Composition of India's Foreign Trade

The composition of India's foreign trade, i.e., the pattern of imports and exports over the years, has changed in many ways.

Composition of Imports :

The principal imports of India may be classified into four major groups as follows: (i) Food and allied products; (ii) Raw materials and intermediate manufactures; (iii) Capital goods; and (iv) Other goods.

Due to the industrial growth in the country, there has been structural changes in imports since 1951 as under:

1. Increasing imports of capital goods and raw materials.

2. Declining imports of foodgrains and consumer goods.

The following observations are made in this regard:

1. Food and Allied Products:

Import of food and allied products claimed a share of 19 per cent in the total imports in the year 1960-61. Large imports of foodgrains were required to meet the domestic need of the country. In 1970-71 imports of food and allied items shared nearly 15 per cent of the total imports. The situation has improved in the food economy of India during the eighties. As such, in 1980-81 the imports of food items constituted just 3 per cent of the total imports.

2. Raw Materials and Intermediate Manufactures:

This group includes various items such as edible oil, petroleum oil and lubricants, fertilisers, iron and steel, non-ferrous metals, pearls and precious stones, etc. The share of imports of all these items together in the total imports has sharply increased from 47 per cent in 1960-61 to near 78 per cent in 1980-81.

3. Capital Goods:

This group includes non-electrical machinery, electrical machinery, locomotives and other transport equipments, etc. In 1960-61, imports of capital goods claimed nearly 32 per cent share in total imports. This has gradually declined and came down to about 21 per cent in 1992-93.

4. Petroleum Oil and Lubricants (POL):

India's import expenditure on POL imports has substantially increased over the years. It was 6.1 per cent of the total import expenditure in 1960-61. This had increased to 8.3 per cent in 1970-71 and thereafter increased dramatically to nearly 42 per cent in 1980-81. Such a sharp rise is attributed to two hikes in oil prices in the seventies - first in 1973-74 when the Oil and Petroleum Exporting Countries (OPEC) raised the price of oil from $2.50 to $3.0 per barrel to $11.65 per barrel and the second in 1978-89 when the price of oil was further raised to $35 per barrel.

During the eighties, however, the country made successful efforts to increase domestic oil production. Besides, there was a decrease in international oil prices. As a result, the share of POL I imports bill in the total import expenditure declined to 25 per cent in 1990-91.

Concluding Remarks :

During the fifties and sixties, India's imports were largely determined by the stance of import substitution. In the seventies, the country's imports were greatly influenced by the goal of reaping efficiency gains in the export sector through imported inputs. During the eighties, import expenditure on petroleum, oil and lubricants (POL was sizeable; besides the crucial import of trade liberalisation in changing India's import structure.