per cent of total export earnings.38. Capital goods had accounted for about one-third of import expenditure in 1960. increase in the importance of manufactured products Share of agriculture and allied products in total exports declined from 44. drugs and medicines. Its share has also declined consistently to 0. COMPOSITION OF IMPORTS: There have been significant changes in the relative importance of these groups over time. increased to 41. paper.3 per cent in 2007-08 That of manufactured products increased from 45. backward.3 per cent in 1970-71.which fell to a little more than one-fifth in 1996-97.1 per cent over the same period.9 per cent in 1980-81. cutlery. other yarns and textile fabrics. (iii) Capital goods and (iv) Other goods. COMPOSITION OF EXPORTS: Trend over the years . COMPOSITION OF IMPORTS: Rise in the import expenditure on POL (petroleum. pulses and flour. COMPOSITION OF IMPORTS: Imports of the country have been divided into four broad groups: (i) Food and live animals (ii) Raw materials and intermediate manufactures. In 2007-08 . i. Spare parts.6 percent of total import expenditure. This clearly depicts the changing production structure of the economy and the march from an underdeveloped. hardware. pigments and instruments. imports of POL were $ 79.2 per cent in 2007-08 The second most important export item in 1960-61 was tea and it contributed 19. COMPOSITION OF EXPORTS: The most important export item in 1960-61 was jute and it contributed 21 per cent of total export earnings. oils (vegetable.COMPOSITION OF IMPORTS: In 1947-48. dyes and colors. way. oil and lubricants) imports.one in 1973-74 when the Oil and Petroleum Exporting Countries (OPEC) raised the price of oil and the other in 1978-79 when the price of oil was raised sharply to $ 35. chemicals.2 per cent in 1960.3 per cent to 63.

3 per cent).K. a little less than onethird) of India's import expenditure in 2007-08. During recent years. Canada and U. 4 per cent in 1960.1 per cent and in 2007-08 was 38.. Saudi Arabia (share 7.7 per cent in 2007-08 . the dependence on the U.2 per cent).S.A.90 per cent) Singapore (share 3. New trading partners like West Germany. USA (share 8. Thus.R. Their share in India's export earnings rose from 3.A. DIRECTION OF TRADE: Planning period as a whole. The OPEC group accounted for 4.European countries plus the United States and Canada. Share of OPEC in India's import expenditure 30. Share of Japan increased from 1.R. Developing nations (particularly of Asia) have increased their share in India's imports.4 per cent.S. More than half of these exports were accounted for by the EU countries in 2007-08.S. DIRECTION OF TRADE: (2007-08) China occupied the first position in India's imports (share 10. Expansion in trading relations with the socialist countries especially the erstwhile U. emerged .92 per cent) Switzerland (share 3. Export of readymade garments.3 per cent) Germany (share 3. increases in the exports of chemicals and allied products. .8 per cent in 1990-91.7 per cent) UAE (share 5. and Others. as well. In 2007-08. There was a change in the relative position of U. iron ore.3 per cent) Iran (share 4.9 per cent in 2007-08.S.e. the share of U. They accounted for 32. the picture started showing some changes.3 percent . Eastern Europe Developing Nations.import requirements of crude oil.8 per cent). leather and leather manufactures have also increased..5 per cent in 1950-51 to 2. the share of Eastern Europe in total exports had slumped to 2. and U. with the latter pushing down the former to the second place.R.0 per cent in 2007-08. declined considerably. intermediate products and foodgrains from that country ..S.3 per cent. West Germany and U.4 per cent in 1960-61 to 2.A . India has obtained maximum imports from U.1 per cent. Share of U. DIRECTION OF TRADE : India's trading partners can be divided into five major groups: OECD (Organization for Economic Cooperation and Development . With the expansion of trading relations with Japan.1 per cent in 2007-08.K.5 per cent in 2007-08. Within a decade.4 per cent in 1960-61 to 7. DIRECTION OF EXPORTS: OECD group accounts for a major portion of India's exports.K. DIRECTION OF TRADE: In the year 1950-51.61 to 22.1 per cent of exports in 1960-61 and its share in 2007. declined to 2.2 per cent in 2007-08 as oil imports from this region increased markedly.K in India's imports was 20.1 per cent. was 18. DIRECTION OF TRADE : Imports: Importance of OECD as a group has declined considerably over the period 1960-61 to 200708. the combined share of these two countries was 39.0 per cent (i. DIRECTION OF TRADE: Share of Eastern Europe in imports also increased considerably from 3.S. The share of this group in India's import expenditure was 78 per cent in 1960-61 which fell to 34. . The share of this group in 1960-61 was 66.34 nations).S.COMPOSITION OF EXPORTS: Due to industrialization the exports of engineering goods rose substantially.S.8 per cent and that of U.has imported large scale quantities of capital goods.08 rose to 16. in Indian imports declined from 19.S.

GDP ratio showed substantial improvements during the 1990s as compared with the earlier decades. the share of U. EXPANSION OF FOREIGN TRADE: The export-import ratio (which indicates the proportion of imports that can be financed from export earnings) increased from 64. The Export-GDP ratio: 4.1 per cent in 1990s. For instance.76 billion imports) in 2008-09 .1 billion imports) in 1990-91 to US $ 456.2 per cent in 1980s 9. However.46 billion ($168. EXPANSION OF FOREIGN TRADE: India's trade has increased significantly in the post-reform period .7 per cent in 2003.5 billion in l991-92 to $ 119 billion in 2008-09. Asia and Latin America accounted for more than 40 per cent of India's export earnings in 2007-08.8 per cent in 1990s 15. 25. exports to Asian countries accounted for 31.3 per cent.S.K.2 billion ($ 18.0 per cent during 1980s to 84. it deteriorated thereafter and fell to 59 per cent in 2008-09.7 per cent occupied the top position. etc. with a share of 12.6 per cent in 1990s Average annual import growth rate rose from 7. Most important in this group have been the countries of Asia.5 per cent in 2008-09.6 per cent in 1980s 7. EXPANSION OF FOREIGN TRADE: Reflecting the liberalization of trade regime and the increasing external openness of the economy India's trade.5 per cent) U. substantial reduction in customs tariff rates.A. in India's total exports was as high as 23.9 per cent) Germany (share 3. In absolute terms. DIRECTION OF EXPORTS: In 2007-08 U. Shift from the inwardoriented policy of the past to an outward-oriented policy. This came down 4.5 per cent in 1970s 4. the trade volume rose from US $ 42. decanalising of many items of trade Wide ranging measures to give a thrust to exports .1 per cent in 2008-09. U.6 per cent) China (share 6.A. trade deficit increased substantially from $ 1.2 per cent to 9. The overall trade-GDP ratio increased 9.1 per cent in 2007-08. These data indicate an increasing openness of the Indian economy in 1990s. In fact. (share 9.9 per cent during 1990s and stood at 81. . the average annual export growth rate rose from 8.3 per cent in 1990s.1 per cent in 1980s to 8.8 per cent in 1970s 11. India initiated a number of measures to 'open up' the foreign trade sector . DIRECTION OF EXPORTS: At the start of the planning process in India in 1950-51. since 1992-93 the rate of increase of imports has been consistently higher than the rate of increase of exports excepting 1993-94.6 per cent of India's total export earnings in 2007-08. massive import liberalization measures These include devaluation of the rupee in July 1991 Introduction of the convertibility of rupee first on trade account and then for all current account transactions.6 per cent over the same period.70 billion exports and $ 287.DIRECTION OF EXPORTS: Developing nations of Africa.3 in 1970s 7. As a result.E. 2000-01 and 2002-03.1 per cent) Hong Kong (share 3. However.8 per cent in 1980s 17. (share 4.1 per cent).K. Both export growth and import growth rates registered an increase in the post reform period vis-a-vis 1980s. The import-GDP ratio 5.6 per cent) Singapore (share 4.04.1 billion exports and $ 24. POST REFORM PERIOD (AFTER 1991) GROWTH AND STRUCTURE OF INDIA'S FOREIGN TRADE SINCE 1991 : Commencing July 1991. Liberalization of import regime.

9 per cent. DIRECTION OF IMPORTS: As far as the share of different countries in India's imports is concerned.1 per cent in 2007-08.6. Over the same period. CHANGES IN COMPOSITION OF EXPORTS : India's manufacturing exports are showing tendencies of shifting away from traditional exports towards relatively manufactured products.0 per cent) Japan (share 7. Between 1992 and 2008-09. the relative share of travel and transportation in India's exports which was as high as 64 per cent in 1995-96 fell to 21. 12. In 2007-08 it was 5.8 per cent.9 per cent. imports of capital goods have accounted for 28.9 % Percentage share of chemicals and allied products . recording a growth of 16.3 per cent in 2007-08. The share of POL in total import expenditure was 25. India's exports of services increased from $ 4.7 per cent in 2008-09 Share of software services rose from 10 per cent to 46.3 per cent). oil and lubricants).1 per cent Germany (share 8.12.share in total export earnings . CHANGES IN COMPOSITION OF IMPORTS: As a result of liberalization in the post-reform period and changing consumer tastes .CHANGES IN COMPOSITION OF EXPORTS : The share of agriculture and allied products in total exports was 19. All through the post-reform period.6 per cent in 2007-08. An encouraging trend . the share of iron and steel in import expenditure fell from 4.9 per cent to 3.readymade garments share in export earnings . This fell to 11. . An important reason for this improved performance has been an increase in the exports of drugs. Software export growth was consistently around 30.1 per cent in 200708.2 per cent of the increase in exports over the period.5 per cent in 1990-91 13.0 per cent in 1990-91 and 31. pharmaceuticals and fine chemicals.4 per cent over the period.4 per cent in 1990-91. Engineering goods share of 11. Exports of manufactured goods accounted for 61. CHANGES IN COMPOSITION OF EXPORTS : Exports of petroleum products accounting for 19.5 per cent) UK (share 6. CHANGES IN COMPOSITION OF EXPORTS : 1990-91 .7 per cent) Saudi Arabia (share 6. imports of electronic goods and computer goods have increased substantially during the recent years The share of fertilizers in import expenditure fell from 4.7 per cent) Belgium (share 6. The share of chemical elements and compounds in total import expenditure remained stable at 5-6 per cent.0 per cent in 2007-08.1 per cent in 1990-91 to only 2. In 2007-08 share of 22. Exports of software services reached a level of $ 47 billion in 2008-09.6 per cent. Gems and jewellery in 1990-91 .0 per cent over the period 2003-04 to 2007-08 but fell to 16.2 per cent of total imports.4 per cent.6 per cent in 2008-09 due to global recession.9 billion to $ 101. Manufactured products account for a major share of the increase in aggregate exports over the period 1990-91 to 2007-08. USA occupied the first position in 1990-91 with a share of 12. CHANGES IN COMPOSITION OF EXPORTS : As far as composition of service exports is concerned.exports of electronic goods and computer goods have shown good performance Rise in service exports since 1991 and changes in the composition of service exports .1 per cent.16. CHANGES IN COMPOSITION OF IMPORTS: The most important import item in terms of expenditure is POL (petroleum.2 billion.9 per cent of total exports.

DIRECTION OF EXPORTS: Share of developing nations of Africa. The share of OPEC group in India's export earnings was 5.6 per cent in 1990-91 which rose to 16. DIRECTION OF EXPORTS: The OECD group of countries’ share in India's exports was 53.5 per cent in 1990-91 which fell to 38. USA occupied the second position with a share of 14.1 per cent) Hong Kong (share 3.3 per cent in 2007-08. Asia and Latin America has risen considerably over the eighteen-year period 1990-91 to 2007-08 from 17. DIRECTION OF EXPORTS: In 2007-08 USA (share of 12.8 per cent of India's export earnings in 1990-91 and 20.6 per cent.6 per cent of India's export earnings in 2007-08.9 per cent) Germany (share 3.8 per cent USA (share 8.7 per cent) UAE (share 5.3 per cent) Saudi Arabia (share 7. .90 per cent) Singapore (share 3. The position changed markedly thereafter due to the disintegration of the USSR. USSR with a share of 16.6 per cent) Singapore (share 4.2 per cent).4 per cent in 2007-08.3 per cent) Germany (share 3.1 per cent in 2007-08. Countries of Asia accounted for 31.7 per cent) occupied the first place UAE (share 9.3 per cent). RECENT TRENDS Increasing Value and Volume of Foreign Trade Rapid Increase in Imports Slow Increase in Exports Mounting Deficit in Balance of Trade Trend Towards Globalisation Changing Composition of Trade Changing Direction of Trade Lower Share in World Exports Changing Role of Public Sector Trade Policy Reforms.6 per cent) China (share 6. Taken separately.DIRECTION OF IMPORTS: In 2007-08 China occupied the first position with a share of 10.7 per cent Japan (share 9.5 per cent) UK (share 4.1 per cent occupied the first position in 1990-91.1 per cent).1 per cent to 42.92 per cent) Switzerland (share 3. EU accounted for 21.

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