Academic journal article ASBM Journal of Management

India's Foreign Trade: An Exploratory Study

Academic journal article ASBM Journal of Management

India's Foreign Trade: An Exploratory Study

Article excerpt

Introduction

Several economists have argued against "Free trade" or "Foreign Trade" on the ground that it benefits exporting countries and impoverishes importing countries, whether or not these regions or "Nations" or "Countries" benefit indirectly. After independence many changes have taken place in almost all the sectors of the Indian economy, especially after liberalization of the economy. During the period 1947 to 1991, the Government of India was following a mixed economy combining the features of capitalism and socialism. This resulted in government interventions, i.e. encouraging exports and controlling or substituting imports. Thereafter in the nineties, India adopted liberal and free market oriented policy and liberalized its economy and opened it to the international arena. With liberal i zation, privat i zati on and globalization of the economy, the government policies on exports and imports also changed. Many foreign countries, which were members of the trading blocs like SAARC and WTO, ventured into the arena of international trade and entered into many trade agreements with the neighbours. The Indian economy has changed along with the changes in government policy. Many products moved from the previous restricted trade list to the open general list, with the number of products in the restricted list having gone down to somewhere around two hundred. With liberalization of the licensing policy, many Indian firms have ventured into export and import business, while many foreign countries have entered the Indian market. An attempt is made in this study to find out the impact of India's international trade during this period

Review of Literature

Banik (2001) made an analysis of India's exports during the 1990s, and found out the nature of demand side factors, as against supply side bottlenecks, that have constricted the growth of exports. Easing of supply side constraints too would have aided the revival of export growth, he observed.

Banik (2001) identified a set of determinants which are responsible for a significant decline in India's export growth during the post-reform era, i.e. after 1991. The study reveals that the non-tariff barriers by developed countries during 1996-97 led to a decline in the demand for Indian exportable. Supply-side factors, (such as, procedural delays, poor infrastructure) are extremely important for maintaining a high export growth in a sustained way.

Ahluwalia (2002) examined India's experience with gradualist reforms that took place after 1991. The study confirms that industrial and trade policy reforms have done an outstanding job, but labour market reforms, which are missing so far, are also required to give a boost to exports. The study recommends that the concept of liberalization should extend to agriculture and corrective steps must be taken in order to achieve growth beyond 6 percent.

Chaudhuri (2002) investigated the impact of economic reforms on industrial structure and productivity. The study reveals a disappointing overall performance in both output growth, i.e. GDP and employment. The study further suggests that more efforts need to be put in to ensure that the demand is on the higher side so that productivity can be enhanced, a large number of employment opportunities can be generated, and thereby poverty can be reduced.

Srinivasan (2006) studied the influence of China and India on the world economy. The study concludes that India's prospects for overtaking China depend mainly on implementing difficult reforms in five key areas: deregulation of labour markets and an end to the small-scale sector; renewal of agricultural growth; increased investment in infrastructure; elimination of fiscal de f ic i t s ; a n d , f i na l l y, ac r o s s- th e -b o a rd privatisation and further trade liberalisation.

Siggel (2007) investigated the impact of reforms on manufacturing industries. It was found that the manufacturing sector managed to increase its employment base at an average annual rate larger than 2 per cent. …

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