Before Second World War, India was forced to export more than its imports in order to meet the unilateral transfer of payments. During the Second World War, there was basic change in the nature of India's international trade.
The goods were exported to Britain. Thus, the more exports and less imports was the feature of India's foreign trade which results in the growth of a favourable trade balance.
The value of exports and imports both increased during 1938-39 to 1947-48 but the value of exports was much higher than the imports. The value of exports doubled in 1947-48 as compared to 1938-39. The commodity structure of exports has also undergone a change.
The export of raw material declined from 45% of total exports in 1938-39. However, for the sake of convenience, the study of foreign trade in pre-independence period can be divided into following parts.
1. Volume of Trade:
In the pre-independence period, India enjoyed not a good volume of foreign trade. In 1934, the total value of India's foreign trade was Rs. 186 crore. In 1938-39, its value rose to Rs. 321 crore, of it, the value of exports was Rs. 169 crore and of imports it was Rs. 152 crore.
Again in 1947-48 the total volume of foreign trade rose to Rs. 792 crore comparing of Rs. 403 crore as exports and Rs. 389 crore as imports.
2. Composition of Foreign Trade:
Before independence, only a few commodities sere numbered in the list of foreign trade. India was the exporter of raw materials and agricultural commodities. Generally, Indian exports were-cotton, textile, raw cotton, food grains, tea, oilseeds etc. On the import side, India used to import finished consumer goods, machines, chemicals, iron and steel etc.
3. Direction of Trade:
Before independence, most of India's foreign trade relations .ere with England and common wealth countries. 34% of total exports went to and 31% of total imports came from England.
Apart from this, share of British countries comprises of Burma, Canada, Sri Lanka etc., in our exports was 21% while in imports it was 10%, As regards USA, its share in total exports of India was 7% while of imports it was registered to be 8%.
4. Balance of Payments:
Before independence, India enjoyed favourable balance of payments. In 1939, balance of trade was favourable to the extent of 17 crore which in 1946-47 increased to Rs. 31 crore.