Academic journal article Indian Foreign Affairs Journal

India's International Trade: Trends and Perspectives

Academic journal article Indian Foreign Affairs Journal

India's International Trade: Trends and Perspectives

Article excerpt

This paper seeks to review India's external trade since 2000-01. It will highlight the positive features reflected in trade trends. It will also try to flag certain areas of concern that may need to be addressed. It attempts to present an overall snapshot and some macro perspectives rather than getting into a detailed analysis product wise or market wise. The essay also dwells briefly on the current framework of rules governing international trade, particularly as they relate to India.

At the outset, it needs to be recognised that given India's size as well as its aspirations for development, its trade indicators are quite modest. While India is No. 2 in the world in terms of population and No. 7 in terms of nominal GDP, it only figures at No.19 in terms of exports with a 1.64 percent share and ranks No.13 in terms of imports with a 2.34 percent global share. The ratio of India's exports to GDP at 12.88 percent is relatively low at its level of development. So is India's merchandise export per capita, at US$ 208. Table 1 presents a comparative picture vis-a-vis several other developing and emerging economies.

Historically, India was a leading trading nation till the arrival of the East India Company and the British colonial rule. From available accounts, during the medieval period, India's exports far exceeded her imports, both in the variety of items as well as in volume. They comprised a number of products, including textiles, carpets, inlay furniture, hand crafted items, pearls and jewellery, and spices. The chief articles of import were horses from Kabul and Arabia, dry fruit, and precious stones. India also imported glassware from Europe, high grade textiles like satin from West Asia, while China supplied raw silk and porcelain. Several Indian ports, including Kozhikode, Surat and Nagappattinam to mention a few, have played a prominent part.

Export has been regarded as a priority sector for the Indian economy by the present government as well as by all earlier governments. Exports provide a good avenue for promoting growth and for earning foreign exchange. Labour intensive exports can also contribute in a significant measure to employment generation. 'Export or perish' was in fact a slogan used in the early sixties by India's first Prime Minister, Jawaharlal Nehru. While India has made considerable improvement over the years in its trade performance, the export numbers are still rather low for a large country like India.

In diplomacy, the clout and leverage that a nation wields in manoeuvring its way in world affairs can depend on various factors. In today's world, strength in foreign trade is an important one. Greater economic inter linkages and commerce with lands near and far, contribute to strengthening partnerships, generating greater understanding, and enhancing scope for leverage. Exports, in particular, also bestow a certain brand value and reputation as has been the case of Germany or Japan.

Review of Trade Trends

A look at India's external trade1 in the last twenty years reveals the following broad trends:

* India's exports were US$ 18 billion in 1990-91, and it took almost ten years to double to US$ 36.8 billion in 1999-2000. And, in those years, India's share of world trade was less than 1 percent.

* While India's major economic policy reforms began in 1991 and gave way to dismantlement of the so called license raj, substantial changes in trade policy came later. Quantitative restrictions on imports were fully done away with only in 2001. A steady reduction of import duties down to ASEAN levels on several non-agricultural products was also a policy move implemented during the Nineties.

* The effect of these reforms, coupled with investments by the Indian industry in sectors like steel, chemicals, and the automobiles sector energised trade. From 2002-03 onwards (see Table 2), exports began doubling every three years. For example, India's exports rose from US$ 52 billion in 2002-03 to US$ 103 billion in 2005-06 and from US$ 83 billion in 2004-05 to US$ 163 billion in 2007-08. …

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