Eco Project Man Ish

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INTRODUCTION

Since independence the number of changes has been took place in all most all sectors of the

Indian economy, As far as foreign trader is concerned India has adopted an inward-oriented

restrictive trade policy till 1960"s. Since 1960"s, India has adopted the import substitution

policy, however the liberalisation era was started in 1970"s, but it is a mild in nature, in the late

1980"s and early 1990"s the drastic changes have been took place under the leadership of our

late Prime Minister Mr. P.V.NarshimhaRao, and the finance minister Dr. Manmohan Singh.

Indian economy has shifted towards the globalization and our economy is linked with world

economy. During 1950-1951 to 2003-2004 the Govt, of India have been implemented number of

foreign trade policies, these policies have brought a tremendous changes in Indians foreign trade.

Study area:-

In the present work an attempt has been made to the study the Trends in Indias foreign trade

Policy planning period In order to study the trends in foreign trade the three components of

trade are considered i.e. Exports, Imports, Trade balance.

Objectives:-

To examine the impact of Govt, foreign trade policy on

(A) Exports

(B) Imports

(C) Trade balance


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Data and research methodology:-

The entire data used for the present study have been obtained from the secondary sources; the

data required for the analysis of different periods are collected from the following sources.

1. R.B.I. Annual Reports and Monthly Reports various issues

2. Economic and Political Weekly - Various issues.

3. Foreign TradeReview various issues

4. Internet.etc

5. Economic surveys- Ministry of finance, Govt of India various issues.

As far as research methodology is concerned the data has been analyzed by using simple to

moderate statistical tools like Averages, Percentages, and Graphs are used for analyzing the data.

International trade or foreign trade implies that the trade between two or more countries. It is one

of the important macro- fundamental variables of an Economy. The Foreign trade is considered

as Engine of growth this Engine of growth is depend upon the various factors such as the ratio

of foreign trade of an economy with world trade, terms of trade, volume of export, volume of

import and trade balance etc. As far as foreign trade policy is concerned number of changes have

been took place during the planning period i.e. 1951-1952 onwards.

In the initial period of planning India has adopted restrictive trade and import substitution policy

till 1970s during this period public sector has assigned a major role to play in economic

development of the country, on the other hand private sector play its role with regulation

However, at the end of 1970s and beginning of 1980s India has changed its foreign trade policy

from restrictive trade to liberal trade policy During 1980s and 1990s the drastic changes have

been took place in the economies of the world. Economic power centers in the world have

shifted over the years and the Engine of growth has also altered, the late 1980s and early

1990s have seen a new wave towards globalization of finance and greater integration of

production through trade under different political conditions including trade policies in order to

share the benefits of globalization. Since planning period Indias foreign trade has passed

through the above mentioned foreign trade policies which has impacted on the volume of


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YEAR EXPORT IMPORT TRADE BALANCE

1 2 3 4

1 9 5 0 - 5 1

1 9 5 1 - 5 2

1 9 5 2 - 5 3

1 9 5 3 - 5 4

1 9 5 4 - 5 5

1 9 5 5 - 5 6

1 9 5 6 - 5 7

1 9 5 7 - 5 81 9 5 8 - 5 9

1 9 5 9 - 6 0

1 9 6 0 - 6 1

1 9 6 1 - 6 2

1 9 6 2 - 6 3

1 9 6 3 - 6 4

1 9 6 4 - 6 5

1 9 6 5 - 6 6

1 9 6 6 - 6 7

1 9 6 7 - 6 8

1 9 6 8 - 6 9

1 9 6 9 - 7 0

1 9 7 0 - 7 11 9 7 1 - 7 2

1 9 7 2 - 7 3

1 9 7 3 - 7 4

1 9 7 4 - 7 5

1 9 7 5 - 7 6

1 9 7 6 - 7 7

1 9 7 7 - 7 8

1 9 7 8 - 7 9

1 9 7 9 - 8 0

1 9 8 0 - 8 1

1 9 8 1 - 8 2

1 9 8 2 - 8 3

1 9 8 3 - 8 41 9 8 4 - 8 5

1 9 8 5 - 8 6

1 9 8 6 - 8 7

1 9 8 7 - 8 8

606

716

578

531

593

609

605

561581

640

642

660

685

793

816

810

1157

1199

1358

1413

15351608

1971

2523

3329

4036

5142

5408

5726

6418

6711

7806

8803

977111744

10895

12452

15674

608

890

702

610

700

774

841

1035906

961

1122

1090

1131

1223

1349

1409

2078

2008

1909

1582

16341825

1867

2955

4519

5265

5074

6020

6811

9143

12549

13608

14293

1583117143

19658

20096

22244

-2

-174

-124

-79

-107

-165

-236

-474-325

-321

-480

-430

-446

-430

-533

-599

-921

-809

-551

-169

-99-217

104

-432

-1190

-1229

68

-612

-1025

-2725

-5835

-5802

-5490

-6060-5399

-8763

-7644

-6570

imports, exports, trade balance etc. Impact of foreign trade policy on Indias foreign trade is

shown in the following table and graphs.

Table showing volume of exports, imports, trade balance during pre and post liberalization

period


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1 9 8 8 - 8 9 20232 28235 -8003

1 9 8 9 - 9 0 27658 35328 -7670

1 9 9 0 - 9 1 32533 43198 -10645

1 9 9 1 - 9 2 44041 47851 -3810

1 9 9 2 - 9 3 53688 63375 -96871 9 9 3 - 9 4 69751 73101 -3350

1 9 9 4 - 9 5 82674 89971 -7298

1 9 9 5 - 9 6 106465 121647 -15182

1 9 9 6 - 9 7 118817 138919 -20102

1 9 9 7 - 9 8 130100 154176 -24067

1 9 9 8 - 9 9 139753 178332 -38579

1 9 9 9 - 0 0 159561 215236 -55675

2 0 0 0 - 0 1 203571 230872 -27301

2 0 0 1 - 0 2 209018 245199 -36181

2 0 0 2 - 0 3 255137 291133 -35996

2 0 0 3 - 0 4 283605 346474 -62869

Graph showing volume of exports, imports and trade balance since


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Source:-

1) Economic survey Govt of India 2002-2003

Table No.6.3 Page.No.101 2) Annual Report RBI 2003-

2004. Page No.94. 3) Economic and Political Weekly

May 15-21. 2003- 2004 Page 1982.

In the above table and graph the volume of export, imports and trade balance is shown from

1950-51 to2003-2004. Since planning period there is increase in the volume of all factors either

positively or negatively.

Exports:-

In the year 1950-51 the volume of exports were Rs.606/-crores and it has increased up to

Rs.1413/- crores in 1969-1970 in the initial years of pre liberalization period the volume of

exports have been increased gradually, However in the liberalization period volume of exports

has been increased up to Rs1531/- in 1970-71, in 1989-90 it has increased up to Rs27658/-crores

in the post liberalization period the volume of exports has increased up to Rs283605/-crores i.e.

In 2003-2004.

Imports:-

In the initial year of planning period the volume of imports were Rs608/-crores i.e. is in 1950-51,

after two decades it has increased up toRs1582/- crores in 1969-70, during the liberalization

period the volume of imports has increased from Rs.1634/-crores in1971-

72 to Rs.35328/- in 1989-90, in post reform period it has increased from RS44041/- crores toRs.346474/- crores in 2003-04.


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Trade balance:-

The volume of trade balance of India has remained always negative (i.e. Due to the volume of

imports exceeds the volume of exports) expect for only two years trade balance of India has

remained positive i.e. is in the year 1972-73 and 1976-77. The volume of trade balance was Rs -

2/-crores in1950-51, and it was increased up to Rs.-169/- in 1969- 70, however there is a

continuously increase in the negative volume of trade balance in pre-reform period it was Rs.-

7670/- in1989-90 crores, and in post reform period it has increased up toRs.-62869/- crores i.e. is

in2003-2004.


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INTRODUCTION


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INTRODUCTION

The economy of India is the 12th largest economy in the world by market

exchange rates and the 4th largest by Purchasing Power Parity (PPP). In 1990s,

following the economic reforms from a socialist-inspired economy, the countrybegan to experience swift economic growth, as market opened for international

competition. In the 21st century, India is an emerging power with vast human and

natural resources, and huge knowledge base. Economists predict that by 2020,

India will be among the largest economies of the world.

India was under socialistic democratic-based policies from 1947 to 1991. The

economy was characterized by regulations and public ownership, leading to

corruption and slow growth rate. Since 1991 continuing economic liberalization

has moved the economy towards a market based system. A revival of economic

reforms and better economic policy in 2000s accelerated India's economic growth.

In 2008 India established itself as the world's 2nd largest growing economy.

However, year 2009 saw a significant slowdown in India's official GDP growth

rate to 6.1% as well as the return of a large projected fiscal deficit of 10.3% of

GDP.

The international trade has been growing faster than world output indicates that the

international market is expanding faster than the domestic markets. There are

indeed many Indian firms too whose foreign business is growing faster than the

domestic business. This is manifested/ necessitated/ facilitated by the following

facts:

(a) The Competitive business Environment

(b) Globalization

(c) The universal liberalization Policy.


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Table-1 shows the growth of world merchandise exports. The table indicates that during 1950-

60, the value of world exports become double. In the next 10 years it increased nearly 2 times.

During 1970s, the value of the world exports increased by about 5 times. Worldwide inflation,

particularly the successive hikes in oil prices, significantly contributed to sharp increase in the

value of exports. During 1980-90, the value of world exports increased by 80%. Between 1990-

2000, it increased by over 90%. In fact, exports of developing countries have been increasing

faster than those of the developed.

The Second half of the 20th century has seen trade expansion substantially faster than output. In

the last two decades of the 20th century, world trade has grown twice as fast as world real GDP

(6%versus 3%).India presented an interesting case. There was near stagnation in its foreign

trade-GDP ratio for about four decades since the commencement of development planning.

During this period it was around 15%. The inward looking economic policy, import compression

and slow progress on the export front were responsible. Since the economic liberalization, in

1991 there has however, been an increase in Indias foreign trade-GDP ratio it is about 20%

now.


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FOREIGN TRAE POLICYS OF INDIA:STRUCTURE AND OBJECTIVES


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FFOORREEIIGGNN TTRRAADDEE PPOOLLIICCYY OOFF IINNDDIIAA

PREAMBLE

CONTEXT

For India to become a major player in world trade, an all encompassing, and comprehensive

view needs to be taken for the overall development of the countrys foreign trade. While increase

in exports is of vital importance, we have also to facilitate those imports which are required to

stimulate our economy. Coherence and consistency among trade and other economic policies is

important for maximizing the contribution of such policies to development. Thus, while

incorporating the existing practice of enunciating an annual EXIM Policy, it is necessary to go

much beyond and take an integrated approach to the developmental requirements of Indias

foreign trade. This is the context of the new Foreign Trade Policy.

OBJECTIVES

Trade is not an end in itself, but a means to economic growth and national development. The

primary purpose is not the mere earning of foreign exchange, but the stimulation of greater

economic activity. The Foreign Trade is built around two major objectives. These are:

1. To double our percentage share of global merchandise trade within the next five years;

2. To act as an effective instrument of economic growth by giving a thrust to employment

generation.

STRATEGY

These objectives are proposed to be achieved by adopting, among others, the following

strategies:

1. Unshackling of controls and creating an atmosphere of trust and transparency to unleash theinnate entrepreneurship of our businessmen, industrialists and traders.

2. Simplifying procedures and bringing down transaction costs.

3. Neutralizing incidence of all levies and duties on inputs used in export products, based on the

fundamental principle that duties and levies should not be exported.


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4. Facilitating development of India as a global hub for manufacturing, trading and services.

And many more

5. Identifying and nurturing special focus areas which would generate additional employment

opportunities, particularly in semi-urban and rural areas, and developing a series of

Initiatives for each of these.

6. Facilitating technological and infrastructural upgradation of all the sectors of the Indian

economy, especially through import of capital goods and equipment, thereby increasing

value addition and productivity, while attaining internationally accepted standards of quality.

7. Avoiding inverted duty structures and ensuring that our domestic sectors are not

disadvantaged in the Free Trade Agreements/Regional Trade Agreements/Preferential Trade

Agreements that we enter into in order to enhance our exports.

8. Upgrading our infrastructural network, both physical and virtual, related to the entire

Foreign Trade chain, to international standards.

9. Revitalizing the Board of Trade by redefining its role, giving it due recognition and inducting

experts on Trade Policy.

10. Activating our Embassies as key players in our export strategy and linking our Commercial

Wings abroad through an electronic platform for real time trade intelligence and enquiry

dissemination.


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HIGHLIGHTS OF INDIAS TRADE POLICY

I- Special Economic Zones (SEZs)

Offshore Banking Units (OBUs) shall be permitted in SEZs. Detailed guidelines are being

worked out by RBI. This should help some of our cities emerge as financial nerve centres of

Asia.

Units in SEZ would be permitted to undertake hedging of commodity price risks, provided such

transactions are undertaken by the units on stand-alone basis. This will impart security to the

returns of the unit.

It has also been decided to permit External Commercial Borrowings (ECBs) for a tenure of less

than three years in SEZs. The detailed guidelines will be worked out by RBI. This will provide

opportunities for accessing working capital loan for these units at internationally competitive

rates.

II- Employment oriented

Agriculture

Export restrictions like registration and packaging requirement are being removed today on

Butter, Wheat and Wheat products, Coarse Grains, Groundnut Oil and Cashew to Russia .

Quantitative and packaging restrictions on wheat and its products, Butter, Pulses, grain and flour

of Barley, Maize, Bajra, Ragi and Jowar have already been removed on 5th March, 2002.

Restrictions on export of all cultivated (other than wild) varieties of seed, except Jute and Onion,

removed.

To promote export of agro and agro based products, 20 Agri export zones have been notified.

In order to promote diversification of agriculture, transport subsidy shall be available for export

of fruits, vegetables, floriculture, poultry and dairy products. The details shall be worked out in

three months.

3% special DEPB rate for primary & processed foods exported in retail packaging of 1 kg or

less.


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Cottage Sector and Handicrafts

(i) An amount of Rs. 5 crores under Market Access Initiative (MAI) has been earmarked for

promoting cottage sector exports coming under the KVIC.

(ii) The units in the handicrafts sector can also access funds from MAI scheme for developmentof website for virtual exhibition of their product.

(iii) Under the Export Promotion Capital Goods (EPCG) scheme, these units will not be required

to maintain average level of exports, while calculating the Export Obligation.

(iv) These units shall be entitled to the benefit of Export House status on achieving lower

average export performance of Rs.5 crores as against Rs. 15 crores for others; and

(v) The units in handicraft sector shall be entitled to duty free imports of an enlarged list of

items as embellishments up to 3% of FOB value of their exports.

Small Scale Industry

With a view to encouraging further development of centers of economic and export excellence

such as Tirupur for hosiery, woolen blanket in Panipat, woolen knitwear in Ludhiana, following

benefits shall be available to small scale sector:

i.) Common service providers in these areas shall be entitled for facility of EPCG scheme.

ii.) The recognized associations of units in these areas will be able to access the funds under the

Market Access Initiative scheme for creating focused technological services and marketing

abroad.

iii.) Such areas will receive priority for assistance for identified critical infrastructure gaps from

the scheme on Central Assistance to States

iv.) Entitlement for Export House status at Rs. 5 crores instead of Rs. 15 crores for others.

Leather

Duty free imports of trimmings and embellishments up to 3% of the FOB value hitherto confined

to leather garments extended to all leather products. Textiles

i.) Sample fabrics permitted duty free within the 3% limit for trimmings and embellishments.

ii.) 10% variation in GSM be allowed for fabrics under Advance Licence.


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iii.) Additional items such as zip fasteners, inlay cards, eyelets, rivets, eyes, toggles, velcro tape,

cord and cord stopper included in input output norms.

iv.) Duty Entitlement Passbook (DEPB) rates for all kinds of blended fabrics permitted. Such

blended fabrics to have the lowest rate as applicable to different constituent fabrics.

Gem & Jewellery

i.) Customs duty on import of rough diamonds is being reduced to 0%. Import of rough

diamonds is already freely allowed. Licensing regime for rough diamond is being

abolished. This should help the country emerge as a major international centre for

diamonds.

ii.) Value addition norms for export of plain jewellery reduced from 10% to 7%. Export of all

mechanized unstudded jewellery allowed at a value addition of 3 % only. Having already

achieved leadership position in diamonds, now efforts will be made for achieving quantum

jump on jewellery exports as well.

iii.) Personal carriage of jewellery allowed through Hyderabad and Jaipur airport as well.

(III) Technology oriented

(a) Electronic hardware

The Electronic Hardware Technology Park (EHTP) scheme is being modified to enable thesector to face the zero duty regime under ITA (Information Technology Agreement)-1. The units

shall be entitled to following facility:

Net Foreign Exchange as a Percentage of Exports (NFEP) positive in 5 years.

No other export obligation for units in EHTP.

Supplies of ITA I items having zero duty in the domestic market to be eligible for

counting of export obligation.

(b) Chemicals and Pharmaceuticals

All pesticides formulations to have 65% of DEPB rate of such pesticides. Free export of samples

without any limit. Reimbursement of 50% of registration fees for registration of drugs.

(c) Projects

Free import of equipment and other goods used abroad for more than one year.


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SPECIAL SCHEMES IN TRADE POLICY

A.) Export clusters

a.) Upgradation of infrastructure in existing clusters/industrial locations under the Department

of Industrial Policy & Promotion (DIPP) scheme to increase overall competitiveness of the

export clusters.

b.) Supplemental efforts to be made under the ASIDE scheme and similar schemes of other

Ministries to bridge technology and productivity gaps in identified clusters.

c.) 10 such clusters with high growth potential to be reinvigorated based on a participatoryapproach.

B.) Rehabilitation of sick units

For revival of sick units, extension of export obligation period to be allowed to such units based

on BIFR rehabilitation schemes. This facility shall also be available to units outside the purview

of BIFR but operating under the State rehabilitation program..

Removal of Quantitative Restrictions

a.) Import of 69 items covering animal products, vegetables and spices, antibiotics and films

removed from restricted list.

b.) Export of 5 items namely paddy except basmati, cotton linters, rare earth, silk cocoons,

family planning devices except condoms removed from restricted list.

C.) Special economic zones scheme

a.) Sales from Domestic Tariff Area (DTA) to SEZs to be treated as export. This would now

entitle domestic suppliers to Drawback/ DEPB benefits, CST exemption and Service Tax

exemption.

b.) Agriculture/Horticulture processing SEZ units will now be allowed to provide inputs and

equipments to contract farmers in DTA to promote production of goods as per the


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requirement of importing countries. This is expected to integrate the production and

processing and help in promoting SEZs specializing in agro exports.

c.) Foreign bound passengers will now be allowed to take goods from SEZs to promote trade,

tourism and exports.

d.) Domestic sales by SEZ units will now be exempt from SAD.

e.) Restriction of one year period for remittance of export proceeds removed for SEZ units.

f.) Netting of export permitted for SEZ unit provided it is between same exporter and importer

over a period of 12 months.

g). SEZ units permitted to take job work abroad and exports goods from there only.

h.) SEZ units can capitalize import payables.

i.) Wastage for subcontracting/exchange by gem and jewellery units in transactions betweenSEZ and DTA will now be allowed.

j.) Export/import of all products through post parcel/courier by SEZ units will now be allowed.

k.) The value of capital goods imported by SEZ units will now be amortized uniformly over

10 years.

l.) SEZ units will now be allowed to sell all products including gems and jewellery through

exhibitions and duty free shops or shops set up abroad

m.) Goods required for operation and maintenance of SEZ units will now be allowed duty free.

D.) EOU Scheme

a.) Agriculture/Horticulture processing:- EOUs will now be allowed to provide inputs and

equipments to contract farmers in DTA to promote production of goods as per the

requirement of importing countries. This is expected to integrate the production and

processing and help in promoting agro exports.

b.) EOUs are now required to be only net positive foreign exchange earner and there will now

be no export performance requirement.

c.) Foreign bound passengers will now be allowed to take goods from EOUs to promote trade,

tourism and exports.


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d.) The value of capital goods imported by EOUs will now be amortized uniformly over 10

years.

e.) Period of utilization of raw materials prescribed for EOUs increased from 1 year to 3 years.

f.) Gems and jewellery EOUs are now being permitted sub-contracting in DTA.

g.) Wastage for subcontracting/exchange by gem and jewellery units in transactions between

EOUs and DTA will now be allowed as per norms.

h.) Export/import of all products through post parcel/courier by EOUs will now be allowed.

i.) EOUs will now be allowed to sell all products including gems and jewellery through

exhibitions and duty free shops or shops set up abroad.

j.) Gems and jewellery EOUs will now be entitled to advance domestic sales.

E.) EPCG scheme

a.) The scheme shall now allow import of capital goods for pre-production and post- production

facilities also.

b.) The Export Obligation under the scheme shall now be linked to the duty saved and shall be

8 times the duty saved.

c.) To facilitate upgradation of existing plant and machinery, import of spares shall also beallowed under the scheme.

d.) To promote higher value addition in exports, the existing condition of imposing an

additional Export Obligation of 50% for products in the higher product chain to be done

away with.

e.) Greater flexibility for fulfillment of export obligation under the scheme by allowing export

of any other product manufactured by the exporter. This shall take care of the dynamics of

international market.

f.) Capital goods upto 10 years old shall also be allowed under the scheme.

g.) To facilitate diversification into the software sector, existing manufacturer exporters will be

allowed to fulfill export obligation arising out of import of capital goods under the scheme

for setting up of software units through export of manufactured goods of the same company.

h.) Royalty payments received from abroad and testing charges received in free foreign

exchange to be counted for discharge of export obligation under EPCG scheme.


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F.) DEPB Scheme

a.) Facility for provisional DEPB rate introduced to encourage diversification and promote

export of new products.

b.) DEPB rates rationalized in line with general reduction in Customs duty.

G.) Advance License

a.) Standard Input Output Norms for 403 new products notified.

b.) Anti-dumping and safeguard duty exemption to advance license for deemed exports for

supplies to EOU/SEZ/EHTP/STP.

H.) DFRC Scheme

a.) Duty Free Replenishment Certificate scheme extended to deemed exports to provide a boost

to domestic manufacturer.

b.) Value addition under DFRC scheme reduced from 33% to 25%.

I.) Reduction of Transaction Cost

a.) High priority being accorded to the EDI implementation programme covering all major

community partners in order to minimize transaction cost, time and discretion. We are now

gearing ourselves to provide on line approvals to exporters where exports have been effected

from 23 EDI ports.

b.) Online issuance of Importer-Exporter Code (IEC) number by linking the DGFT EDI

Network with the Income Tax PAN database is under progress.

c.) Applications filed electronically (through website www.nic.in/eximpol) shall have a 50%

Lower processing fee as compared to manual applications.


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J.) Miscellaneous

a.) Actual user condition for import of second hand capital goods up to 10 years old dispensed

with.

b.) Reduction in penal interest rate from 24% to 15% for all old cases of default under Exim

Policy.

c.) Restriction on export of warranty spares removed.

d.) IEC holder to furnish online return of imports/exports made on yearly basis.

e.) Export of free of cost goods for export promotion @ 2% of average annual exports in

preceding three years subject to ceiling of Rs.5 lakh permitted


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Composition of Indian Foreign Trade

Indian foreign trade has undergone a change in its composition over the years. In 1948-49, tea,

jute manufacturers, cotton manufactures, oilseeds, hides and skins, and metals and ores

constituted 71 per cent of total Indian exports. This dependence on a few commodities not

only introduced an element of instability in export prospects but was bound to weaken the

country's position in regard to larger questions of policy [Planning Commission, (1950)].

Import consisted of manufactured goods and food grains. On the eve of independence in 1947,

exports consisted chiefly of raw materials and plantation crops while imports composed of light

consumer goods and other manufactures [Mathur, (2006)]. The composition of trade has

changed considerably. Today the manufactured goods and services dominate the export basket.

The composition of exports shows a perceptible shift in this decade i.e. 2000s from light

manufactures to heavy manufactures and petroleum crude and products as shown in Table 6. The

share of textiles and ready-made garments (RMG) has fallen dramatically by 11.1

percentage points in 2006-07 over 2000-01 followed by gems and jewellery, leather and

leather manufactures and handicrafts. Share of engineering goods and petro products has

increased by 7.6 percentage points and 10.7 percentage points, respectively. The share of

primary products has declined somewhat with the decline in share of exports from agricultural

and allied sector being partly offset by a rise in the share of ores and minerals by 2.8 percentage

points. The share of chemicals, including petrochemicals, has increased marginally. The share of

petroleum crude and products has risen further to 18 per cent in the first half of 2007-08 from 15

per cent in 2006-07. Engineering goods share also maintained a rising trend in 2007-08. Export

growth in 2006-07 was driven mainly by petroleum products with 59.3 per cent growth and

engineering goods with 38.1 per cent growth. The perceptible increase in the share of petroleum

products in total exports reflected not only the rise in POL prices but also Indias enhanced

refining capacity. The rising share of engineering goods reflected Indias revival of

heavy manufactures. Induced by strong international minerals, after growing at a compound

annual growth rate (CAGR) of 50 per cent in the first half of this decade, moderated to 12.6 per

cent in 2006-07 [Finance Ministry, (2008)].


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The composition of imports showed much less change than that of exports as shown in Table 7.

POL continues to be the single major item of import with its share stabilizing at the 30-31 per

cent level. The share of capital goods imports shows the sharpest rise of about 4.9 percentage

points in 2006-07 over 2000-01 due to a 3.7 percentage point rise in the share of transport

equipment and 1.6 percentage point rise in the share of non-electrical machinery (excluding

machine tools). It has, however, plateau at 13 per cent in the first half of 2007-08. The greatest

decline is in the import share of pearls and precious and semi-precious stones, reflecting the fall

in export share of gems and jewellery. Imports of gold and silver have been at around 8 per cent

though it has increased to 10 per cent in the first half of 2007-08. Share of electronic goods

imports has increased to 9 per cent, while food and allied imports show a marginal fall in share

due to the fall in the share of edible oils, though import of cereals has shot up in 2006-07 from a

negligible level. With the rise in crude oil prices, growth in POL imports continued to be high in

2006-07 though it moderated in the first half of this fiscal [Finance Ministry, (2008)].


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TThhee OObbjjeeccttiivveess oofftthhee FFoorreeiiggnn TTrraaddee PPoolliiccyy ooffIInnddiiaa

Some of the objectives of foreign trade policy of India are as follows:

Trade propels economic growth and national development. The primary purpose is not the mereearning of foreign exchange, but the stimulation of greater economic activity. The foreign trade

policy of India is based on two major objectives, they are as follows:

1) To double the percentage share of global merchandise trade within the next five years.

2) To act as an effective instrument of economic growth by giving a thrust to employment

generation.

Agriculture and industry has shown remarkable resilience and dynamism in contributing to a

healthy growth in exports. In the last five years the exports witnessed robust growth to reach a

level of US$ 168 billion in 2008-09 from US$ 63 billion in 2003-04. Our share of global

merchandise trade was 0.83% in 2003; it rose to 1.45% in 2008 as per WTO estimates. Our share

of global commercial services export was 1.4% in 2003; it rose to 2.8% in 2008. Indias total

share in goods and services trade was 0.92% in 2003; it increased to 1.64% in 2008. On the

employment front, studies have suggested that nearly 14 million jobs were created directly or

indirectly as a result of augmented exports in the last five years.

The short term objective of the policy is to arrest and reverse the declining trend of exports and

to provide additional support especially to those sectors which have been hit badly by recession

in the developed world. The policy is empowered with objective of achieving an annual export

growth of 15% with an annual export target of US$ 200 billion by March 2011. In the remaining

three years of this Foreign Trade Policy i.e. upto 2014, the country should be able to come back

on the high export growth path of around 25% per annum. By 2014, policy expects to double

Indias exports of goods and services.

The long term objective of policy for the Government is to double Indias share in global trade

by 2020. In order to meet these objectives, the Government would follow a mix of policy

measures including fiscal incentives, institutional changes, procedural rationalization, and

enhanced market access across the world and diversification of export markets. Improvement in


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infrastructure related to exports; bringing down transaction costs, and providing full refund of all

indirect taxes and levies, would be the three pillars, which will support us to achieve this target.

Endeavour will be made to see that the Goods and Services Tax rebates all indirect taxes and

levies on exports.

Indian Foreign Trade PolicySince 1947

In India, the main legislation concerning foreign trade is the Foreign Trade (Development and

Regulation) Act, 1992. The Act provides for the development and regulation of foreign trade by

facilitating imports into, and augmenting exports from, India and for matters connected therewithor incidental thereto. As per the provisions of the Act, the Government:-

(i) May make provisions for facilitating and controlling foreign trade;

(ii) May prohibit, restrict and regulate exports and imports, in all or specified cases as well as

subject them to exemptions;

(iii) Is authorized to formulate and announce an export and import policy and also amend the

same from time to time, by notification in the Official Gazette;

(iv) is also authorized to appoint a 'Director General of Foreign Trade' for the purpose

of the Act, including formulation and implementation of the export-import policy.

Accordingly, the Ministry of Commerce and Industry has been set up as the most important

organ concerned with the promotion and regulation of foreign trade in India. In exercise of the

powers conferred by the Act, the Ministry notifies a trade policy on a regular basis with certain

underlined objectives. The earlier trade policies were based on the objectives of self-

reliance and self-sufficiency. While, the later policies were driven by factors like export led

growth, improving efficiency and competitiveness of the Indian industries, etc. Since

independence a number of changes have taken place in all most all sectors of the Indian

economy, As far as foreign trade is concerned, India adopted an inward-oriented restrictive trade

policy till 1960"s. Since 1960"s, India adopted the import substitution policy, however the


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liberalisation era was started in 1970"s, but it is a mild in nature, in the late 1980"s and early

1990"s the drastic changes took place under the leadership of our late Prime Minister Mr.

P.V.Narshimha Rao, and the finance minister Dr. Manmohan Singh. Indian economy has shifted

towards globalization and our economy is linked with world economy. Throughout 1950-1951

to 2003- 2004 the Govt, of India have implemented a number of foreign trade policies, these

policies have brought a tremendous change in India's foreign trade. Indian Foreign Trade Policy

took a while in shaping up to a definitive framework.

In the post-Independence pre liberalization era, exports were ignored and the domestic market

was fiercely protected. While world exports grew by over 8%, Indian exports grew only by 3-4%

during the 1950s and 1960s. To curb rising imports in 1960s, the foreign trade policy included

import substitution and export promotion to revive exports. The 1970s saw a rise in foreign trade

with exports growing at16% and imports at 20%. However the oil crisis in 1970s hit the export

industry with the result of the foreign policy being tweaked to encourage exports through export

subsidies.

The Balance of Payments crisis in 1991 and subsequent rescue by IMF and other

international banks resulted in the liberalization of the foreign trade policy. This was the

much needed revolution Indian foreign trade needed. Licensing was abolished and exports and

imports were free subject to the negative list. Export Promotion of Capital Goods (EPCG) was

implemented with zero customs duty on import of capital goods with an export obligation of 6

times the duty saved on the goods to be fulfilled in 6 years. Specific schemes were implemented

to promote exports in specific foreign markets and on specific products. Specialized units and

zones for foreign trade were set up. There were drastic reductions on import duty as well. India

joined the WTO in 1995 and export-import targets were set to 25% and 20% respectively

during 1997-2002. Emphasis was laid on Indian investment overseas and economic groupings.

Duty free import of energy and oil related products which are required for production of export

products was introduced in 2004-09.

Under the current foreign trade policy of the UPA government, efforts are focused on specific

sectors like Agriculture, Handlooms, Gems & Jewellery, Leather, Marine, and Green products.

Market diversification has been identified as key with focus on 26 new countries. Incentives of

2-3% on FOB value have been proposed.


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The target of the current foreign trade policy is to bring Indias share in global exports to 2% by

2020. While this is largely achievable, issues such as low quality of Indian exports and poor

access to foreign markets as well as the rise of Chinese exports in the global market could play

game changing roles in the future of Indian foreign trade.

Indias Foreign Trade Partners

In the last decade, exports to Asia and Africa have increased substantially while exports to North

America and Europe have shrunk significantly. Asia accounts for over 50% of exports while

North America and Europe totally account for a little over 35%. Latin American and African

countries account for over 10% of exports and this is likely to grow in the years to come. Indian

exports are majorly accounted for by USA, the Middle East Asian countries, Korea and

Australia. India majorly imports more than it exports from China, Germany, Hong Kong, UK,

Switzerland and Japan.

Chief Items of Exchange

Indias trade basket is like that of any other developing country. Indian exports primarily

comprise of petroleum products, gems & jewellery, machines, pharmaceuticals and fine

chemicals, RMG cotton, transport equipment, iron ore, cotton yarn & fabrics. Petroleum

products account for almost US$ 30 bn of Indias exports with Gems & Jewellery coming a close

second with US$ 20 bn. Indias imports are majorly constituted of petroleum crude & products

(almost US$80 bn of Indian imports). Other majorly imported goods are electronic goods,

transport equipment, gold, iron & steel, precious stones, coal & coke among others. Export &

Import of services is growing phenomenally at 31% and 24% respectively and this forms a major

part of Indias BoP. Software Exports alone account for US$ 40.3 bn. However, oil imports have

reduced in 2009-10 with the effect of reducing the trade deficit.


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Scope for Improvement:

There is definite scope for improvement and growth in foreign trade. India needs to

start targeting the developing economies of the world due to the scale of growth in these

markets as well as large, untapped demand.

India needs to focus on its manufacturing industry so as to improve range of export

products, quality of products as well as reduce cost of productions through technological

upgradation and economies of scale.

India needs a second green revolution to further exploit its competitive advantage in

agricultural produce and products.

Export needs to be further promoted and this can be done through more export subsidies

and lower export duties on lesser exported products.


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FOREIGN TRADE POLICY 2004-09

The new Foreign Trade Policy (FTP) takes an integrated view of the overall development of

India's foreign trade and. goes beyond the traditional focus on pure exports. This would be clear

from the following statement in the policy document, "Trade is not an end in itself, but a means

to economic growth and national development. The primary purpose is not the mere earning of

foreign exchange, but the stimulation of greater economic activity."

Objectives and Strategy of FTP, 2004-09

In line with the above focus, the FTP lays down two major objectives:

I. To double our percentage share of global merchandise trade within the next five years; and

II. To act as an effective instrument of economic growth by giving a thrust to employment

generation.

Strategies proposed to achieve these objectives include the following:

1. Unshackling of controls and creating an atmosphere of trust and transparency in dealing with

business.

2.Simplifying procedures and bringing down transaction costs.

3. Neutralizing incidence of all levies and duties on imports used in export products.

4. Facilitating development of India as a global hub for manufacturing, trading and services.

5. Identifying and nurturing special focus areas which would generate additional employment

opportunities, particularly in semi-urban and rural areas.

6. facilitating technological and infrastructural up gradation of all the sectors of the Indian

economy, especially through import of capital goods and equipment.

7. Avoiding inverted duty structures and ensuring that domestic sectors are not disadvantaged in

trade agreements.


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8. upgrading the infrastructural network related to the entire Foreign Trade chain, to international

strandards.

9. Revitalizing the Board of Trade by redefining its role, and inducting into it experts on trade

policy.

10. Activating Indian Embassies abroad as key players in the export strategy.


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FOREIGN TRADE POLICY 2009-2014

CONTEXT

The UPA Government has assumed office at a challenging time when the entire world is facingan unprecedented economic slow-down. The year2009 is witnessing one of the most severe

global recessions in the post-war period. Countries across the world have been affected in

varying degrees and all major economic indicators of industrial production, trade, capital flows,

unemployment, per capita investment and consumption have taken a hit.Though India has not

been affected to the same extent as other economies of the world, yet our exports have suffered a

decline in the last 10 months due to a contraction in demand in the traditional markets of our

exports. After four clear quarters of recession there is some sign of a turnaround and the

emergence of green shoots.Announcing a Foreign Trade Policy in this economic climate is

indeed a daunting task. We cannot remain oblivious to declining demand in the developed world

and we need to set in motion strategies and policy measures which will catalyse the growth of

exports.

OBJECTIVES

The short term objective of our policy is to arrest and reverse the declining trend of exports and

to provide additional support especially to those sectors which have been hit badly by recession

in the developed world. We would like to set a policy objective of achieving an annual export

growth of 15% with an annual export target of US$ 200 billion by March 2011. In the remaining

three years of this Foreign Trade Policy i.e. upto 2014, the country should be able to come back

on the high export growth path of around 25% per annum. By 2014, we expect to double Indias

exports of goods and services. The long term policy objective for the Government is to double

Indias share in global trade by 2020.


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STRATEGIES

In order to meet these objectives, the Government would follow a mix of policy measures

including fiscal incentives, institutional changes, procedural rationalization, enhanced market

access across the world and diversification of export markets. Improvement in infrastructure

related to exports; bringing down transaction costs, and providing full refund of all indirect taxes

and levies, would be the three pillars, which will support to achieve this target.

We need to encourage value addition in our manufactured exports to take an initiative to

diversify our export markets and offset the inherent disadvantage for our exporters in emerging

markets to deepen our trade engagement with other major economic groupings in the world. The

Government seeks to promote Brand India through six or more Made in India shows to be

organized across the world every year.

In the era of global competitiveness, there is an imperative need for Indian exporters to upgrade

their technology and reduce their costs. The status holders will be permitted to import capital

goods duty free (through Duty Credit Scripts equivalent to 1% of their FOB value of exports in

the previous year), of specified product groups.

For upgradation of export sector infrastructure, Towns of Export Excellence and units located

therein would be granted additional focused support and incentives. The policy is committedto support the growth of project exports. We would like to encourage production and export of

green products through measures such as phased manufacturing programme for green

vehicles, zero duty EPCG scheme and incentives for exports.

To enable support to Indian industry and exporters, especially the MSMEs, in availing their

rights through trade remedy instruments under the WTO framework, we propose to set up a

Directorate of Trade Remedy Measures. In order to reduce the transaction cost and institutional

bottlenecks, the e-trade project would be implemented in a time bound manner to bring all stakeholders on a common platform. Additional ports/locations would be enabled on the Electronic

Data Interchange over the next few years. An Inter-Ministerial Committee has been established

to serve as a single window mechanism for resolution of trade related grievances.


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TRENDS IN INDIA'S FOREIGN TRADE POLICY


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Trends

The impact of trade reforms is evident from the changing structure of Indias Foreign

Trade in terms of diversity of market and products, and also in the form of higher degree of trade

openness (resulting from higher export growth and the associated increase in the capacity to

import).

Tables 1.1(A) and 1.1(B) present the trends in Indias exports and imports over years in terms of

Rs. crore, and US $ million, respectively. Table 1(C) presents the annual and monthly figures

of recent years in US $ million. Figure 1.1 presents the trend of growth rates of exports and

imports of 2000-2010. Figure 1.2 presents the month-wise growth rates of exports and imports

for two years, 2008-09 and 2009-10. Growth rates referred to in the context of exports and

imports are in US $ terms. During the 1990s, Indian exports have performed well in certain

years, and not so well in a few other years. Using the method of least squares to find a

regression line, trend lines of various parameters have been drawn based on the time series data

for the countrys exports and imports for different periods. These are given in figures 1.3 and 1.4.

The growth rate was high in 1993-94, 1994-95 and 1995-96 at 20%, 18.4%, and 20.8%,

respectively, but declined sharply in 1996-97 to 5.3%, and became negative in 1998-99 at (-

)5.1% on account of the South East Asian crisis and worldwide recession. It again recovered to

10.8% in 1999-2000, and reached the highest growth rate for the decade at 21% in 2000-01.

However, the global economic slowdown and the events of September 11, 2001 led to a steep

fall in the rate of growth of exports during 2001-02 (-1.6%). Liberalisation and trade reforms

have also led to a compositional change in Indias export basket. Analysis of our export basket

indicates an increase in the share of manufactured goods along with an overall widening and

diversification of exports. The period since 2002-03 has recorded a steady export growth rate

above 20% up to 2007-08; the highest performance during these years being 2004-05 at 30.8%,

and 2007-08 at 29%. Compound annual growth rate (CAGR) in US $ terms for 1994-2000 forexports was 6.94%, for 1999-2005 17.80%, for 1994-2005 12.24%, for 2004-09 22.04%, and

for 2002-08, the highest average performance was 25.35%. For the first time, Indias exports

crossed US $100 billion in 2005-06, and recorded US $103.09 billion; and later reached a record

level of US $185.3 billion in 2008-09 (13.6% growth rate). It declined and turned negative in

2009-10 at (-)3.6%., in view of the global meltdown. The deceleration started from September


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2008 and negative growth was recorded from October 2008 up to September 2009 (twelve

consecutive months), as shown in Table 1(C) and Figure 1.2.

Imports crossed US $100 billion for the first time in 2004-05, and have grown steadily thereafter.

Percentage growth was 42.7 in 2004-05, 33.8 in 2005-06, and 35.5% in 2007-08. Deceleration

started from October 2008, and led to low growth rate of 20.7% in 2008-09, and negative growth

rate of (-)5.6% in 2009-10. Pearsons Correlation Coefficient between growth rates of exports

and imports for the period 1994-95 to 2009-10 is 0.8671 (Table 1.1 B). The result is quite high

and positive, indicating that both the growth rates move in the same direction, and quite often

import growth rate tends to be higher than export growth rate. Negative growth rate of imports

was recorded for eleven consecutive months from December 2008 to October 2009, as shown

in Table 1.1(C) and Figure 1.2.

Performance of exports and imports in recent years along with per cent change over the previous

year is as follows:

Trend lines have been drawn based on linear regression equations for exports and imports

for 1995-2010 and 1998-2009, as shown in Fig.1.3 and 1.4, respectively. Linear trend based on

least squares method has been considered. Annual average increase for the two periods for

exports and imports, is as follows:


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1. For 1995-2010 trend line, exports: US $11,604 million; imports: US$19,321 million;

2. For 1998-2009 trend line, exports: US $15,096 million; imports: US$25,143 million.

Performance during 1998-2009 is better compared to the longer period. Imports have all along

been higher than exports, resulting in trade deficit. Exports as per cent of Gross Domestic

Product (GDP) improved from 5.72 in 1990-91 to 8.95 in 1995-96, 9.58 in 2000-01, 12.73 in

2005-06, and 16.0 in 2008-09.

Simultaneously imports as per cent of GDP improved from 7.59 in 1990-91 to 10.33 in 1995-96,

10.86 in 2000-01, 18.41 in 2005-06, and 26.2 in 2008-09. Total foreign trade of the country

(consisting of merchandise exports and imports) as per cent of GDP moved up from 13.32 in

1990-91 to 19.28 in 1995-96, 20.44 in 2000-01, 31.14 in 2005-06, 42.2 in 2008-09, and 36.7 in

2009-10 .Exports as per cent of imports fluctuated from time to time. It was 75.4 in 1990-91,

86.7 in 1995-96, 88.2 in 2000-01, 69.1 in 2005-06, 61.2 in 2008-09, and 62.3 in 2009-10. From

2003-04, growth rate of imports has been higher than that of exports. It was sluggish in a

number of earlier years. The Foreign Trade policy (FTP) (2004-09) envisaged doubling of

Indias share in world exports from 0.75 per cent in 2004 to 1.5 per cent by 2009. However, as

revealed by later developments, doubling of Indias share in global trade has been deferred to

2020 as a long term objective, and doubling of Indias exports of goods and services by 2014 as

another goal. Indias share in world exports remained at 1.1 per cent from 2006. It was 0.7 per

cent in 2000. Exports plus imports of goods and services as per cent of GDP improved from 17.2

in 1990-91, 25.5 in 1995-96, 29.2 in 2000-01, 43.8 in 2005-06, 53.7 in 2008-09, and 48.4 in

2009-10. Greater degree of integration with the world economy through foreign trade consisting

of export and import of merchandise goods, and services is thus evident. This has offered many

advantages, and has also landed the country in troubled waters in certain periods as noticed from

September 2008.

Both external and domestic factors have contributed to the satisfactory performance of exports

since 2002-03. While improved global growth and recovery in world trade aided the

strengthening of Indian exports, firming up domestic economic activity, especially in the

manufacturing sector, also provided a supporting base for strong sector-specific exports. Various


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policy initiatives for export promotion and market diversification seem to have contributed as

well. The opening up of the economy and corporate restructuring have enhanced the

competitiveness of Indian industry. Indias impressive export growth has exceeded world export

growth in most of the years since 1995; but since 2003, it has lagged behind the export growth of

developing countries taken together, mainly because of chinas explosive export growth.

Despite the demand induced moderation in export growth resulting from the global recession,

Indias exports performed relatively better as its rank among leading exporters improved from

27th in 2008 to 22nd in 2009, with the share in world exports at 1.2 per cent. India ranked 15th

among leading importers in 2009, with a share of 1.9 per cent, which also represents an

improvement over 16th position in 2008. Since Indias GDP growth remained ahead of most

of the countries, its import growth would have been relatively higher, leading to higher rank

among importers.

Indias exports and Imports contracted by 3.6 per cent and 5.6 per cent, respectively during

2009-10 as against a growth of 13.7 per cent in exports, and 20.8 per cent in imports in the

previous year. As the decline in imports was steeper than decline in exports, the overall trade

deficit was lower during 2009-10. On balance of payments basis, the trade deficit as a

percentage of GDP was reduced from 9.8 per cent in 2008-09 to 8.9 per cent in 2009-10 .

Indias share in world merchandise exports, after remaining unchanged at 1.1 per cent between

2007 and 2008, reached 1.2 per cent in 2009 mainly due to the relatively greater fall in world

export growth. The increase in Chinas share of world exports between 2000 and 2008 at 5.0

percentage points is around 39 per cent of the total increase in the share of emerging and

developing countries over this period. However, Chinas export growth rate which was above 25

per cent in this decade till 2007 moderated to 17.3 per cent in 2008, and declined to (-) 21.7 per

cent in the first half of 2009, as a result of global recession. Although Indias export growth was

also negative at (-) 18.4 per cent in the first half of 2009, it was lower than the negative growthof the other major emerging and developing countries, and other select countries except Hong

Kong. However, in absolute terms, India is way behind China with its exports constituting only

12.4 per cent of Chinas in 2008. While Indias exports were higher than those of China till 1954,

they started lagging thereafter. Ironically the gap started widening since the 1990s, the period of

Indias reforms. In 1990, the shares in world exports of China and India were 1.8 per cent and


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0.5 per cent respectively; and in 2008, their respective shares stood at 8.9 per cent and 1.1 per

cent. This growing gap between India and China calls for greater introspection on the part of

India.

Indias merchandise imports were also affected by the global recession though with a slight

lag, and grew by 20.7 per cent to US $ 303 billion in 2008-09. This was due to the moderate

growth of 23.5 per cent in import of non-petroleum, oil and lubricants (non-POL) products;

and was low mainly due to both low volume growth by 6.2 per cent and low growth of

import price of the Indian crude oil import basket by 5.5 per cent.

International oil prices recorded unprecedented rise during 2008, and remained considerably

volatile during the entire ensuing period. The price of Indian basket of crude oil which

moved in tune with international oil prices was also volatile, averaging at US $83.57 per barrel

during 2008-09 after reaching an unprecedented US $142 per barrel on July 3, 2008 before

declining sharply following the global recession.

Non-POL non-bullion imports grew by 23.6 per cent in 2008-09 reflecting relatively low

demand for imports for industrial activity, partly due to low industrial growth and partly

due to the use of inventories, and also for imports used as inputs for exports due to fall in global

demand following the world economic recession. (GOI, Economic Survey 2009-10, p. 155).

During 2009-10 import growth was negative at (-) 5.6 per cent accompanied by a decline in both

POL and non-POL imports at (-) 7.0 per cent and (-) 4.9 per cent, respectively.


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RECENTS TRENDS IN INDIA FOREIGN TRADE POLICY 2009-14

Indias Trade Performance

Indias merchandise exports reached a level of US $ 251.14 billion during 2010 -11 registering a

growth of 40.49 percent as compared to a negative growth of 3.53 percent during the previous

year. Indias export sector has exhibited remarkable resilience and dynamism in the recent

years. Despite the recent setback faced by Indias export sector due to global slowdown,

merchandise exports recorded a Compound Annual Growth Rate (CAGR) of 20.0 per cent from

2004-05 to 2010-11.

Indias merchandise exports reached a level of US $ 304.62 billion during 2011 -12 registering a

growth of 21.30 percent as compared to a growth of 40.49 percent during the previous year.

Despite the recent setback faced by Indias export sector due to global slowdown, merchandise

exports still recorded a Compound Annual Growth Rate (CAGR) of 20.3 per cent from 2004-05

to 2011-12.

World Trade Scenario

As per IMFs World Economic Outlook January, 2013, the volume of world trade (goods and

services) in 2012 slowed down to 2.8 per cent compared to the 5.9 per cent achieved in 2011.

As per IMF projections, growth in the volume of world trade is expected to rise to 3.8 per cent

in 2013.The IMF has put its growth projections of world output at 3.5 per cent in 2013. The

advanced economies are expected to grow at 1.4 per cent while the emerging and developing

economies to grow at 5.5 per cent in 2013. The projected growth rates in different countries are

expected to determine the markets for our exports.

As per WTOs International Trade Statistics, 2012, in merchandise trade, India is the 19th

largest exporter in the world with a share of 1.7 per cent and the 12th largest importer with a

share of 2.5 per cent in 2011.


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Exports

Indias merchandise exports reached a level ofUS$ 178.7 billion during 2009-10 registering a

negative growth of 3.5 percent as compared to a growth of 13.6 percent during the previous year.

Notwithstanding the deceleration of the growth in 2009-2010, Indias export sector has exhibited

remarkable resilience and dynamism in recent years. Our merchandise exports recorded a

compound annual growth rate (CAGR) of 22.0 per cent during the five year period from 2004-05

to 2008-09 as compared to the preceding five years when exports increased by a lower CAGR of

14.0 per cent. According to latest WTO data (2009), Indias share in the world merchandise

exports increased from 0.8 per cent in 2004 to 1.3 per cent in 2008. India also improved its

ranking among the leading exporters in world merchandise trade from

30th in 2004 to 21st in 2009. Indias exports have not been affected to the same extent as that of

other economies of the world during the phase of global slowdown. After declining consistently

for the first seven months of the year 2009-10, Indias exports reversed the trend in October,

2009 by registering a positive growth of 3.4%. The upward trend has been maintained since then

wherein exports grew at the rate of 30.0 % in November 2009; 20.3% in December, 2009, 18.7%

in January, 2010, 34.8% in February, 2010; 54.1 % in March 2010, 38.5 % in April 2010, 30.1 %

in May 2010, 43.8% in June 2010, 11.7 % in July 2010, 22.5% The Government had set an

export target of US$ 175 billion for 2009-10. With merchandise exports reaching US$ 178.7

billion in 2009-10, the actual exports exceeded the target by 2.1 per cent which is a remarkable

achievement during a period of recession in Indias major export destinations.

During 2010-11 (Apr-Dec) exports reached a level of US$ 164.7 billion registering a growth of

29.5 per cent with almost all the major commodity groups making positive growth. Only seven

(7) commodities showed negative growth viz. Tea (1.95), Cashew (7.73), Fruits & Vegetables

(28.03), Iron Ore (93.14), Computer Software (92.73), Petroleum Products (13.50) and

Handicrafts (excl. Handmade carpets) (56.90).


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Exports recorded a growth of 21.30 per cent during Apr-Mar 2011-12. The Government has set

an export target of US $ 360 billion for 2012-13. The merchandise exports have reached US $

265.95 billion in 2012-13 (Apr.-Feb.). Export target and achievement from 2004-05 to 2011-12

and 2012-13 (Apr.-Feb.) is given in the below:

Imports

Cumulative value of imports during 2012-13 (Apr.-Feb.) was US $ 448.04 billion as against US

$ 446.94 billion during the corresponding period of the previous year registering a growth of

0.25 per cent in $ terms. Oil imports were valued at US $ 155.57 billion during 2012-13 (Apr.-Feb.) which was 11.92 per cent higher than oil imports valued US $ 139.00 billion in the

corresponding period of previous year. Non-oil imports were valued at US $ 292.47 billion

during 2012-13 (Apr.-Feb.) which was 5.03 per cent lower than non-oil imports of US $ 307.94

billion in previous year.


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Trade Balance

The Trade deficit in 2012-13 (Apr.-Feb.) was estimated at US $ billion 182.09 which was

higher than the deficit of US $ 169.81 billion during 2011-12 (Apr.-Feb.). Performance of

Exports, Imports and Balance of Trade during 2004-05 to 2012-13 (April-Feb.) is given in thetable below

(Values in Rs crores)

S.No

Year Exports %Growth Imports %Growth TradeBalance

1 2004-2005 3,75,340 27.94 5,01,065 39.53 -1,25,7252 2005-2006 4,56,418 21.60 6,60,409 31.80 -2,03,9913 2006-2007 5,71,779 25.28 8,40,506 27.27 -2,68,727

4 2007-2008 6,55,864 14.71 10,12,312 20.44 -3,56,4485 2008-2009 8,40,755 28.19 13,74,436 35.77 -5,33,6806 2009-2010 8,45,534 0.57 13,63,736 -0.78 -5,18,202

7 2010-2011 11,42,922 35.17 16,83,467 23.45 -5,40,5458 2011-2012(Provisional) 14,59,281 27.68 23,44,772 39.28 -8,85,4929 2011-12 (April-February) Press

Release13,20,836 21,32,198 -8,11,362

10 2012-13 (April-February) PressRelease

14,46,627 9.52 24,36,564 14.27 -9,89,938

(Values in US$ Millions)

S.No.

Year Exports %Growth Imports %Growth TradeBalance

1 2004-2005 83,536 30.85 1,11,517 42.70 -27,9812 2005-2006 1,03,091 23.41 1,49,166 33.76 -46,0753 2006-2007 1,26,414 22.62 1,85,735 24.52 -59,3214 2007-2008 1,63,132 29.05 2,51,654 35.49 -88,5225 2008-2009 1,85,295 13.59 3,03,696 20.68 -1,18,4016 2009-2010 1,78,751 -3.53 2,88,373 -5.05 -1,09,6217 2010-2011 2,51,136 40.49 3,69,769 28.23 -1,18,6338 2011-2012(Provisional) 3,04,624 21.30 4,89,181 32.29 -1,84,5589 2011-12 (April-February) Press

Release2,77,125 4,46,939 -1,69,814

10 2012-13 (April-February) PressRelease

2,65,946 -4.03 4,48,037 0.25 -1,82,090


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Foreign Trade Policy, 2009-14

The Foreign Trade Policy (FTP) 2009-14 was announced on 27th August, 2009 in the backdrop

of a fall in Indias exports due to global slowdown. The short term objective of FTP (2009-14)

was to arrest and reverse the declining trend of exports as well as to provide additional support

especially to those sectors which were hit badly by recession in the developed world. The

Policy envisaged an annual export growth of 15 per cent with an annual export target of US$

200 billion by March 2011 and to come back on the high export growth path of around 25 per

cent per annum in the remaining three years of this Foreign Trade Policy i.e. up to 2014. The

long term policy objective for the Government is to double Indias share in global trade by

2020. Subsequently, an Annual Supplement 2010-11 to the FTP (2009-14) was announced on23rd August, 2010. In this Supplement further measures to enhance exports have been

elaborated. Further measures were announced on 11th February 2011. (Details are available in

Chapter 3).

Exports of Principal Commodities

Disaggregated data on exports of Principal Commodities, both in Rupee and Dollar terms,

available for the period 2012-13 (April- January) as compared with the corresponding period of

the previous year are given in Appendix at Table 3.1 and Table 3.2 respectively. Exports of the

top five commodities during the period 2012-13 (April-January) registered a share of 50.8 per

cent in US $ terms mainly due to significant contribution in the exports of Petroleum (Crude &

Products), Gems & Jewellery, Transport Equipments, Machinery and Instruments and Drugs,

Pharmaceuticals & Fine Chemicals. The share of top five Principal Commodity Groups in

Indias total exports during 2012-13 (April-January) is given at Chart shown below.


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The export performance (in terms of growth in US $ terms) of top five commodities during

2012-13 (April-January) vis-a-vis the corresponding period of the previous year is shown in

Chart shown below.


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Plantation Crops

Export of Plantation crops during 2012-13 (AprilJanuary), decreased by 9.95 per cent in US $

terms compared with the corresponding period of the previous year. Export of Coffee registered

a negative growth of 11.44 per cent, the value decreasing from US $ 741.05 million to US $656.26 million. Export of Tea also decreased by 8.50 per cent.

Agriculture and Allied Products

Agriculture and Allied Products as a group include Cereals, Pulses, Tobacco, Spices, Nuts and

Seeds, Oil Meals, Guargum Meals, Castor Oil, Shellac, Sugar & Molasses, Processed Food,

Meat & Meat Products, etc. During 2012-13 (AprilJanuary), exports of commodities under this

group registered a growth of 27.57 per cent with the value of exports increasing from US $

21353.59 million in the previous year to US $ 27240.35 million during the current year.

Ores and Minerals

Exports of Ores and Minerals were estimated at US $ 4389.03 million during 2012-13 (April-

January) registering a negative growth of 35.48 per cent over the same period of the previous

year. Sub groups viz. Iron Ore, Mica, Other ores & minerals and Coal have recorded a negative

growth of 64.99 per cent, 0.80 per cent, 9.46 per cent and 5.24 percent respectively. Processed

minerals registered a growth of 12.14 per cent.

Leather and Leather Manufactures

Export of Leather and Leather Manufactures recorded a negative growth of 2.22 per cent during

2012-13 (April-January). The value of exports decreased to US $ 3973.92 million from US $

4064.33 million during the same period of the previous year. Exports of Leather and

Manufactures have registered a growth of 3.98 per cent and Leather Footwear registered a

negative growth of 10.01 per cent.

Gems and Jewelers


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The export of Gems and Jewellery during 2012-13(April-January) decreased to US $ 34758.78

million from US $ 38755.30 million during the corresponding period of last year showing a


Chemicals and Related Products

During the period 2012-13 (April-January), the value of exports of Chemicals and Related

Products increased to US $ 34686.90 million from US $ 32319.14 million during the same

period of the previous year registering a growth of 7.33 per cent. Basic Chemicals and

Pharmaceuticals & Cosmetics and Rubber, Glass & Other Products have registered a positive

growth and Residual Chemicals and allied products and Plastic & linoleum registered a negative

growth.

Engineering Goods

Items under this group consist of Machinery, Iron & Steel and Other Engineering items. Export

from this sector during the period 2012-13(April-January) stood at US $ 45543.37 million

compared with US $ 47966.60 million during the same period of the previous year, registering a

negative growth of 5.05 per cent. The growth in export of Other Engineering items stood at 5.78

per cent, Machinery & Instruments stood at 3.53 per cent and Machine Tools stood at 4.59 per

cent.

Electronic Goods

During the period 2012-13 (April-January), exports of Electronic Goods as a group was

estimated at US $ 7102.84 million compared with US $ 7441.50 million during the

corresponding period of last year, registering a negative growth of 4.55 per cent.

Textiles

During the period 2012-13 (April-January), the value of Textiles exports was estimated at US $

21200.12 million compared with US $ 22447.75 million in the corresponding period of the

previous year, recording a negative growth of 5.56 per cent. The export of Readymade

Garments, Manmade Textiles & Made Ups, Natural Silk Textiles, Wool and Woolen


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manufactures, Coir and coir manufactures and Jute manufactures registered negative growth of

7.80 per cent, 12.61 per cent, 23.34 per cent, 19.98 per cent, 7.18 per cent and 16.37 per cent

respectively. However, Cotton yarn/Fabrics/Made-ups etc. registered a positive growth of 6.38

per cent.

Handicrafts and Carpets

Exports of Handicrafts declined to US $ 180.51 million during 2012-13 (April- January), from

US $ 214.84 million during the corresponding period of the previous year registering a negative

growth of 15.98 per cent. Export of carpets increased to US $ 812.17 million from US $ 699.26

million during the same period last year registering a growth of 16.15 per cent.

Project Goods

During 2012-13 (April-January), the export of Project Goods were estimated at US $ 87.70

million compared with US $ 44.10 million during the corresponding period of last year

registering a substantial growth of 98.88 per cent.

Petroleum Products

Export of Petroleum Products increased to US $ 48613.38 million during 2012-13 (April-January), as compared with US $ 46489.12 million during the same period of last year

recording a growth of 4.57 per cent.

Cotton Raw including Waste

There was a negative growth in the exports of Cotton Raw including waste by 21.13 per cent

from US $ 3326.67 million in 2011-12 (April-January) to US $ 2623.68 million during 2012-13

(April-January).

Imports of Principal Commodities

Disaggregated data on imports of principal commodities, both in Rupee and Dollar terms,

available for the period 2012-13 (AprilJanuary), as compared to the corresponding period of

the previous year are given in Appendix at Table 3.5 and Table 3.6 respectively. Imports of the


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top five commodities during the period 2012-13 (April-January) registered a share of 61.8 per

cent mainly due to significant imports of Petroleum (Crude & Products), Gold, Electronic

Goods, Machinery except electrical and electronic and Pearls, precious and semi-precious

stones.

The share of top five Principal Commodity in Indias total imports during 2012-13 (April

January) is given at Chart below.

The import performance by growth of top five Principal commodities during 2012-13 (April

January) vis-a-vis the corresponding period of the previous year is shown at Chart below.


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Fertilizers

During 2012-13 (April January), import of Fertilizers (manufactured) decreased to US $

6991.61 million from US $ 8718.13 million in April-January 2011-12 recording a negative

growth of 19.80 per cent.

Petroleum Crude & Products

The import of Petroleum Crude & Products stood at US $ 140729.62 million during 2012-13

April - January as against US $ 125871.43 million during the same period of the previous year

registering a growth of 11.80 per cent.

Pearls, Precious and Semi-Precious Stones

Import of Pearls, Precious and Semi-Precious Stones during 2012-13 (April January)

decreased to US $ 17696.44 million from US $ 26339.27 million during the corresponding

period of the previous year registering a substantial decline of 32.81 per cent.

Capital Goods

Import of Capital Goods, largely comprises of Machinery, including Transport Equipment and

Electrical Machinery. Import of Machine Tools, Non-Electrical Machinery, and Electrical

Machinery registered a negative growth of 4.67 per cent, 6.94 per cent, 6.45 per centrespectively and Transport Equipment registered a positive growth of 0.04 per cent.

Organic and Inorganic Chemicals

During 2012-13 (AprilJanuary), import of Organic and Inorganic Chemicals increased to US $

16116.77 million from US $ 15837.29 million during the same period of last year, registering a

growth of 1.76 per cent. Import of Medicinal and Pharmaceutical Products increased to US $

2550.01 million from US $ 2446.88 million during the corresponding period of last year

registering a growth of 4.21 per cent


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Coal, Coke & Briquettes

During 2012-13 (AprilJanuary), import of Coal, Coke & Briquettes decreased to US $

13301.43 million from US $ 14851.58 million during the same period of last year, registering a


Gold & Silver

During 2012-13 (AprilJanuary) import of Gold and Silver decreased to US $ 46769.39 million

from US $ 51751.03 million during the corresponding period of the previous year registering a


Direction of Indias Foreign Trade

The value of Indias exports and imports from major regions/ countries both in Rupee and

Dollar terms are given in Appendix at Table 3.3, 3.4, 3.7 and 3.8 respectively. Share of major

destinations of Indias Exports and sources of Imports during 2012 -13 (April January) are

given in Chart respectively.

During the period 2012-13 (AprilJanuary), the share of Asia comprising of East Asia, ASEAN,

West Asia, Other West Asia, North East Asia and South Asia accounted for 50.78 per cent of


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Indias total exports in US $ terms. The share of Europe and America in Indias exports stood at

18.88 per cent and 18.77 per cent respectively of which EU countries (27) comprises 16.99 per

cent. During the period, USA (12.89 per cent) has been the most important country of export

destination followed by UAE (12.20 per cent), Singapore (4.79 percent), China (4.59 per cent)

and Hong Kong (3.95 per cent).

Asia accounted for 60.08 per cent of Indias total imports during the period followed by Europe

(17.39 per cent) and America (11.64 per cent). Among individual countries the share of China

stood highest at (11.21 per cent) followed by UAE (7.67 per cent), Saudi Arabia (6.78 per cent),

Switzerland (6.01 per cent) and USA (5.00 per cent).


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Findings & Conclusions

The Project covers the trends in the composition and direction of foreign trade of India during

1995-2010, gives a gist of recent foreign trade policies from 2004, deals with the impact of

global financial crisis on Indias foreign trade during 2008-10, lists measures taken by

Government of India and Reserve Bank of India during the period of recession, and reviews the

global trends in merchandise trade during 2007-10. Indias efforts at diversification of

export and import baskets, and export and import markets are in the desirable directions.

Enhancing competitiveness of Indian enterprises for facing competition in the global markets,

and also within the country is a pre-requisite for the success of enterprises. It is important that the

Government of India in close consultation with industry associations periodically monitors

global industrial environment, and takes appropriate measures for safeguarding the Indian

industry in the era of greater integration with the global economy.

Indian foreign trade has progressed a lot over the last sixty years since Independence. The

period can be divided into three sub-periods of 1950-1970, 1971-1991 and post-1991.The

trade has stagnated and India lost its market share to other countries in 1950s and

1960s.The government policies and dominant views of import substitution and export

pessimism has a negative impact. The situation improved in 1970s and exports has finally picked

up in post liberalization era in general and after 2002 in particular. In terms of composition,

now it is dominated by manufactured goods and services. Services exports contribution has

grown rapidly in recent past. India services exports share in global exports is more than double

of that of Indian manufacturing exports In terms of direction, it is now more distributed around

the world and the share of East Asian countries his on rise in overall trade. Looking at the large

size of the economy, the high growth rates and small share in world trade; with the help of

economic theories, we can safely conclude that there is huge untapped potential for Indian

foreign trade in years to come.


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BIBLIOGRAPHY:-

1. www.commerce.nic.in

2. www.business.gov.in

3. www.wikipedia.org

4. http://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/71947.pdf

5. www.wto.org

6. www.comtrade.un.org

7. www.dailyexportimportdata.com

8. www.dgciskol.nic.in

9. www.ustraderep.gov31

10. http://www.indiastat.com/india/ShowData.asp?secid=331671&ptid=107&level=3

R E F E R E N C E

Exim policy 2002-07

Exim policy 2004-09

www.Indiastat.com

www.commerce.nic.in

www.textile.nic.in

http://commerce.nic.in/medium_term/contents.htm

CMIE

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