Essay on the Trends of Exports and Imports of India

Since the inception of planning, the external sector of the Indian economy has undergone significant transformation.

The share of foreign trade in the country’s GNP has been rising over the years. It has increased from 11.7 per cent in 1985-86 to 14.5 per cent in 1990-91 and further to 16.9 per cent in 1992-93.

During the planning era, an expansion or rising trend of India’s foreign trade is visible. To get a correct perspective, we have taken the values of imports and exports in US dollars rather than in rupees.

The following observations are made regarding the trends in the growth of India’s foreign trade over the years.

1. Modest Growth Rate of Exports:

During 1950-51 to 1980-81, 1950 to 1980, there has been a continuous but modest increase in India’s exports valued in US dollar terms. In 1950-51, export growth rate was nearly 25 per cent which declined to 0.3 per cent in 1960-61. 1986-87 onwards, India’s growth rate of exports has considerably increased. In 1987-88, it reached a peak level of nearly 24 per cent.

It has, however, declined to 3.8 per cent in 1992-93 but again increased to 20 per cent in 1993-94. In 1996-97, the growth rate of export declined to 4.2 per cent. During 1980-81 to 1992-93, exponential growth rate of India’s exports in rupee terms is worked out at 10.6 per cent.

The lower growth of exports may be attributed to a recession abroad, increasing competition ii world market, protectionist barriers etc. However, recent export promotion measures have givens boost to India’s exports. India’s share in world’s exports is today less than 0.5 per cent. It has declined from 2.1 percent in 1950-51.

2. Large Increase in Imports:

The increase in India’s imports has been very large over the years. Imports in value terms have increased from US $ 1,273 million in 1950-51 to US $ 21, 882 million crores in 1992-93. In 1980-81, the annual growth rate of imports was very high at 40 percent as against that of exports at about 7 per cent. In 1992-93, import growth rate was over about 13 per cent as against export growth rate of 4 per cent. In 1994-95 it was 23 per cent. In 1995-96 it went up to 28.0 per cent. In 1996-96 it declined to 5.1 per cent.

However, during 1980-81 to 1992-93, the exponential growth rate of imports (in rupee terms) of India worked out at 7.9 per cent. There has been a marked rise in percentage share of imports in India’s GDP. (73% in 2000-01)

Heavy imports of capital goods, fertilisers, petroleum and some other essential commodities, steep rise in import prices have contributed to the rise of imports in India.

3. Widening Trade Deficits:

India’s balance of trade has been adverse throughout the planning period. In general, imports have been always larger than the exports. The gap between imports and exports has been considerably widening after 1977-78. Trade deficits (imports exceeding exports) have increased from US $ 4 million in 1950-51 to US $ 5,932 million in 1990-91. It was brought down to US $ 1,068 million in 1993-94 but increased again to US $ 14,815 million in 1996-97 and again to 17,841 million in 1999-2000. In 2004-05 trade deficit has jumped to US$ 36,629 million. This had adversely affected the balance of payments and foreign exchange position of the country.

4. Meagre Foreign Exchange Earnings:

Due to the slower growth rate of exports against a faster rise in imports, there has been not only meagre earnings of foreign exchange, but depletion of foreign exchange reserves too. India’s foreign exchange earnings were incapable of financing its imports. As a result, India had to face a severe problem of foreign exchange crisis in July 1991. The new trade policy of 1991 devaluation and other fiscal monetary measures of the government could save the country from this grave situation in the later years of 1992, 1993 and 1994.

The country’s foreign exchange reserves (excluding gold and SDRs) improved from US $ 2,236 million 1990-91 to $ 6,434 million in 1992-93 and further to $ 9,807 million by December 1993. In 1996-97 it stood at 22,367 million US dollar.

Trade deficit in US dollar terms declined from $ 5,932 million in 1990-91 to $ 1,546 million in 1991-92. It, however, increased to $ 3,345 million in 1992-93. In 1993-94, it decline to $ 1,068 million, primarily due to a growth of 21 per cent in dollar value of exports and imports to around less than 4 percent. It again rose to $ 11,359 million in 1995-96 and further to $ 14,379 million in 2000-01.