An Investigative Study Of The Indian Foreign Trade Economics Essay

An fact-finding survey of the Indian Foreign Trade

Divesh Mahesh Singhania ( DMS )

Executive Summary

This study on India ‘s foreign trade negotiations about background of the Indian imports and exports station independency. By and big, the study enterprises to understand the nature and composing of foreign trade in our state over the assorted five-year programs.

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India ‘s foreign trade in the twelvemonth 2012 has besides been discussed along with the estimation for the twelvemonth 2020.

Looking at the big size of the economic system, the high growing rates and little portion in universe trade ; with the aid of economic theories, it is eventually inferred that there is immense untapped potency for Indian foreign trade in old ages to come.

Table of contents

Historical Background and Introductionaˆ¦aˆ¦aˆ¦aˆ¦4

Indian Foreign Trade over 1949-2006aˆ¦aˆ¦aˆ¦aˆ¦..6

Composition of Indian Foreign Tradeaˆ¦aˆ¦aˆ¦aˆ¦aˆ¦7

India ‘s Foreign Trade: 2011-12 aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦.13

5. Estimated Foreign Trade by 2020aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦ 15

6. Conclusionaˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦.17

7. Bibliographyaˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦..18

1. Historical Background and Introduction

Every state requires goods & A ; services to carry through the wants of the populace. Resources are required for the production of these goods & A ; services. It is non practically possible for a state to hold all the resources for the production of these goods & A ; services. To get the better of this trouble some merchandises have to be imported from other states. In this instance India imports & A ; exports different goods & A ; services.

The economic growing of India has improved majorly because of foreign trade. After the new industrial policy of 1991 India ‘s foreign trade went throughA considerableA alterations. India exports a broad scope of merchandises some among these are: chemicals & A ; related merchandises, technology goods, fabrics, crude oil merchandises, treasures & A ; A Jewellery, electronic goods, etc. all these merchandises make over 80 % of the Indian exports. It helps the fabrication sector & A ; besides supplies stuffs required by the EOUs. In the few past old ages India has made good export import trade dealingss with Asiatic states & A ; besides Africa. other than this India has become a large participant in planetary trading system & A ; the major sectors of Indian economic system has been linked straight or indirectly to the outside universe via international trade.

Ever since independency India ‘s export have grew drastically in value footings. Indian ware exports grew from 1950-51 ‘s us $ 1.3 billion to 2003-04 ‘s 63.8 billion that means at a compound rate of about 7.6 % . after liberalisation Indian economic system & A ; foreign trade have shown great growing as compared to the pre-liberalization stage i.e. 1950-90. The existent addition in exports in the post- liberalisation stage has been above theA possibilityA set Forth by the growing in universe demand. The difference between the existent & A ; the possible is majorly evidenced by the betterment in the fight of Indian exports. In the past few old ages, the addition in the growing rates us evidenced. Capital influxs was far more than the funding demands due to which the forex militias increased from 2005-06 ‘s US $ 15.1 billion to 2006-07 ‘s us $ 36.6 billion. Exports & A ; imports of the state are reflected by the domestic production which depends on the authorization of the available factors giving rise to comparative advantage of the economic system.[ CITATION PIL08 l 1033 ]


3. Composition of Indian Foreign Trade

Indian foreign trade altered in its work over the period of clip. In 1948-49, tea, jute makers, cotton industries, oil-rich seeds, fells and teguments, and metals and ores constituted 71per cent of entire Indian exports. Trusting on these trade goods gave birth to instability in export and besides weakened the state ‘s place in respect to larger inquiries of policy. Import included manufactured goods and nutrient grains. In 1947, exports comprised chiefly of plantation harvests and natural stuffs, while stuffs included in imports were light consumer goods and farther industries. The work of trade has changed significantly. Today these manufactured trade goods and services run the export. The work of exports shows a noticeable alteration in this decennary.that is 2000s from little industries to big industries. The part of fabrics and ready-made garments has dropped badly by 11.1 % in 2006-07 over 2000-01 led by jewellery, leather and leather industries and trade. Allotment of technology trade goods and petro goods has improved by 7.6 % and 10.7 % P, correspondingly. The portion of premier goods has reduced slightly with the rejection in part of exports get downing from agricultural and similar portion being partly offset by an addition in the portion of ores and minerals by 2.8 % . Petrochemicals, has contributed marginally. The portion of petroleum oil and goods has gone up to 18 % in get downing 6 months of 2007-2008 which was 15 % in 2006-2007. Engineering trade goods excessively retained an increasing manner in 2007-2008. Export enlargement in 2006-2007 was determined mostly by oil merchandises with 59.3 % addition and technology trade goods with 38.1 % enlargement. The noticeable additions in the portion of crude oil merchandises in whole exports replicate non merely an addition in POL rates but besides India ‘s improved refinement capableness. The increasing portion of technology merchandises shows a mark of India ‘s recovery of of import industries. Induced by strong international minerals, after turning at a compound one-year growing rate of 50 % in the first half of this decennary, comes up to 12.6 % in 2006-2007.[ CITATION PIL08 l 1033 ]

4. India ‘s Foreign Trade: 2011-12*


In 2011-2012, exports were U.S. $ 303.7bn and demonstrated an enlargement of 20.9 % in association to a progress of 40.5 % in the former twelvemonth. There was a singular prostration in the latter half of 2011-2012 in comparing with the first half as the international trading state of affairs worsened following to the attenuation of universe demand due to the euro zone catastrophe. There has been A noticeable rise in imports of POL, Ag and gold machines. Petroleum, oil and lubricators ( POL ) imports at U.S. $ 155.6bn in 2011-2012 demonstrated an increased growing of 46.9 % , chiefly showcasing rise in international petroleum oil rates, as lucifer up to an gap 21.6 % . The standard rate of Indian bath of rough oil during 2011-2012 was at U.S. $ 111.6/barrel. Gold and Ag import at U.S. $ 61.5bn traced a development of 44.4 % in 2011-2012 in comparing with 43.5 % in 2010-2011. Non-oil, gold and Ag imports at some phase in 2011-12 at U.S. $ 271.5bn marked a growing of 22.7 % when compared to 29 % in the earlier twelvemonth. Trade dei¬?cit in 2011-2012 equaled to U.S. $ 184.9bn, in comparing with U.S. $ 118.7bn in 2010-2011.[ CITATION PIL08 l 1033 ]

India ‘s Merchandise Trade during 2011-12

Degree centigrades: UsersToshibaDesktopchart 1.png[ CITATION PIL08 l 1033 ]


As a consequence of assorted export promotional steps initiated by the authorities, the export growing remained steady on a monthly footing. However, after top outing in July 2011, monthly export growing started keeping thenceforth. In the 2nd half of 2011-12, export growing was every bit low as 5.1 per cent as compared with 43.9 per cent in the i¬?rst half. Exports during 2011-12 stood at US $ 303.7 billion, entering a lower growing of 20.9 per cent as compared with an addition of 40.5 per cent during 2010-11. Despite the rupee bead in the 2nd half of 2011-12, export growing showed important control chiefly accredited to the lag in planetary trade caused by a dreary economic and fiscal conditions in the US and euro zone economic systems. Withdrawal of certain export inducements might besides hold affected public presentation of certain export merchandises. As per the commodity-wise exports informations available during 2011-12 ( April-December ) , there was a diminution in the portion of fabricating sector in entire ware exports from 63.0 per cent in April-December 2010 to 60.6 per cent in April-December 2011. In disparity, the several portions of crude oil merchandises and primary merchandises increased during the period. Within fabricating sector, the portion of technology goods and fabric & A ; fabric merchandises declined. Exports of technology goods seem to hold been badly affected during the 2nd half as growing in exports from this sector was signii¬?cantly lower at 16.8 per cent during April-December 2011 as compared with 49.5 per cent during April-December 2010. Within technology sector, growing in exports of conveyance equipment, industries of metals and Fe and steel was signii¬?cantly hit while that of electronic goods moderated marginally. Within fabrication, other trade good groups, viz. , leather & A ; industries, chemicals & A ; related merchandises and fabric & A ; fabric merchandises witnessed higher growing during April-December 2011 as compared with the corresponding period of 2010-11. Exports of crude oil merchandises besides amplified by 54.2 per cent during April-December 2011 as against 44.9 per cent in matching period of 2010-11.Within primary merchandises, exports of ores and minerals continued to demo diminution. Decline in exports of Fe ore was chiefly due to multiple jobs refering to prolonged prohibition on excavation in Karnataka, limitation on excavation in Orissa and Goa, high export responsibility, differential railroad cargo and lag in international Fe ore monetary values. The authorities had hiked the export responsibility on Fe ore to 30 per cent in December 2011 from 20 per cent.[ CITATION PIL08 l 1033 ]

Degree centigrades: UsersToshibaDesktopindias export.png[ CITATION PIL08 l 1033 ]

During the 2011-12 ( April-December ) , the portion of European Union and OPEC states in India ‘s exports declined as compared to April-December 2010. However, portion of developing states was marginally higher during the period. Destination-wise, exports during 2011-12 ( April-December ) indicate that the UAE continued to stay the biggest finish for Indian goods with a portion of 11.6 per cent, followed by the US ( 11.1 per cent ) , Singapore and China ( 5.8 per cent each ) and Hong Kong ( 4.1 per cent ) . These i¬?ve states together accounted for around 38 per cent of India ‘s entire exports during April-December 2011.


With a registered growing of 32.1 per cent during 2011-2012, imports were at US $ 488.6 billion. Import growing was chiefly led by a jet in capital goods, gold and Ag and POL. The POL imports at US $ 155.6 billion reflected an addition in international petroleum oil monetary values because it showed a higher growing of 46.9 per cent. During 2011-2012, the mean monetary value of Indian basket of rough oil stood at US $ 111.6 per barrel which made it 31.1 per cent higher than US $ 85.1 per barrel during 2010-2011. At US $ 271.5 billion, non-oil non- gold and Ag imports at US $ 271.5 billion witnessed a lower growing of 22.7 per cent during 2011-12 as compared with 29.0 per centum in 2010-11. Imports for 2011-12, as per the latest available informations on commodity-wise from April to December in the twelvemonth, crude oil and crude oil merchandises continued to be a major point of India ‘s imports, followed by capital good and gold and Ag. India ‘s entire ware imports for crude oil, crude oil merchandises and related stuff accounted for about 30.6 per cent. Import of gold and Ag showed a significantly higher growing of 55.1 per cent as compared with 53.2 per centum in 2010-11.

International monetary values ( 29.0 per cent ) during April- December 2011 reflects that monetary value every bit good quantum factors led rush in higher imports of gold in value footings ( 50.9 per cent ) during that period. At US $ 251.2 billion, non- oil imports witnessed a growing of 29.5 per centum as against 33.2 per centum during the twelvemonth 2010-11. On history of deceleration/decline in growing of imports of export related points ( viz, pearls, cherished and semi cherished rocks and chemicals ) , there is a slowing in non-oil imports. Most of the classs of capital goods was higher in footings of imports growing during April- December 2011-12 than the corresponding period of 2010-11. Share of European Union in India ‘s entire imports declined marginally to 11.9 per cent from 12.1 per centum during the same period of 2010-11. The portion of OPEC group of states, Africa and developing states rose during April- December 2011-12. China continued to be the largest beginning of imports with a portion of 12.4 per cent in entire imports, followed by the UAE, Switzerland, Saudi Arabia and the US. Together all these states constitute about 37.5 per centum of India ‘s imports.[ CITATION PIL08 l 1033 ]

Structural failing of India ‘s foreign trade

A figure of surveies have showed that trade freedom has n’t progressed in conveying major alterations in the merchandise composing of foreign trade of India. The private and big industrialisation program followed for rather a long clip result in a little industrial division. Finally, this sector has grown signaling technological potency, but these were accompanied by large-stretch technological interval and inefficiencies because of scarce right of entry to fresh engineerings and capital trade goods, controlled private investing, manage on the enlargement of heavy private company. Alteration happened after 1992 with liberalisation of trade. Liberalizing trade had an exciting consequence largely in the instant station reform epoch. Manufactured exports increased and portion of usual exports similar to fabrics leaned to turn down, while new sectors appeared such as pharmaceuticals, chemicals and technology goods. though, the export field is non sufficiently diversified and yet subjugated by easy and uniform goods with little degrees of inventiveness and straightforward engineerings, and for which India ‘s advantage lies in the bing low-cost labor. Due to this forte India exports chiefly those goods for which planetary demand is increasing bit by bit. India ‘s exports were hence determined in chunky engineering merchandises and sulky turning markets. Its encouragement regulation favours domestic market defends uneffective industries and undergoes from deficit in infrastructural services. The following survey approximately verifies the statement stated over. It points out a time-consuming patterned advance of the engineering tallness. Though, a few alteration are able to be seen at produce degree exports from 2000-2001 onwards but it is non important. The labour-concentrated goods such as fabrics and leather merchandises are draging its portion in planetary market but capital-concentrated merchandises are doing a sense.[ CITATION PIL08 l 1033 ]

Estimated Foreign Trade by 2020


Degree centigrades: UsersToshibaDesktop2020.png[ CITATION PIL08 l 1033 ]

Trend analysis was exercised to calculate the export and import development and trade deficit/ excess boulder clay 2020. For this, case concatenation information, series from 1950-07 on export, import and trade deficit/surplus was used. The survey shows that export trade will lift up to U.S. $ 61 billion. On contrary import will maintain turning and transverse U.S. $ 79 billion. The trade shortage will maintain rise and touch U.S. $ 18 billion by 2020.

6. Decision

The period of the Indian foreign trade can be divided into three sub- periods of 1950-1970, 1971-1991 and station 1991 which shows it has progressed a batch during these old ages. The clip when India lost its market portion to other states in 1950s and 1960s was when the trade got stagnated. Import permutation and export pessimism has a negative impact because of the authorities policies and dominant positions. The state of affairs improved in 1970s and picked up in station liberalisation epoch in general and after 2002 in peculiar. It is non dominated by manufactured goods and services in footings of composing. Servicess exports part has grown quickly in recent yesteryear. The portion of Indian services exports in planetary exports is more than two-base hit of that of Indian fabrication exports portion. It is now more distributed around the universe and the portion of East Asiatic states his on rise in overall trade. The high growing rates and little portion in universe trade, with the aid of economic theories maintaining in head the big size of the economic system. We can reason that there is a immense untapped potency for Indian foreign trade in the old ages to come.[ CITATION PIL08 l 1033 ]


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