India in the World Trade during Pre and Post-Period of Economic Reforms: A Comparative Analysis

Article excerpt

The last decade of 20th century in India is marked by macro-economic crisis. For example, gross fiscal deficit in 1990-91 was as high as 9.4 percent of GDP, while current account deficit is 3.1 percent of GDP. Also, inflation rate was 10 percent. The foreign exchange reserves for financing India's import of capital goods, machinery, technology and POL products were just below to two weeks time. (1) It signifies the import-oriented export-led debt encouraged growth, which was a paltry 0.7 percent and GDP growth was 1.3 percent in the year of 1991-92. (2) The high international indebtedness led to default in debt servicing, which was considered as most important factor for the pursuance of new economic policy in the form of structural adjustment programme on the compulsive conditions imposed by international financial institutions especially by the IMF and the world bank under the acute pressure of the investment policy of United States. (3). It has been increasingly realized that India, compared with many developing countries pursued development strategy, which was more heavily based on import-substitution led industrialization characterized by intensive state intervention and regulatory environment. There have been successes and failures in different economies owing to the introduction of New Economic Polices. Present paper in view of this, examines the impact of New Economic Policy on the trade in India as compared with industrial countries (ICs), developing countries (DCs) and the world.

Export Performance: A Comparative View

Trade of a county comprises export and import. A country's export performance, thus, determines the import capacity of a country, which, in turn, determines the process of production and thereby the economic development. In view of this, an attempt is made to examine comprehensively the export performance of India in comparison with industrial countries (ICs), developing countries (DCs) and the world.

Table-1 compares the indices of unit value of export (1981 = 100) during the period of preeconomic reforms as well as during the post-economic reform period in India with different groups of countries. The unit value indices of export in industrial countries (ICs), which was 100 in 1981 improved to 132 in 1991. The corresponding figure from the level of 100 in 1981 moved up to 120 in the world and to 188 in the case of India in 1991. In contrast to above, the unit value of export in developing courtiers (DCs) from the level of 100 in 1981 went down to 84 in 1991. During the period of post-economic reforms (1991 to 1999), the unit value of export in all groups of countries experienced deterioration steadily. For example, it went down from 132 in 1991 to 125 in 1999 in industrial countries (ICs), 84 to 74 in developing countries; from 166 to 114 in India; and that for the world from 120 to 111. Over the longer period from 1981 to 1999, the unit value indices of export (1981 as a base) steadily improved in industrial countries (ICs), in India and the world, whereas, it portrayed a deterioration in developing countries (DCs).

The performance of export in terms of indices of units value of export has been compared in Table-2 by fitting the linear regression equation (y = a + bt), while table 3 portrays semilogarithmic (Log Y=a+bt) regression equation. During the period of pre-economic reform (1981-91), indices of unit value of export improved in industrial countries (ICs), world and India, while it deteriorated in developing countries (DCs).

In marked contrast to above, during the period of post economic reforms (1991 to 1999), the indices of unit value of export in all set of countries portrayed a deceleration. Over the longer period 1981 to 1999, the indices of unit value of export improved in India, industrial countries (ICs) and the world, while there is deterioration in developing countries (DCs). It is satisfying that India's unit value of export from the period 1981 to 1999 moved up by 4. …