India. At the level of Central Government it is administered by the Ministry of Commerce and Industry. Foreign trade accounted for 48.8% of India’s GDP in 2015.
There are records throughout history of India’s trade with foreign countries. Even before independence, the Government of India maintained semi-autonomous diplomatic relations.India exports approximately 7500 commodities to about 190 countries, and imports around 6000 commodities from 140 countriesTable of recent India Foreign Trade2008176.4305.5-129.12009168.
3447.9-137.6 Foreign trade in India includes all imports and exports to and from India. At the level of Central Government it is administered by the Ministry of Commerce and Industry.
Foreign trade accounted for 48.8% of India’s GDP in 2015.The top 10 commodity exportsRankCommodityHS CodeValue (US$ billion)Share (%)1Refined Petroleum2761.
219.22Gems, precious metals, coins7141.2133Vehicles8714.54.64Machines, engines, pumps8513.64.35Organic chemicals2912.
13.86Pharmaceuticals3011.73.77Cereals1010.13.28Iron and steel729.
12.99Clothing (not knit or crotchet)589.12.910Electronics859.12.8 Composition of foreign trade of India Composition of foreign Indian foreign trade means major commodity or sectors in which India is doing export and import.India is a very old participant in world trade.
Indian foreign trade registered a number of structural changes during the planning period. The percentage of non- traditional goods in total export has increased i.e, export of chemical and engineering goods have shown a good rise. Some other items are gems and Jewellery.
India is making export of few traditional goods like; tea, coffee, rice, pulses, spices, tobacco, jute, iron ore etc.Since independence, composition of export trade of India has undergone a change. Prior to independence, India used to export agricultural products and raw materials, like jute, cotton, tea, oil seeds, leather, food grains, cashew nuts, and mineral products.It also exported manufactured goods. But now in its export kitty are included mostly manufactured items like, machines, ready-made garments, gems and Jewellery, tea, jute manufactures, Cashew Kernels, electronic goods, especially hardware’s and software’s which occupy prime place in exports.
Share Commodity Composition of Exports: Commodity Group2010-112011-122012-13Agriculture and Allied9.7%12.4%14%Ores and minerals3.4%2.8%2.0%Jewellery 16%14.7%15.4%Drugs pharmaceuticals 4.
3%4.4%5.0%Manufactures of metals3.
1%Crude and petroleum (including coal)16.8%18.7%18.9% Compositional changes in India’s export basket have been taking place over the years. The export of India’s primary products in export fell over from 16% in 2000-01 to 12% in 2012-13. The share of manufacturing export fell drastically from 78.
8% in 2000-01 to 66% in 2011-12 and further to 64% in 2012-13. The fall was mainly in the traditional export items like textiles, leather and jute. The share of petroleum crude and refined items increased from 4.3% in 2000-01 to 18.6% in 2012-13.Share Commodity Composition of Import: Commodity Group2010-112011-122012-13Food and allied products2.9%3%3.
0%precious stones9.4%5.7%6.1%Gold and silver11.5%12.6%13.0%Electronic goods7.
2%6.7%7.0% There has been a significant change in the import basket of India in the recent years. The share of gold and silver imports increased from 9.3% in 2000-01 to 12.
6% in 2011-12 with a high import rate of 44.5%. Import of crude oil is the largest item of India’s import basket.Composition of foreign Indian foreign trade means major commodity or sectors in which India is doing export and import.
India is a very old participant in world trade. Its participation have been promoted by the opening of Suez Canal and speedy development of the ship building industry supplemented by the spread of industrial revolution in Europe and fast expansion of Indian railways. India’s merchandise exports reached a level of U.S. $185.3 billion during 2008-09 registering a growth of 13.6 per cent as compared to a growth of 29.1 per cent during the previous year.
Notwithstanding the deceleration of the growth in 2008-09, India’s export-sector has exhibited remarkable resilience and dynamism in the recent years. Our merchandise exports recorded an Average Annual Growth Rate (AAGR) of 23.9 per cent during the five year period from 2004-05 to 2008-09, as compared to the preceding five years when the exports increased by a lower AAGR of 14.
3 per cent. According to latest WTO data (2009), India’s share in the world merchandise exports increased from 0.8 per cent in 2004 to 1.1 per cent in 2008. India also improved its ranking in the leading exporters in world merchandise trade from 30th in 2004 to 27th in 2008.Direction of foreign tradeDirection of foreign trade means the countries to which India exports its goods and the countries from which it imports. Thus direction consists of destination of exports and sources of our imports.
Prior to our Independence when India was under British rule, much of our trade was done with Britain. Therefore, UK used to hold the first position in India’s foreign trade. However, after Independence, new trade relationships were established. Now USA has emerged as the most important trading partner followed by Germany, Japan and UK. India is also making efforts to increase the exports to other countries also the direction of India’s exports and imports. Direction of foreign trade means those countries with which India has trade ties. Direction of Indian foreign trade has undergone a considerable change after independence.
Direction of foreign trade can be discussed as follows:1. Organisation of Petroleum Exporting Countries (OPEC):OPEC includes countries Kuwait, Iran, Saudi Arabia, United Arab Emirates (UAE) and Indonesia. India was exporting 11% of her total exports to these countries in 1989-81 and it has gone to 12% in 2001-02. But during this period, our imports have steadily declined from these countries i.e. from 27.8% to 5.
8%. India’s oil export was 27.8% in 1980-81 and due to domestic production of oil, our import decreased.2. Eastern Europe:Countries of East Europe like erstwhile USSR, Poland, Romania, Bulgaria, Yugoslavia, East Germany and Czechoslovakia are included in this group. Our exports to these countries were 8% and imports were 4% in 1960-61. Our trade increased with Russia after 1971 treaty.India’s co-operation and friendship grew with these countries.
India’s exports to these countries were 22.1% and imports were 10.3%. Nearly 84% of the trade was with Russia.
After the fragmentation of USSR our trade declined. In 2001-02 out exports were 2.3% and imports were 1.4%.
3. Organisation of Economic Co-operation and Development Countries:In this organisation developed countries of the West and Japan are included. India’s exports with these countries were 46.
6% of total exports in 1980-81 and its share increased to 49.3% in 2001-02. Our exports with USA have increased from 11.
1% to 19.4%.Our exports to Japan have decreased. India’s exports to European Union during the said period have remained more or less constant. India’s imports have declined from 45.8% in 1980-81 to 40.1% in 2001-02. Specially our imports have declined significantly from USA in this period.
4. Developing Countries:Asian countries excluding Japan and OPEC, Latin American countries and Africa fall in this category. Our trades with these countries have been increasing. In 1980-81, Indian exports were 18.9% and imports 15.
7%. In 2001-02 out exports increased to 28% and imports to 19.1%. Asian countries contribute 65 to 70% of trade with India.
India’s foreign trade with Africa and South America is very small.India has vast requirements of industrialisation. So it purchases from U.K.
, USA, and USSR and from many other countries.Trends of indian foreign trade1. Huge Growth in the Trade:the total value of foreign trade which was Rs. 1,972 crore in 1950-51, gradually increased to Rs. 2,835 crore in 1960-61 and then to Rs.
3,487 crore in 1965-66. After that the value of trade increased at a quicker pace from Rs. 3,169 crore in 1970-71 to Rs. 9,301 crore in 1975.
-76 and then rose significantly to Rs. 19,260 crore in 1980- 81.Thereafter, the total value of trade rose significantly to Rs. 30,553 crore in 1985-86 to Rs. 63,097 crore in 1989-90 and to Rs. 91,893 crore in 1991-92 and then to Rs.
1,17,063 crore in 1992-93 and finally to Rs. 22.15,191 crore in 2008-09. 2. Higher Growth of Imports:Another peculiarity that can be seen from this trend is that there has been consequential higher growth in respect of imports of the country since 1951. Thus the total value of imports which was Rs. 1,025 crore in 1950-51 gradually rose to Rs.
1,634 crorein 1970- 71, i.e., by only 59 per cent. Since then the value of imports started to rise at a very faster pace and thus reached the level of Rs. 12,549 crore in 1980-81 and then to Rs. 43,193 crore in 1990-91 showing an increase of 667 per cent and 244 per cent during the last two decades respectively.
The factors which were largely responsible for this phenomenal increase in imports include: huge import of industrial inputs, regular import of food grains under P.L. 480 rising anti-inflationary imports, liberal imports of non-essential items, periodic hike on oil prices and the initiation of liberal import policy by the government during 1985-86 to 1991-92. In 2008-09, the value of imports rose significantly to Rs. 13,74,436crore, showing a growth rate of 33.77 per cent over the previous year.3. Inadequate Growth of Exports:Another very peculiar situation that the country has been facing is a very slow growth in respect of its exports.
In the initial period, total value of exports in India rose marginally from Rs. 947 crore in 1950-51 to Rs. 1,535 crore in 1970-71, showing an increase of only 62 per cent. But since then the growth of exports in the country could not keep pace with the growth in imports. Total value of exports rose gradually to Rs. 6,711 crorein 1980-81 showing an increase of 337 per cent over 1970-71 and then to Rs. 32,553 crore in 1990-91, showing an increase of 385 per cent over the value of 1980-81.
In 1993-94, the value of exports rose considerably to Rs. 69,751 crore showing a growth of 29.9 per cent over the previous year.
In 2008-2009, the value of exports rose to Rs. 8,40,755 croreshowing a growth rate of 28.2 per cent over the previous year. Again in 2009-2010 (Apr.
-Jan.) the value of exports stood at Rs. 3,72,096 crore showing a negative growth of 19.9 per cent over the previous year. Due to the introduction of various export promotion measures since the devaluation of rupee in 1966, the value of Indian exports recorded some increase but this increase in exports was totally inadequate considering the sizeable growth in the value of imports.This has resulted in a persistent and widening trade deficit in the country. The factors which were mostly responsible for this low growth of exports include un-favourable terms of trade for Indian primary (agro-based) goods, inadequate export surplus, adoption of the policy of protectionism by developed countries and long period of business recession in developed country in recent years.4.
Deficit in the Balance of Trade:As a result of higher growth of imports and slow growth of exports the country has been experiencing a mounting trade deficit since 1980-81. During the last 45 years period, the country has recorded a small surplus in its trade only in two years (viz., in 1972-73 and in 1976-77).Due to adverse balance of trade situation, the extent of trade deficit in India gradually rose from Rs. 78 crore in 1950-51 to Rs.
949 crores in 1965-66. Recording a decline to Rs. 99 crorein 1970-71, the extent of trade deficit rose from Rs.
1,229 crorein 1975-76 to Rs. 5,838 crore in 1980-81 and then considerably to Rs. 10,640 crores in 1990-91. But after the introduction of some changes in the trade policy and due to considerable import compression the extent of trade deficit declined remarkably to Rs.
3,809 crore in 1991-92.Accordingly, the annual average deficit in balance of trade which was Rs. 108 cu.re during the First Plan gradually rose to Rs 747 crore during the Third Plan. But due to import compression and boosting exports, the annual average trade deficit declined to Rs. 167 crore during the Fourth Plan. But since then the annual average deficit in balance of trade rose significantly from Rs.
810 crore during the Fifth Plan to Rs. 5,716 crore during the Sixth Plan and then to Rs. 7,720 croreduring the Seventh Plan.In 1992- 93 the extent of trade deficit again rose to Rs.
9,687 crore due to huge increase in import. But during 1993-94, the extent of trade deficit declined to Rs. 3,350 crore due to considerable increase in exports. But during 2008-2009, the extent of trade deficit again rose to Rs. 5,33,681 crore. Again during 2009- 2010, the extent of trade deficit further rose to Rs. 2,31,110 crore (April-Sept.
).Balance of Payments Problem in IndiaWhat measures can be adopted to tackle the problem of disequilibrium in the balance of payments will also be discussed: About 15 years ago in 1991 India had to experience a severe balance of payments crisis.A default on payments, which would have a disastrous consequent for the Indian economy, had become for the first time in our history a serious possibility in June 1991. It was at this time that new Congress Government with Dr. ManmohanSingh as our Finance Minister took several short-term and long-term measures to overcome the balance of payments crisis.Apart from undertaking various measures of domestic liberalisation, he took several for-reaching measures relating to balance of payments problem. Rupee was devalued in July 1991 and later in two years’ time, foreign exchange rate of rupee was made market-determined and also convertible into foreign currencies.
Anti-export basis in our economic strategy was removed and accordingly tariffs on imports were reduced, so as to promote competition. In this way costly import-substitution strategy of industrialisation was abandoned. These measures bore fruits and India was successful in solving the balance of payments problem.
Our exports started growing at a relatively rapid rate than before. Capital flows and remittances by NRIs increased manifold. Of course for a short time, we got special assistance from IMF and World Bank to fulfill our obligations regarding balance of payments.Balance of Trade and Balance of Payments:Balance of trade and balance of payments are two related terms but they should be carefully distinguished from each other because they do not have exactly the same meaning. Balance of trade refers to the difference in value of imports and exports of goods only, i.e., visible items only.
Movement of goods between countries is known as visible trade because the movement is open and can be verified by the customs officials.During a given period of time, the exports and imports of goods or merchandise may be exactly equal, in which case, the balance of payments of trade is said to be balanced. But this is not necessary, for those who export and import are not necessarily the same persons. If the value of exports exceeds the value of imports, the country is said to experience an export surplus or a favourable balance of trade.
If the value of its imports exceeds the value of its exports, the country is said to have-a deficit or an adverse balance of trade.Determinants of Balance of Payments: (1) National income at home and abroad,(2) Exchange rate of national currency(3) The domestic prices of goods and factors,(4) International oil and commodity prices and(5) Demand for and supply of foreign currency.CONCLUSIONForeign trade in india is increasing day by day and it has promoted the imports and exports in our country.
Government of india has promoted the foreign trade so that the GDP can be increased.Various schemes are being launched by the government to promote foreign trade in india