Foreign Trade - Its Changing Composition

Foreign trade : Changing composition and encouraging scenario| | | | | Foreign trade has played a crucial role in India’s economy growth. The composition and direction of India’s foreign trade has undergone substantial changes, particularly, after the liberalization process which began in the early 1990s. Our major exports now includes manufacturing goods such as Engineering Goods, Petroleum Products, Chemicals & Related Products, Gems & Jewellery, Textiles, Electronic Goods, etc. which constitute over 80 per cent of our export basket.

On the other hand, major import items constitute capital goods and intermediates which not only support the manufacturing sector but also supply raw-materials for the export oriented units.

Over the years, India’s trade with countries of Asia ; ASEAN and Africa has gone up substantially. Apart from that, India is now a major player in global trading system and all the major sectors of Indian economy are linked to world outside either directly or indirectly through international trade. Total Trade Of Exports And Imports Over The Years In Crore Rupees| |

While imports rose by 45%, exports increased by 43% Even though figures for January show a slight slow down by comparison for both exports (9% growth) and imports (18% growth), it does not take away from the overall high rise in trade through 2003.

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At a time when the world economy is just about recovering, Indian incomes are actually growing fast as is evident from the rising imports, besides the other economic variables. This implies that the country’s growth is independent of world growth. The rising exports are a reflection of the fact that India ’s export sector is making headway.

This is of special significance at a time when the Indian rupee is rising against the American dollar. Since the beginning of 2003, the rupee has been more or less steadily rising against the dollar, and the rise would probably have been higher than what it has been, had the central bank (RBI) not intervened. While an appreciation in the rupee makes exports expensive for the US, which is India ’s largest trading partner, it has evidently not made much difference to India ’s exports Exports rise but trade gap widens

The performance in January has taken the sheen out of India’s shining export sector. Export growth dropped to 8. 7 per cent in January after registering an unprecedented growth of 42 per cent in December. The overall export growth for the current fiscal still remains on track to meet the target of 12 per cent, but the hopes generated by the December performance have been dashed. According to latest trade figures released by the Commerce Ministry, exports in January 2004 were valued at $ 5. 117 billion against $ 4. 706 billion in January 2003. This worked out to a growth of 8. per cent. In January 2003, exports had grown by 10. 6 per cent. Overall, in the first 10 months (April-January) of the current fiscal, exports grew by 12. 8 per cent. In the corresponding period last year, exports had recorded a growth of 17. 1 per cent. During April-January 2003-04, exports amounted to $ 47. 502 billion against $ 42. 1 billion during April-January 2002-03. The current financial year has been particularly challenging for India ‘s exports with the rupee gaining in value against dollar, thereby eroding export competitiveness.

Exporters also have been complaining about the withdrawal of tax benefits, instability in policies regarding export incentives and non-availability of export credit at internationally competitive rates. Except for the strong pre-Christmas overseas consumer demand, the December spurt in export growth has remained unexplained although the government was then quick to claim a “turn-around” in the export sector. India’s imports, on the other hand, continue to show a healthy growth, indicative of the general revival in industrial activity in the country this year.