India's Foreign Trade - Volume, Composition and Direction

INTRODUCTION

Among several features of Globalization/”>Globalization-3/”>Globalization, one relates to increasing interactions among nations and removal of barriers to facilitate movement of goods, capital, labour and technology. It is a process that renders various activities and aspiration worldwide in scope or application. As a part of this process of increasing integration of the world, many countries have adopted Economic Reforms and Liberalization-2/”>Liberalization in their own ways.

The rapid integration of Brazil, Russia, India, China and South Africa into the world market was an important element of globalization. Trade is the primary manifestation of this increasing integration and changing organizational structure of the global economy which has been much more extensive than in the past involving more countries & regions. In the similar way, it is also much more intensive as Foreign Trade became a key component of most countries economic activities. Over the years emerging economies like China, India, Brazil, Mexico, Russia and South Africa have made their presence felt in the global market and have come forth as new key drivers of global Growth.

Among other emerging countries, China and India are the fastest growing economies. India with its distinct development strategy has the potential to influence economic activities of the global economy in the years to come. With this background, this study is an exploratory attempt to measure the quantum leap in export and import to India, and to identify changes in commodity composition and regional patterns of inflows and outflows of merchandise trade. The analysis pertains to four points of time 1990, 1995, 2000 and 2005. Some of the major findings of the study are as follows: (i) Manufacturing sector has increased its share vis-̂-vis other tradable sectors; (ii) Specialization of production and diversification of consumption; (iii) Indian trade is gradually moving away from low value-added product

TRADE Infrastructure-2/”>INFRASTRUCTURE FOR EXPORT SCHEME (TIES)

Objectives

To enhance export competitiveness by bridging gaps in export infrastructure, creating focused export infrastructure, first mile and last mile connectivity for export-oriented projects and addressing quality and certification measures.

Salient features

It would provide financial assistance for setting up and upgradation of existing infrastructure with export linkages like border haats, cold chains, dry Ports etc.
The Central and State Agencies, including Export Promotion Councils, Commodities Boards, SEZ Authorities and Apex Trade Bodies recognised under the EXIM policy of Government of India; are eligible for financial support under this scheme.
The Central Government funding will be in the form of grant-in-aid, normally not more than the Equity being put in by the implementing agency or 50% of the total equity in the project. (In case of projects located in North Eastern States and Himalayan States including J&K, this grant can be upto 80% of the total equity).

MERCHANDISE EXPORTS FROM INDIA SCHEME

It is an export promotion scheme launched under the Foreign Trade Policy (FTP) 2015-20.
It has replaced 5 different schemes of earlier FTP (Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agri. Infrastructure Incentive Scrip, Vishesh Krishi and Gram Udyog Yojana) for rewarding merchandise exports which had varying conditions (sector specific or actual user only) attached to their use.
Now there would be no conditionality attached to the scrips issued under the scheme.

Service Exports from India Scheme (SEIS)

It was launched under the Foreign Trade Policy (FTP), 2015-20 replacing the earlier scheme ‘Served from India Scheme’.
SEIS shall apply to `Service Providers’ located in India’ instead of `Indian Service Providers’. Thus, SEIS provides for rewards to all Service providers of notified Services, who are providing services from India, regardless of the constitution or profile of the service provider.

TRENDS

In the age of globalisation, India is new entrant to expand international trend. In 1991, the government initiated some changes in its strategy on trade, foreign Investment, Tariffs and Taxes under the name of “New Economic Reforms”. Indian government mainly concentrated on reforms on Liberalization, openness and export sponsorship activity. It is witnessed that foreign Trade of India has considerably revolutionized export in the Post reforms period. Trade Volume increased and the composition of exports has undergone several noteworthy changes. In Post – reform Period, the major provider to export’s growth has been the manufacturing sector.
Though India has steadily opened up its wealth, its tariffs are high as compared with other countries, and its conjecture norms are still restricted. Foreign trade in India in legal term is the Foreign Trade (Development and Regulation) Act, 1992. The Act provide with the development and regulation of foreign trade by assisting imports into, and supplementing exports from India.
To fulfil the requirements of the Act, the government may make necessities for assisting and controlling foreign trade, may forbid, confine and regulate exports and imports, in all or particular cases as well as subject them to exclusion. Government is endorsed to devise and declare an export and import policy and also amend the same from time to time, by notification in the Official Gazette, and is also authoritative to appoint a ‘Director General of Foreign Trade’ for the purpose of the Act, including formulation and accomplishment of the export-import policy.
The 15X15 MatrixStrategies was introduced in 1995 and major aim of this policy was to recognize market diversification and commodity diversification. When reviewed the success of this, it represented that the share of the total top 15 product groups exported to the top 15 market destinations declined from 71% in 1996-97 to 66% in 2000-01 in respect of the total export of these 15 product groups for all destinations taken together. It clearly showed the market diversification for these product groups.
The major items of India’s exports controlled in the Matrix continue to remain the same during 2000 – 01 such as Gems and Jewellery, RMG Cotton including accessories and Cotton Yarn, Fabrics and Made Ups. The top three destinations changed from US, UK and Japan to US, Hong Kong and UAE. Another strategy was Focus LAC which was introduced in 1997 in order to enhance exports of chosen products such as Textiles including RMG, Engineering goods and Chemical products to Latin American Region. The highest growth rate of exports to this region was accomplished during period of 2000-01 when the value of exports was high of US$ 982 million.
Though the current trade between LAC and India is still low, there is possibility to increase two-way trade between India and the LAC region. It is observed from the export strategies of previous time is that the composition, competitiveness and complexion of world products trade are changing rapidly and there is a need to review the market constantly for any medium term export strategy to achieve a higher share of global exports on a sustainable basis. The main concentration of previous foreign trade strategies was on the existing export products of India.
Nonetheless, presently, the government has made policy on trade and investment policy that has established an obvious change from protecting ‘producers’ to benefiting ‘consumers’. It is reflected in its foreign trade strategy of India for 2004/09 which indicated that “for India to become a major player in world trade we have also to make possible those imports which are required to stimulate our economy”. With numerous economic alterations, globalisation of the Indian economy has been the foremost factor to formulate the trade policies.
The announcement of a new Foreign Trade Policy of India for a five year period of 2004-09, substituting until now taxonomy of EXIM Policy by Foreign Trade Policy is major step in the development of foreign trade policy. This policy made the overall development of India’s foreign trade and offers guidelines for the development of this sector. Main purpose of the Exim Policy is to hasten the economy from low level of economic activities to high level of economic activities by making it a globally oriented energetic economy and to derive maximum benefits from expanding global market opportunities, to encourage continued economic growth by providing access to essential raw materials, intermediates, components, consumables and Capital Goods required for augmenting production, to boost the techno local strength and efficiency of Indian agriculture, Industry and services, thereby, improving their competitiveness, to generate new EMPLOYMENT and opportunities and encourage the attainment of internationally accepted standards of quality.
Finally, this policy provides quality consumer products at reasonable prices. A vibrant export-led growth strategy of doubling India’s share in global commodities trade with an attention on the sectors having prospects for export development and potential for employment generation, represent the main factor of the policy. These activities augment India’s international competitiveness and assist in increasing the suitability of Indian exports. The trade policy recognizes major strategies, outlines export incentives, and also focus on issues relating to institutional support including SIMPLIFICATION of procedures relating to export activities.
India is now violently pushing for a more moderate global trade management, especially in services. It has understood a Leadership role among developing nations in global trade debates, and played a decisive part in the Doha negotiations. With economic reforms, globalisation of the Indian economy has been the major factor in devising the foreign trade policy of India.

Challenges

The objective of the Foreign Trade Policy is to twofold India Percentage share of global merchandise trade and to act as an effectual instrument of economic growth by giving a thrust to employment generation, especially in semi-urban and rural areas. The growth performance of exports has been a result of watchful effort of the Government to lessen transaction costs and assist trade. The guidelines of the Foreign Trade Policy (2004-09) for a five year period clearly articulate objectives, strategies and policy initiatives that has been involved in putting exports on a higher growth line.
There are numerous challenges and issues in foreign trade. These include burden of export promotion schemes, danger of circular trading, and risk of importing outdated machinery. Sometimes policy fails to take a holistic view of trade issues. Other issue is relative importance of the home market, the nature or the degree of State intervention and recessionary conditions in the global market. India’s exports have suffered due to structural constraints operating both on the demand and supply side.
On the demand side exports have continued to undergone the problems of adverse world trading Environment, protectionist sentiments in the developed countries in the guise of technical standards, environmental and social concerns and tariff differentials in imports by the developed countries. At the supply end, the factors that have constrained exports from India include infrastructure constraints, high transaction costs, inflexibilities in labour laws, quality problems, constraints in attracting FDI in the export sector, etc

Conclusion

It is summarized that foreign trade has significant function in the fiscal development of any nation. India has made strong foreign trade policies and reformed these from time to time with the process of globalisation and liberalization. Since 1991, India’s foreign trade considerably transformed. India’s major exports include manufacturing and engineering goods. India has good trading relations with all developed countries in the world. More than fifty percent of India’s total export trade is with Asia and ASEAN region and about sixty percent of India’s total imports is with the same countries. India’s wealth previously was agricultural economy.

India’s major requirement use to be food grains and other goods in import with fast industrialization, the composition of India’s imports goods changed and needed chemicals, Fertilizers and machinery which were required to meet the developmental requirements of country. In the composition of export; country sells agricultural products such as tea, spices, and other raw materials. However, with the industrialization of the financial system, compositions of exports changed. Currently, India exports products such as machinery chemicals and marine products. This may enhance the fiscal condition of India.

India’s Foreign Trade: An Overview

India’s foreign trade has grown significantly in recent years. In 2020-21, India’s total trade (exports + imports) was US$900 billion, up from US$300 billion in 2000-01. India’s exports have grown at an Average annual rate of 10% over the past 20 years, while its imports have grown at an average annual rate of 12%.

India’s foreign trade is dominated by goods trade. In 2020-21, India’s goods exports were US$410 billion, while its goods imports were US$490 billion. India’s services trade is also growing rapidly, but it is still a relatively small part of India’s total trade. In 2020-21, India’s services exports were US$200 billion, while its services imports were US$190 billion.

India’s main foreign trade partners are the United States, China, the United Arab Emirates, and Hong Kong. In 2020-21, India’s top five export destinations were the United States (15%), China (14%), the United Arab Emirates (10%), Hong Kong (7%), and Saudi Arabia (6%). India’s top five import sources were China (18%), the United States (11%), Saudi Arabia (8%), Iraq (7%), and the United Arab Emirates (6%).

India’s foreign trade balance has been in deficit for many years. In 2020-21, India’s Trade Deficit was US$80 billion. The main reason for India’s trade deficit is that it imports more goods than it exports. India’s imports are mainly of capital goods, Intermediate Goods, and consumer goods. India’s exports are mainly of manufactured goods, agricultural products, and services.

India’s Foreign Trade Policy is designed to promote exports and to reduce imports. The government of India provides a number of incentives to exporters, such as tax breaks and duty-free imports of raw materials. The government also imposes tariffs on imports to protect domestic industries.

India has signed a number of free trade agreements (FTAs) with other countries. These FTAs are designed to reduce tariffs and other barriers to trade between India and its trading partners. The most important FTAs that India has signed are the India-ASEAN FTA, the India-Japan FTA, and the India-Korea FTA.

India’s foreign trade faces a number of challenges. One challenge is that India’s exports are concentrated in a few products, such as textiles, gems and jewelry, and pharmaceuticals. This makes India vulnerable to changes in the global demand for these products. Another challenge is that India’s infrastructure, such as ports and roads, is not adequate to support its growing trade. Finally, India’s labor laws are complex and make it difficult for businesses to hire and fire workers.

Despite these challenges, India’s foreign trade has the potential to grow significantly in the future. India has a large and growing Population, which provides a large domestic market for goods and services. India also has a young and educated workforce, which is a valuable asset for businesses. Finally, India is located in a strategic location, which makes it a natural hub for trade between Asia and the rest of the world.

India’s foreign trade opportunities are vast. India can increase its exports by diversifying its product base and by penetrating new markets. India can also increase its imports by reducing tariffs and other barriers to trade. Finally, India can attract more foreign investment by improving its infrastructure and by making its labor laws more flexible.

India’s foreign trade has been growing steadily in recent years. In 2020-21, India’s total trade (exports + imports) was $945 billion, up from $510 billion in 2010-11. This growth has been driven by both increasing exports and imports.

India’s exports have grown at an average annual rate of 10% in the last decade. The main drivers of export growth have been the IT and IT-enabled services sector, the gems and jewellery sector, and the engineering goods sector. India’s imports have also grown at a rapid pace, averaging 12% per year in the last decade. The main drivers of import growth have been the petroleum sector, the capital goods sector, and the intermediate goods sector.

India’s foreign trade is highly diversified. In 2020-21, India’s top five export destinations were the United States, the United Arab Emirates, China, Hong Kong, and Singapore. India’s top five import sources were China, the United States, Saudi Arabia, Iraq, and the United Arab Emirates.

India’s foreign trade is also highly concentrated in a few sectors. In 2020-21, the top five export sectors were engineering goods, petroleum products, gems and jewellery, pharmaceuticals, and ready-made garments. The top five import sectors were petroleum products, gold, electronic goods, coal, and iron and steel.

India’s foreign trade has a significant impact on the Indian economy. Exports and imports account for about 40% of India’s GDP. Foreign trade also creates jobs and contributes to economic growth.

India’s foreign trade is facing some challenges. One challenge is the rising trade deficit. India’s trade deficit has been increasing in recent years, reaching $189 billion in 2020-21. This is due to the fact that India imports more goods and services than it exports.

Another challenge is the protectionist measures being adopted by some countries. Some countries, such as the United States, have imposed tariffs on Indian goods. This has made it difficult for Indian exporters to compete in the global market.

Despite these challenges, India’s foreign trade is expected to continue to grow in the coming years. The government has taken several measures to boost foreign trade, such as signing free trade agreements with other countries and improving the infrastructure for trade. These measures are expected to help India increase its exports and imports.

Here are some frequently asked questions about India’s foreign trade:

What is India’s foreign trade?
India’s foreign trade refers to the total value of goods and services that India imports and exports. In 2020-21, India’s total trade (exports + imports) was $945 billion.
What are the main drivers of India’s foreign trade?
The main drivers of India’s foreign trade are the IT and IT-enabled services sector, the gems and jewellery sector, and the engineering goods sector.
What are the main challenges facing India’s foreign trade?
The main challenges facing India’s foreign trade are the rising trade deficit and the protectionist measures being adopted by some countries.
What are the government’s measures to boost foreign trade?
The government has taken several measures to boost foreign trade, such as signing free trade agreements with other countries and improving the infrastructure for trade.
What is the outlook for India’s foreign trade in the coming years?
India’s foreign trade is expected to continue to grow in the coming years. The government’s measures to boost foreign trade are expected to help India increase its exports and imports.

India’s foreign trade has been growing steadily in recent years. In 2020-21, India’s total trade (exports + imports) was $944 billion, up from $516 billion in 2010-11. This growth has been driven by both increasing exports and imports.
India’s exports have been growing at an average rate of 10% per year since 2010-11. In 2020-21, India’s exports were $418 billion, up from $206 billion in 2010-11. The main drivers of India’s export growth have been the IT and IT-enabled services sector, the engineering goods sector, and the gems and jewellery sector.
India’s imports have also been growing at an average rate of 10% per year since 2010-11. In 2020-21, India’s imports were $526 billion, up from $310 billion in 2010-11. The main drivers of India’s import growth have been the crude oil sector, the machinery and equipment sector, and the chemicals sector.
India’s foreign trade is highly diversified. In 2020-21, India’s top 10 export destinations were the United States, the United Arab Emirates, China, Hong Kong, Singapore, Germany, the United Kingdom, Japan, and the Netherlands. India’s top 10 import sources were China, Saudi Arabia, the United States, Iraq, the United Arab Emirates, Kuwait, Switzerland, South Korea, and Indonesia.
India’s foreign trade is in surplus. In 2020-21, India’s trade surplus was $66 billion. This surplus is mainly due to India’s strong export performance in the IT and IT-enabled services sector.
India’s foreign trade is facing some challenges. One challenge is the rising trade deficit with China. In 2020-21, India’s trade deficit with China was $53 billion. Another challenge is the increasing protectionism in some countries. This protectionism is making it difficult for Indian exporters to compete in international markets.
Despite these challenges, India’s foreign trade is expected to continue to grow in the coming years. This growth will be driven by the increasing demand for Indian goods and services in the global market.
India’s foreign trade has a significant impact on the Indian economy. The export sector is a major source of employment and Foreign Exchange earnings for India. The import sector helps to meet the needs of the Indian economy and also provides competition to domestic producers.
India’s foreign trade is governed by a number of policies and regulations. These policies and regulations are designed to promote exports, protect domestic industries, and ensure fair trade practices.
India’s foreign trade is an important part of the Indian economy. It contributes to economic growth, employment, and foreign exchange earnings. The government of India is committed to promoting foreign trade and ensuring that it is conducted in a fair and competitive manner.

Here are some MCQs based on the above information:

Which of the following is not a challenge facing India’s foreign trade?
(A) The rising trade deficit with China
(B) The increasing protectionism in some countries
(C) The declining value of the Indian rupee
(D) The increasing demand for Indian goods and services in the global market
Which of the following is not a policy or regulation governing India’s foreign trade?
(A) The Export Promotion Councils
(B) The Foreign Trade Policy
(C) The Import-Export (Control) Act
(D) The Foreign Exchange Management Act
Which of the following is not a major export sector of India?
(A) The IT and IT-enabled services sector
(B) The engineering goods sector
(C) The gems and jewellery sector
(D) The agriculture sector
Which of the following is not a major import sector of India?
(A) The crude oil sector
(B) The machinery and equipment sector
(C) The chemicals sector
(D) The consumer goods sector
Which of the following is not a top export destination of India?
(A) The United States
(B) The United Arab Emirates
(C) China
(D) The United Kingdom
Which of the following is not a top import source of India?
(A) China
(B) Saudi Arabia
(C) The United States
(D) Japan
Which of the following is the main