Question

Answer the following question in about 150 words.

Write a note on the changing nature of the international trade of India.

Answer 1

In 1950-51, India’s external trade was worth Rs. 1,2140 million, which rose to Rs. 22,09,270 crore in 2009-10. The main reasons for the rise in the quantum of trade are momentum generated by the manufacturing sector, the government's liberal policies, and market diversification. The nature of India’s foreign trade has changed over the years. Although the total volume of imports and exports has increased, the value of imports remains higher than that of exports. There has also been an increase in the trade deficit over the last couple of years. This increase in the deficit is attributed to the rise in crude petroleum prices, which are a major component of India’s international trade.

1. Changing Nature of India’s Exports: The composition of commodities in India’s international trade has been evolving over the years. The share of agriculture and allied products has declined, whereas shares of petroleum and crude products and other commodities have increased. The shares of ore minerals and manufactured goods have largely remained constant from 1997-98 to 2003-04. The increase in the share of petroleum products is due to rising petroleum prices and India’s refining capacity. The decline in traditional products is largely due to the competition from the international market. Amongst agricultural products, there is a great decline in the exports of traditional items such as coffee, spices, tea, pulses, etc. though an increase has been registered in floricultural products, fresh fruits, marine products, and sugar, etc.
   The manufacturing sector alone accounted for 68 per cent of India’s total value of exports in 2010-11. Engineering goods have shown significant growth in the export list. China and other East Asian countries are our major competitors.
   Gems and jewellery account for a larger share of India’s foreign trade.
2. Changing Nature of India’s Import: India faced a serious food shortage during the 1950s and 1960s. The major items of import at that time were foodgrain, capital goods, machinery, and equipment. The balance of payments was adverse, as imports exceeded exports despite all efforts at import substitution. After the 1970s, foodgrain imports were discontinued due to the success of the green revolution, but the 1973 energy crisis pushed up petroleum prices, and the import budget was also increased. Fertilisers and petroleum replaced foodgrain imports. Machine and equipment, special steel, edible oil, and chemicals largely make up the import basket.
   There has been a steep rise in petroleum product imports. It is used not only as a fuel but also as an industrial raw material. It indicates the tempo of rising industrialisation and a better standard of living. Sporadic price rise in the international market is another reason for the same. Capital goods imports continued to increase due to rising demand in the export-oriented industrial and domestic sectors. Non-electrical machinery, transport equipment, metal manufacturers, and machine tools were the main categories of capital goods.
   Import of food and allied products declined, with a fall in edible oil imports. Other major items of India’s import include pearls and semi-precious stones, gold and silver, metalliferous ores and metal scrap, non-ferrous metals, electronic goods, etc.