STRUCTURAL CHANGES IN

INDIAS FOREIGN TRADE

T.P. Bhat
November 2011
Institute or Stu!ies in In!ustri"# Deve#o$ment
New Delhi
A Study Prepared as a Part of a Research Programme
STRUCTURAL CHANGES% INDUSTR& AND
E'(LO&'ENT
IN THE INDIAN
ECONO'&
Macroeconomic Implications of Emerging Pattern
Sponsored by
In!i"n Coun)i# o So)i"# S)ien)e Rese"r)*
+ICSSR,
New Delhi
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Contents

1- Histori)"# .")/!ro$
2- Forei0n Tr"!e in 2
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"n! 1
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(#"n
1- Deve#o$ment o Com$#e2 Re0ime
3- E$iso!e o tr"!e Liber"#i4"tion
5- E)onomi) Gro6t* "n! (o#i)7 Fr"me6or/ o Forei0n Tr"!e
8- Forei0n Tr"!e (o#i)7 Reorms "ter 199192
:- Servi)e Se)tor "n! Reorm
;- E2$ortIm$ort Gro6t* S)en"rio
9- Commo!it7 Com$osition o E2$ort "n! Im$ort ."s/et
10- F")tor Intensit7 An"#7sis o E2$orts
11- F")tor Intensit7 An"#7sis o Im$orts
12- Stru)tur"# <e"/ness o In!i"s Forei0n Tr"!e
11- St"bi#it7 o In!i"s Com$"r"tive A!v"nt"0e
13- Rise o Servi)e Se)tor E2$orts
15- Re#"tions*i$ .et6een E)onomi) Gro6t* "n! E2$ort Gro6t*
18- Re#"tions*i$ .et6een Tr"!e "n! Em$#o7ment
1:- C"n In!i" S/i$ In!ustri"#i4"tion (*"se=
1;- Con)#usions
List o T"b#es
1 Indicators of LongTerm Indian Economic Performance, 1950010 !"#erage
ann$al growth%
India&s E'ports, E'port (rowth and )hare in (DP
* Trade and +apital "cco$nt ,alances !Million -%
. E#ol$tion of India&s Trade ,alances !/s0 +rores%
5 )E1 E'ports and India&s total E'ports2 " +omparison
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3 E'ports, Imports, Trade ,alance and (rowth /ates for 195051 to 193940 !#al$e
in million 5)- 6 percentages%
4 E'ports and Imports in 1940s and 1970s !E'ports and Imports in million - 6 growth in
8%
7 E'port, Import and ,alance Pa9ments from 199091 to 00910
9 +hange in the +omposition of E'ports 00001 to 01011 !in 8%
10 )hare of ,$l: Imports in Total Imports !in 8%
11 Ma;or E'port Destination in 00001 and 01011 !share in 8%
1 Prod$ct )tr$ct$re of E'ports of India
1* Prod$ct )tr$ct$re of Imports of India
1. )ectoral ,rea:down of India&s E'ports !in 8%
15 )ectoral ,rea:down of India&s Imports !in 8%
13 +ommodit9 +omposition of E'ports with <igh ):ill and Technolog9 Intensit9 =9
India and >ther "sian +o$ntries in 001 !in8 of total man$fact$red e'ports of each
co$ntr9%
14 E'ports from )pecial Economic 1ones
17 India and +hina2 Prod$ct +omposition of <ightech E'ports !in 8 of hightech
e'ports%,
00.
19 India&s Trade in )er#ices !5) - million%
0 (DP, E'port and Import (rowth /ates D$ring Decades !in 8%
1 )hare of e'ports and Imports to (DP !in 8%
Indicators of India&s Man$fact$ring Emplo9ment, E'port and Import Performance
* Ind$str9wise "nn$al /ates of (rowth in Emplo9ment and Emplo9ment Elasticit9 in
Man$fact$ring Ind$stries !199091 to 00.05%
List o Anne2ure
I!"% +omposition of India&s E'ports 195051, 193031 and 194041 !share in
8% I!,% +omposition of India&s E'ports 197071 to 00709 !share in 8%
II!"% +omposition of India&s Imports 195051, 193031 and 194041 !share in
8% II!,% +omposition of India&s Imports !share in8%
III Direction of India&s E'ports 193031 to 00407 !)hare in
8% I? Direction of India&s Imports 193031 to 00407
?!"% E'port @actor Intensit9 (ro$pAise )hare of different commodities in total e'ports
!percentage%
?!,% E'port @actor Intensit9+ommodit9 wise
?I!"% Import factor Intensit9(ro$pwise
?I !,% Import @actor Intensit9+ommodit9wise
?II (DP, E'port and Import (rowth /ates, 19515 to 00709 !in 8%
?III Trends in E'port, Import, Trade ,alance and /atio of E'port to Import
IB Man$fact$ring ?al$e "dded !M?"%, Ind$str9, and E'ports !in 8%
List o Gr"$*s
1 E'port Trends in @actor Intensit9
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E'port Trends in @actor intensit9 of @ood prod$cts and "gric$lt$ral /aw materials
* Trends in E'ports of Mineral >res and Metals and @$els
. Import factor Intensit9 Trends in "ll food prod$cts and "gric$lt$re /aw materials
5 Import @actor Intensit9 in Mineral ores and Metals and f$els
3 Import @actor Intensit9 Trends in "ll :inds Technolog9 Man$fact$res
4 )hare of Primar9 E'ports and )hare Man$fact$ring E'ports
7 )hare of Primar9 and Man$fact$re Imports in Total Imports
9 (rowth of E'port, Import and (DP d$ring 19515 to 00709
10 E'change /ate "ppreciation !C%, Depreciation !%, E'port and Import (rowth /ate !8%
11 (DP and E'port (rowth /ates
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Histori)"# b")/0roun!

The domestic prod$ction reflects on e'ports and imports of the co$ntr90 The
prod$ction in t$rn depends on endowment of factor a#aila=ilit90 This leads to
comparati#e ad#antage of the econom90 @or long, India has =een endowed with
la=o$r and land, =$t capital was alwa9s a scarce factor0 Aith this =ac:drop, India
remained =etter off in the prod$ction of la=o$rDintensi#e commodities0 India&s
foreign trade started to gain significance d$ring the latter half of the 19
th
cent$r90 The
period 1900D191. saw e'pansion in India&s foreign trade0 The rise in the o$tp$t of s$ch
crops as oilseeds, cotton, ;$te and tea was largel9 d$e to a flo$rishing e'port trade0 The
@irst Aorld Aar was a serio$s set=ac: to India&s foreign trade0 In the immediate postD
war period, India&s e'ports increased d$e to rise in world demand for raw materials
and remo#al of war time restrictions0 The imports, too, increased to satisf9 the pentD
$p demand0 India&s foreign trade was se#erel9 hit =9 the great depression of 19*0s0 It
was mainl9 d$e to2 sharp fall in commodit9 prices, decline in cons$mer&s p$rchasing
power and discriminator9 trade policies adopted =9 the colonial go#ernment, to name
=$t a few0 D$ring the )econd Aorld Aar, India achie#ed h$ge e'port s$rpl$s, ena=ling
her to acc$m$late s$=stantial amo$nt of sterling =alances0
There was a h$ge press$re of pentD$p demand in India d$ring the )econd
Aorld Aar0 The import reE$irements were larger and e'port s$rpl$ses were
smaller at the end of the war0 The partition of the co$ntr9 enlarged the deficit in
food and raw materials0 There was a sharp contraction in e'port s$rpl$ses of
commodities li:e raw cotton and raw ;$te0 >ilseeds and pig iron were reE$ired in large
E$antities to meet increased domestic ind$strial needs0 These shortages were some
e'tent co$nterD=alanced =9 increased e'ports of primar9 commodities s$ch as spices,
mica and #egeta=le oil0 <owe#er, #ol$me of e'ports in 19.3D.4 was still onl9 a=o$t
twoDthirds of preDwar le#el0 In 19*7D*9, ;$te man$fact$res, cotton
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man$fact$res and tea acco$nted for onl9 a=o$t *5 per cent increased dependence
on a few commodities and =ro$ght an element of insta=ilit9 in the e'port prospects
1
0
Prior to independence, India&s foreign trade was t9pical of a colonial and
agric$lt$ral econom90 E'ports consisted mainl9 of raw materials and plantation
crops, while imports composed of light cons$mer goods and other man$fact$res0
The str$ct$re of India&s foreign trade reflected the s9stematic e'ploitation of the
co$ntr9 =9 the foreign r$lers0 The raw materials were e'ported from India and finished
prod$cts imported from the 50F0 The prod$ction of final prod$cts were disco$raged0
@or e'ample, cotton te'tiles, which at one time constit$ted =$l: of India&s e'ports,
acco$nted for the largest share of her imports d$ring the ,ritish r$le0 This res$lted
in the decline and deca9 of Indian ind$stries0
>#er the last si' decades, India&s foreign trade has $ndergone a complete
transformation in terms of composition of commodities0 The e'ports co#er a wide
range of traditional and nonDtraditional prod$cts while imports mainl9 consist of
capital goods, petrole$m prod$cts, raw materials, intermediates and chemicals to meet
the e#er increasing ind$strial demands0
The pattern of e'port trade d$ring 1950D1930 was mar:ed =9 two main trends2
1% among commodities which were directl9 or largel9 =ased on agric$lt$ral prod$ction
s$ch as tea, cotton te'tiles, ;$te man$fact$res, hides and s:ins, spices and to=acco
e'ports did not increase on the wholeG and % there was a significant increase
were in the e'ports of raw man$fact$res li:e iron ore =$t these were not significant to
offset the decline in traditional e'ports0 In 1950D51, =asic primar9 prod$cts dominated
the Indian e'port sector0 The primar9 prod$cts were2 cashew :ernels, =lac: pepper,
tea, coal, mica, manganese ore, raw and tanned hides and s:ins, #egeta=le oils,
raw cotton and raw wool0 These prod$cts constit$ted *. per cent of the total e'ports0
The proportion of intermediate prod$cts was slightl9 higher with .1 per cent0
<owe#er, these prod$cts were agric$lt$reD=ased low #al$e added0 This gro$p
consisted of commodities s$ch as cotton piece goods, woollen carpets, g$ms, resins
and lac, g$nn9 =ag and g$nn9 clothes0 ,9 and large, this trend contin$ed with little
#ariations0 There has =een an o#erall rise in the e'ports of cashew :ernels, tea, g$ms
and resins, #egeta=le oil, raw cotton and g$nn9 clothes0
1
Math$r, ?i=ha, !003%, @oreign Trade of India, 19.4 to 004, Trends, Policies and Prospects, New
+ent$r9 P$=lications, New Delhi0
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The rise was not consistent and e'ports did not show m$ch d9namism0 The world
demand for man9 agric$lt$reD=ased prod$cts failed to increase or decline d$e to
c9clical down t$rn in the glo=al econom90
The decade of 1950s also witnessed =alance of pa9ments cr$nch0 In the midD
1950s the sterling =alance that India acE$ired d$ring the )econd Aorld Aar got
e'ha$sted0 The e'port proceeds were not eno$gh to meet the growing import demand0
The decline in agric$lt$re prod$ction and growing tempo of de#elopment acti#it9
added press$re0 The e'ternal factors s$ch as the clos$re of )$eH +anal added to the
strain on the domestic econom90 The cr$cial pro=lem at that ;$nct$re was that of
foreign e'change shortage0 The )econd @i#e Iear Plan with its emphasis on the
de#elopment of ind$str9, mining and transport had a large foreign e'change
component0 This strain on the =alance of pa9ments necessitated the stiffening of
import polic9 at a later stage0 India was also at that time negotiating with the
International ,an: of /econstr$ction and De#elopment !I,/D% in respect of loans to
co#er the foreign e'change needs of se#eral of its de#elopment pro;ects0 India was
also e'ploring possi=ilities of deferred pa9ments in respect of imports of capital
goods from #ario$s co$ntries0
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Forei0n Tr"!e in 2
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" progressi#e tightening $p of import polic9 too: place in 19540 The >pen (eneral
License !e'cept for po$ltr9, fish, #egeta=les, etc0, from Pa:istan% discontin$edG instead
limited E$otas in respect of essential commodities were granted to importers on the
=asis of their act$al imports d$ring 195D530 No fresh licenses were iss$ed in this
period to esta=lished importers and the conditions of iss$e of capital goods licenses on
deferred pa9ment =asis were made more stringent0 The licenses were gi#en :eeping in
#iew the a$sterit9 meas$res and imports of cons$mer&s goods =eing c$t drasticall9 and
that of raw materials and intermediate prod$cts =eing limited to the minim$m
necessar9 for the maintenance of prod$ction0 +apital goods licensing contin$ed to =e
confined to the highest priorit9 programmes0 "s a res$lt, the imports came down
drasticall90 In the late 1950s, the go#ernment imports witnessed a contin$o$s $pward
trend, which incl$ded food imports0 The =alance of pa9ments position in 1959D30 was
comparati#el9 =etter than the pre#io$s 9ears0 There was an increase in e'ports as also
a red$ction in imports0 The e'ports of hides and s:ins, cotton te'tiles, #egeta=le oils
and man$fact$res s$ch as =ic9cles, sewing machines and fans increased0 E'port
d$ties on a few prod$cts were red$ced and draw=ac:s of import d$ties on raw
materials $sed in the man$fact$re of e'ports were granted0 )pecial licenses for import
of raw materials and components and spare parts were granted for a n$m=er of
commodities on the =asis of e'port performancesG in a few cases this facilit9 was
e'tended to the imports of capital goods also0 The polic9 of remo#ing E$antitati#e
restrictions on e'ports was contin$ed and e'port E$otas on items li:e certain oilseeds
and oils were li=eraliHed0 The search for new mar:ets contin$ed and agreement
designed to raise the le#el of trade with se#eral East E$ropean co$ntries were
concl$ded0
In 1930D31, =oth go#ernment and pri#ate imports showed an increase0
Imports of food grains, raw cotton and metals contri=$ted significantl90 D$ring this
period, the go#ernment set $p 1 E'port Promotion +o$ncils to promote e'ports in
respecti#e areas and special e'port schemes were also de#ised and operated0 In
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some cases, larger import licenses were iss$ed as part of e'port prod$ction0 The
=alance of pa9ments once again came $nder considera=le press$re in 193.D35 d$e to
rising de=t ser#ice =$rden, repa9ment to the IM@, increase in imports of food and
goods for de#elopment0 The e'ports were not s$fficient to meet the import
reE$irements0 <owe#er, there was an impro#ement in the $tiliHation of e'ternal
assistance0 This did not help to mitigate the cr$nch in the =alance of pa9ments
sit$ation0
India resorted to the de#al$ation of /$pee in the face of financial crisis in J$ne
19330 The nominal de#al$ation was to the e'tent of 5405 per cent !/s .04 to /s 405 per
dollar% in relation to the po$nd and dollar0 It has =een estimated that it was a=o$t
*305 per cent in real terms0 Domestic inflation had ca$sed Indian prices to =ecome
m$ch higher than world prices at the preDde#al$ation e'change rate0 In
1933, the foreign aid was c$t off and this compelled the de#al$ation0 This act was
accompanied =9 li=eraliHation of foreign trade, partic$larl9 li=eraliHation in import
controls and tariff c$ts0 In spite of this India did not recei#e foreign aidG s$=seE$entl9,
the go#ernment =ac:edDoff its commitment to li=eraliHation0 "lmost all li=eraliHing
initiati#es were re#ersed and import controls tightened0 "ccording to T0N0 )rini#asan
Kde#al$ation was seen as a capit$lation to e'ternal press$re which made
li=eraliHation politicall9 s$spectL !)rini#asan, p0 1*9%M0 Two additional factors
pla9ed a role in the 1933 de#al$ation0 The first was India&s war with Pa:istan in late
19350 The 5) and other co$ntries, friendl9 with Pa:istan, withdrew foreign aid to
India, which necessitated de#al$ation0 In addition, the large amo$nt of deficit spending
reE$ired =9 war effort accelerated inflation and led to f$rther disparit9 =etween
Indian and international prices0 Defence spending in 1935D33 was . per cent of the
total e'pendit$re0 The second factor was the dro$ght of 1935D33 which led to sharp
rise in prices o#er 10 per cent0 The go#ernment $sed the method of E$antitati#e
restrictions with #ar9ing le#els of se#erit9 $ntil the importDe'port polic9
anno$ncement in 1975D770 The fact of the matter was that the regime of import control
was consolidated and strengthened in the s$=seE$ent 9ears and more or less intact in
the 1970s0
@rom independence to 1933 de#al$ation co$ld =e cl$==ed as one period of
trade polic9 in =road terms0 It ma9 =e characteriHed as K transition from li=eral to
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mo#e towards infle'i=ilit9M0 The Po$nd sterling de#al$ation of 19.9 pro#ided some
scope for rela'ing the war time import and other controls for e'panding the scope of
>pen (eneral Licensing !>(L% and increasing tariffs in order to ta:e some of the
press$re off the import licensing s9stem0 <owe#er =9 1953 inflation had =eg$n to
erode the effects of the de#al$ation, and this contin$ed and accelerated d$ring the ne't
ten 9ears0 In effect amo$nting to contin$ing and s$=stantial real appreciation of the
r$pee in relation to the then fi'ed rates with the Po$nd and the 5) dollar0
+onseE$entl9, the start of the )econd @i#e Iear Plan in 1953 coincided with a se#ere
foreign e'change crisis, and the following period $p to 1933 was characterised =9
comprehensi#e and tight administration of the import licensing s9stem0 These foreign
trade policies were an e'tension of more general economic policies $nder which the
Kcommanding heights Kof ind$strial econom9 were dominated =9 state enterprises, and
the pri#ate sector was s$=;ect to e'tensi#e controls, which collecti#el9 came to =e
:nown as the KLicensing /a;M

0
In the preDde#al$ation period of 1933, all imports were either s$=;ect to
discretionar9 import licensing or were KcanaliHed K=9 monopol9 go#ernment trading
organiHations, with some fle'i=ilit9 pro#ided =9 changing >(L lists0 The prod$cts on
>(L lists co$ld onl9 =e imported =9 act$al $sers and co$ld not =e resold2 the9 were
entirel9 raw materials, components or machines which were not domesticall9
prod$ced and reE$ired =9 domestic prod$cers0 In this s9stem tariffs lost most of
their rele#ance for reg$lating the E$antit9 of imports and for protecting local
ind$stries2 their main f$nction was to raise re#en$e and to transfer E$ota rents from or
to the recipients of import licenses0 "fter 1953, import licensing was reg$larl9
tightened in response to steadil9 worsening foreign e'change sit$ation, and tariffs
were increased #er9 high le#els =9 earl9 19330 "s res$lt, large and highl9 #aria=le
gaps opened $p =etween domestic and international prices of man$fact$red
prod$cts0 In order to offset the antiDe'port =ias res$lting from the increasingl9 o#er
#al$ed e'change rate s$=sidies were pro#ided to man$fact$red e'ports =9 allowing
e'porter to import d$t9 free otherwise restricted raw materials, components and
machines that the9 co$ld sell in the domestic mar:et for premi$ms that reflected the
scarcit9 #al$es0 "s a res$lt of these s$=sidies and other e'port incenti#es for

,hagwati, Jagdish N0 "nd Padma Desai0 !1940%, India2 Planning for Ind$strialiHation, >'ford
5ni#ersit9 Press, London0
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man$fact$ring, a fairl9 range of man$fact$red prod$cts =eg$n to =e e'ported for the
first time0 The a#erage implicit protection was #er9 high and increasing d$ring the
preDde#al$ation period0
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Deve#o$ment o Com$#e2 Re0ime

In the late 1940s and earl9 1970s, the trade regime was =ased on a comple' s9stem
of licensing0 India&s trade polic9 hea#il9 relied on E$otas rather than on tariffs
*
0
Imports were reg$lated thro$gh a licensing s9stem witho$t an9 polic9 prescriptions0
<owe#er, import licenses allocated reflect two ma;or criteria2 1% the principle of
Nessentialit9&, and % the principle of Nindigeno$s nonDa#aila=ilit9&0 Th$s, the imports,
in terms of =oth magnit$de and composition, were to =e permitted onl9 if the firm in
E$estion certified to the go#ernment that the9 were Nessential& !as inp$ts or eE$ipment
for prod$ction%0 "t the same time the go#ernment had to clear the imports from the
#iewpoint of indigeno$s a#aila=ilit92 if it co$ld =e shown that there was domestic
prod$ction of that prod$cts imports, then imports were not permitted !regardless of
E$alit9 or cost considerations%0 "lmost all imports were s$=;ect to discretionar9 import
licensing or were NcanaliHed& =9 the go#ernment monopol9 trading organiHations0 The
onl9 e'ceptions were commodities listed in the >pen (eneral License !>(L%
categor90 +apital goods were di#ided into restricted categor9 and the >(L
categor90 Ahile import licenses were reE$ired for restricted capital goods, those in the
>(L co$ld =e imported witho$t a license s$=;ect to se#eral conditions0 Intermediate
goods were also classified as falling into the =anned, restricted and limited permitted
categories pl$s the >(L categor90 The =anned, restricted and limited permissi=le lists
were in the order of import stringenc90 >(L imports of intermediate goods were
go#erned =9 the act$al $ser condition0 The import of cons$mer goods was =anned
!e'cept those that were considered essential and co$ld onl9 =e imported =9 the
designated go#ernment canaliHing agencies%0
)ignificant acceleration in e'port growth rate was recorded in midD1970s0
<owe#er, e'ports grew relati#el9 slower than imports0 "s a res$lt, the =alance of
pa9ments cr$nch remained with a different magnit$de0 The moderniHation of ind$strial
technolog9 was =ecoming imperati#e0 The import control stiffened the man$fact$ring
sector0 The necessit9 for economic reform emerged from this
*
,hagwati, J0N0 and )rini#asan T0N0 !1945%, @oreign Trade /egimes and Economic
De#elopment2 India, New Ior:, +ol$m=ia 5ni#ersit9 Press0
~ 9
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=ac:drop0 The process of li=eraliHation that =egan in midD1970s was slow and
fragmented0 Man9 e'port incenti#es were introd$ced and imports were tied to e'ports0
<owe#er, the growth of imports o#er e'ports :ept a contin$o$s press$re on =alance of
pa9ments0 Despite =$o9anc9 in e'port growth and slowDdown in imports the =alance
of pa9ments cr$nch aggra#ated0 The foreign reser#es were hardl9 eno$gh to meet
one month&s import =ill0
There was a slow and s$stained rela'ation of import controls with the
E'portDImport Polic9 of 1944D470 )e#eral capital goods that were pre#io$sl9 not
allowed to =e imported witho$t an import license were steadil9 shifted to the >(L
categor90 The n$m=er of capital goods on the >(L list increased from 49 in 1943 to
1140 in 19770 These changes were made with the intention of allowing domestic
ind$stries to moderniHe0 D$ring the 1970s, the import licensing of capital goods in
the restricted list was administered with less stringenc9
.
0 "s a res$lt, the import
penetration ratio in the capital goods sector increased from 11 per cent to 17 per cent
in 1975D73
5
0 In the case of intermediate goods, there was a stead9 shift of items from
restricted and limited permissi=le categor9 to the >(L categor90 <owe#er, in practice
a capital or intermediate good was placed on the >(L list onl9 if it was not =eing
domesticall9 prod$ced0 This ma9 ha#e led to some degree of competition among
esta=lished prod$cers of intermediate and capital goods0 ,9 1974D77, the $nweighted
a#erage of tariffs on man$fact$red goods was 1.4 per cent with most tariff lines for
man$fact$ring cl$stered aro$nd a range of 1.0D130 per cent
3
0
The speed of trade reform E$ic:ened a shift from E$antitati#e import
controls to protecti#e s9stem =ased on tariffs was initiated =9 the /a;i# (andhi
(o#ernment in No#em=er 19750 /estrictions on imports of capital goods were f$rther
rela'ed to enco$rage technological moderniHation0 In the midD1970s, there was a
renewed emphasis on e'port promotion0 The n$m=er and #al$e of incenti#es offered
to e'porters were increased and administration proced$res were
streamlined0 The allotment of /EP !replenishment% licensesDtrada=le import
.
P$rsell, ( !1993%, Indian Trade Policies since 19919 /eforms, The Aorld ,an:, Aashington
D0+0
5
(older, ,0, /anganathan ?0)0 !1990%, Li=eraliHation of +apital (oods Imports in India,
Aor:ing
Paper No07, National Instit$te of P$=lic @inance and Polic9, New Delhi0
3
)en, F$nal !009%, Trade Polic9, IneE$alit9 and Performance in Indian Man$fact$ring, /o$tledge,
London0
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entitlements awarded to e'porters on a prod$ct specific =asis =ecame more genero$s0
@inall9, the d$t9 e'emption scheme for imported inp$t was e'tended to co#er all
imported inp$ts for =oth direct and indirect e'porters0
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Tr"!e Liber"#i4"tion

" ma;or programme of economic reform and li=eraliHation was introd$ced in 1991
with emphasis on e'ternal sector0 The new trade polic9 re#ersed the direction followed
for decades0 The tariff protection red$ced, rela'ed and simplified the restricti#e
import licensing regime0 Import licensing was totall9 a=olished with respect to
imports of most machiner9, eE$ipment and man$fact$red intermediate prod$cts0
Internal reforms incl$ded red$ced control o#er locational restrictions and ind$strial
licensing0 In some sectors controls were red$ced on administrati#e prices0 The polic9
foc$s was primaril9 on li=eraliHation of capital goods and inp$ts for ind$str9, to
enco$rage domestic and e'portDoriented growth0 <owe#er, imports of cons$mer goods
remained reg$lated0 There has =een no change in the str$ct$re of e'port incenti#es and
s$=sidies0 India&s financial ser#ices are grad$all9 =eing li=eraliHed
4
0 Ahile significant
headwa9 was made in li=eraliHing telecomm$nications, other ser#ices s$ch as
shipping, roads, ports and airports are =eginning to open $p0 <owe#er, foreign
participation remains relati#el9 low and administrati#e =arriers remain0 India amended
its cop9right law in 199. to compl9 with its o=ligations $nder the Trade /elated
Intellect$al Propert9 /ights !T/IPs% agreement0 There was also a significant change in
tariff rates with the pea: rate red$ced from *00 per cent to 150 per cent, and the pea:
d$t9 on capital goods c$t to 70 per cent0 +$stoms d$t9 rates fell from an a#erage of 94
per cent in 1990D91 to 9 per cent to in 1995D930 There was little or no change in the
trade polic9 with respect to cons$mer goods which remained on the negati#e list
7
0
The e'change rate was $nified and made con#erti=le on c$rrent acco$nt in 199*0
Tariffs ha#e =een red$ced from an a#erage of 41 per cent in 199* to *5 per cent
in 1994, howe#er, the tariff str$ct$re remained comple' and escalation remains high in
se#eral ind$stries, nota=l9 in paper and paper prod$cts, printing and p$=lication,
wood and wood prod$cts, food and =e#erages and to=acco0 "s of
4
"hl$walia, I0J0 !1999%, India&s Economic /eforms2 "n "ppraisal, in J0D0 )achs, "0 ?arshne9 and N0
,a;pai !ed%, India in the Era of Economic /eforms, New Delhi2 >'ford 5ni#ersit9 Press0
7
,alas$=raman9am, ?0N0 !00*%, India Trade Polic9 /e#iew, The Aorld Econom9, 3!9%2 Pp0 1*54
370
~ 12
~
Decem=er 1995, more than *000 tariff lines co#ering rawDmaterials, intermediaries
and capital goods were freed from import licensing reE$irements0 Pea: tariff rates
red$ced from *00 per cent at the =eginning of 1990s to .0 per cent =9 the end of
the decade0 In the same period, the weighted tariff a#erage fell from 45 per cent to
5 per cent0 Tariff rates fell across the =oard, on intermediate, capital and cons$mer
goods
9
@rom a #er9 comple' c$stoms tariff str$ct$re in 1991 with an incredi=le arra9
of general, specific and $serDend e'emptions, the str$ct$re has =een simplified0 In
00, c$stoms d$ties incl$ded onl9 fo$r rates !*5 per cent, 5 per cent, 15 per cent and
5 per cent%0 In general, =o$nd tariffs are s$=stantiall9 higher than applied rates,
partic$larl9 for agric$lt$ral prod$cts0 The import licenses contin$e to =e the main nonD
tariff =arriers0 >#er the 9ears, the n$m=er of goods s$=;ect to import licensing ha#e
=een red$ced with an emphasis on ind$strial and capital goods rather than cons$mer
prod$cts
10
0 In 1994, India presented a programme for the remo#al of remaining
restrictions to its trading partners0 The reforms in tariff and nonDtariff =arriers ha#e not
=een accompanied =9 similar reforms on e'port s$=sidies and incenti#e programmes0
These incl$de income ta' e'emptions, s$=sidiHed credit, e'port ins$rance and
g$arantees0 The o#erall scope of s$ch incenti#es has =een enhanced, res$lting in more
e'plicit e'portDoriented policies, which ha#e increased the possi=ilities of reso$rce
misallocation0 <owe#er, since 1993D94, mean tariffs slowl9 increased0 The remo#al
of E$antitati#e restrictions too: place in 000 and
001, after India failed in its attempt to defend them on =alance of pa9ments gro$nds
at the AT>0
India has also simplified its foreign in#estment regime and opened $p a
n$m=er of sectors to foreign direct in#estment0 This was the case in man$fact$ring
where foreign participation of $p to 51 to 4. per cent can ta:e place a$tomaticall9 in a
n$m=er of sectors0 Ma;or changes since 199* ha#e incl$ded a$tomatic permission for
foreign eE$it9 participation of $p to 50 per cent in some mining acti#ities0 This also
applies to oil e'ploration and offered incenti#es s$ch as ta' holida9s0 @DI polic9 has
=een f$rther li=eraliHed0 In#estment is allowed in greater n$m=er of sectors and
9
Das, D0F0 !00*%, O$antif9ing Trade ,arriers2 <as Protection Declined )$=stantiall9 in
Indian
Man$fact$ringP I+/IE/, Aor:ing Paper 105, J$l9, New Delhi, p0 170
10
(o#ernment of India !199*%, Ta' /eform +ommittee2 @inal /eport, part II, Ministr9 of
@inance,
New Delhi0
~ 13
~
made eligi=le for a$tomatic in#estment proced$res
11
0 <owe#er, @DI was not permitted
in a few sensiti#e sectors0
In 001, the remo#al of all import restrictions maintained for =alance of
pa9ments reasons were effected0 Import weighted means tariffs ha#e slowl9
increased from .03 per cent in 1993D94 to *00 per cent in 1999D0000 Ahile
remo#ing O/s on imports in 001, the go#ernment has raised the tariff rates from
the lower applied to higher =o$nd le#els0 In case of agric$lt$ral commodities, India
engaged in Ndirt9& tarification =9 setting #er9 high =o$nds wa9 a=o#e applied le#els0
Th$s, raising tariffs to their =o$nds in effect wo$ld #irt$all9 sh$t of an9 imports
1
0
India =egan to ma:e $se of all meas$res to protect the domestic econom9 $nder the
AT> r$les0 It incl$des the $se of sanitar9 and ph9toDsanitar9 !)P)% meas$res0 The
go#ernment set $p a Kwar roomM to monitor the imports of *00 sensiti#e tariff lines0
The protecti#e meas$res that came into #og$e are in the form of tariff ad;$stments,
le#9 of antid$mping and co$nter#ailing d$ties, safeg$ard actions s$ch as temporar9
imposition of O/s and )P) meas$res0
"s a res$lt, the c$stoms tariff has =ecome the main form of =order
protection0 The tariff rates remained relati#el9 highG the M@N rate fell to 9 per cent in
00* and pea: rate of tariff red$ced to *0 per cent0 @inall9, twoDtier tariff rates were
introd$cedG 10 per cent for raw materials, intermediates and components and
0 per cent for final prod$cts0 In addition to the tariff, importers ha#e to pa9 additional
and special d$ties on a n$m=er of prod$cts0 India&s =inding of tariff lines increased
from 34 per cent to 4 per cent as per the commitment to the AT>0 The new =indings
were primaril9 in te'tiles and clothing0 India also renegotiated =indings in some farm
prod$cts0 The a#erage =o$nd rate in agric$lt$ral prod$cts was 5003 per cent, higher
than applied M@N rate0 The gap pro#ided scope for applied rates to =e re#ised on a
few agric$lt$ral prod$cts0 Ahile import licensing and tariff restrictions are generall9
declining, there has =een an increase in other import meas$res0 India =ecame one of
the main $sers of antid$mping meas$res, with o#er 50 cases initiated since
19950 The n$m=er of acti#ities reser#ed for the p$=lic sector has =een red$ced from
si' to three as also the n$m=er of sectors reser#ed for smallDscale
11
/eser#e ,an: of India !199.%, "nn$al /eport0
1
)rini#asan, T0N0 !001%, India&s /eforms of E'ternal )ector Policies and @$t$re M$ltilateral
Trade
Negotiations, Economic (rowth +enter, Iale 5ni#ersit9, New <a#en0
~ 14
~
ind$str90 Price control maintained on petrole$m and fertiliHers ha#e grad$all9 phased
o$t0
The tariff contin$es to remain the principal trade instr$ment and important
so$rce of ta' re#en$e at aro$nd 13 per cent of +entral go#ernment ta' re#en$e0
"pplied M@N tariffs, partic$larl9 for nonDagric$lt$ral prod$cts contin$e to fall
steadil9, with o#erall a#erage c$rrentl9 at 1507 per cent0 "t 101 per cent the a#erage
for nonDagric$lt$ral prod$cts is considera=l9 lower than the a#erage for agric$lt$ral
prod$cts, which is .007 per cent0 The growing gap =etween agric$lt$ral and nonD
agric$lt$ral tariffs has also raised dispersion in the tariff and the escalation pattern
shows increasing deDescalation =etween $nprocessed and semiDprocessed and in
some cases =etween semiDprocessed and final prod$cts0 Aith the e'ception of a few
applied tariffs at their corresponding =o$nd rates, the difference =etween the =o$nd
applied rates is considera=le0 The difference pro#ides the go#ernment scope to raise
applied tariffs0 This was $sed to raise tariffs for some agric$lt$ral prod$cts in recent
9ears0 Nonetheless, the o#erall downward trend for tariff contin$ed0 @$rther red$ction
in the Kpea: rateM was effected in 004 from 105 to 10 per cent0 Despite grad$al
reform o#er the 9ears, the tariff regime remains comple'0 There are a n$m=er of
e'emptions, which are =ased on ind$strial $se0 The polic9 regarding tariff rate E$otas
remain $nchanged since 000 The economic reform introd$ced in 1991 helped India
to eliminate Ne'port pessimism& of 1950s and 1930s
1*
0 It =elied the arg$ment that
Ne'port pessimism& !s$ch as protectionism in ind$strialiHed co$ntries% or Neconomic
nationalism& !=ased on the =elief that domestic protection for domestic cons$mption is
economicall9 s$perior to trade% is right co$rse0 It was realiHed that there is no #irt$e in
prod$ction =eing Ndomestic&, if s$ch prod$ction is inefficient0
India offers tariff preferences $nder its regional trade agreements0 These
preferences are not significant0 The $se of import restrictions has declined, with
aro$nd *05 per cent of tariff lines0 India contin$es to =e a freE$ent $ser of
antid$mping meas$res0 In recent 9ears, the n$m=er of in#estigations and meas$res in
force ha#e shown a declining trend0 The ma;orit9 of s$ch meas$res were targeted at
1*
Jalan, ,imal !1993%, India&s Economic Polic92 Preparing for the Twent9Q@irst +ent$r9, ?i:ing, New
Delhi0
~ 15
~
chemicals, plastics, r$==er prod$cts, =ase metals and te'tiles and clothing
1.
0 India is
not a mem=er of the AT> agreement on (o#ernment proc$rement0 The proc$rement
policies ha#e $ndergone reform at the +entral (o#ernment le#el, howe#er, preferences
for smallDscale ind$str9 and state owned enterprises contin$e0
India&s e'port regime contin$es to =e comple'0 E'port prohi=itions and
restrictions ha#e remained $nchanged since 000 In order to red$ce the antiDe'port
=ias inherent in import and indirect ta' regime, a n$m=er of d$t9 remission and
e'emption schemes ha#e =een in place to facilitate e'ports0 The schemes are open
to all e'porters who $se imported inp$ts0 The scheme of ta' holida9s are offered to
sectors s$ch as electronics, farm prod$cts, ser#ices, e'port processing Hones,
e'portDoriented $nits and special economic Hones0
India&s recent foreign trade polic9 modifications $nderline the importance of
increasing e'ports and facilitate those imports which are reE$ired to stim$late the
econom90 The foreign trade polic9 is =$ilt aro$nd two ma;or o=;ecti#es0 These are2
1% to do$=le the percentage share of glo=al merchandise trade within ne't fi#e 9ears,
and % to act as an effecti#e instr$ment of economic growth =9 gi#ing a thr$st to
emplo9ment generation0 The :e9 strategies o$tlined to achie#e this are2
R 5nshac:ling of controls and creating an en#ironment of tr$st and
transparenc9 to $nleash the capa=ilities of enterprisesG
R Ne$traliHing incidence of all le#ies and d$ties on inp$ts $sed in e'port of
prod$ctsG
R N$rt$ring special foc$s areas which will generate additional emplo9ment
opport$nities, especiall9 in semiD$r=an and r$ral areasG
R )implif9ing the proced$res and =ringing down transaction costsG
R @acilitating technological and infrastr$ct$re $p gradation of all sectors0
R Promotion of K,rand IndiaM goodsG and
1.
AT> !004% KTrade Polic9 /e#iew of IndiaM, /eport =9 the )ecretariat, /estricted
ATSTP/S)S17,
17 "pril0
~ 16
~
R Emphasis on Kfoc$ssed mar:et and prod$ct schemeM0
This new EBIM polic9 is essentiall9 a roadmap for de#eloping international
trade0 <owe#er, this ma9 =e modified from time to time to meet the changing
d9namics of foreign trade0 The polic9 foc$ses on prod$ct lines s$ch as agric$lt$re,
handicraft, gems and ;eweller9, and leather0 The promotional meas$res for these
prod$cts consist of e'emptions from =an: g$arantee $nder EP+( scheme, d$t9 free
imports of capital goods $nder EP+( scheme, imports of inp$ts $nder the ad#ance
license scheme and d$t9 free import entitlements $p to a certain #al$e and +?D
e'emptions on d$t9 free imports0 India&s trade reform has =een cali=rated in order to
ma:e str$ct$ral transformation less painf$l0
Years Gross Domestic
Product
at Factor
cost
Per Capita et
atio!a"
Product
Gross
Fi#ed
Capit
a" 195152 to 196061 3.8 2.2 11.4
196162 to 197071 4.1 1.4 14.4
197172 to 198081 3.2 0.7 17.8
198182 to 199091 5.2 3.0 21.4
199192 to 200001 5.6 3.5 24.2
200102 to 200506 7.1 5.2 28.6
200607 to 200910 8.5 6.7 36.2
~ 17
~
E)onomi) Gro6t* "n! (o#i)7 Fr"me6or/ o Forei0n
Tr"!e

India&s foreign trade polic9 was highl9 restricti#e and central to the growth strateg90
It was a ma;or factor in India&s poor growth performance0 "fter independence in
19.4, India&s primar9 tas: were to end disr$ptions ca$sed =9 partition and the
esta=lishment of a new go#ernment0 In 1950D51 period, when the @irst @i#e Iear Plan
!@@IP% was prom$lgated, consists largel9 of a listing of infrastr$ct$re and other
go#ernment pro;ects which were $nder wa90 It was not $ntil the form$lation of the
)econd @i#e Iear Plan !)@IP%
15
that India&s =road economic polic9 g$idelines were
adopted that wo$ld dominate $ntil the 1970s0 Most of India&s economic data does
not go =e9ond 1950D51 and th$s anal9sis starts with that data0 Table 1 gi#es the
e#ol$tion of real gross domestic prod$ct !(DP% o#er the 9ears, as well as share of
gross domestic capital formation in (DP and per capita net national prod$ct0 The
growth targets were fi'ed for each plan and in most cases the achie#ements were
=elow the targeted rates of growth0 The growth rate of a=o#e 3 per cent was achie#ed
from )e#enth @i#e Iear Plan onwards with e'ception of 9
th
Plan !1994D
00%0 The agric$lt$ral growth rates did not pic: $p o#er the 9ears0
T"b#e 1
In!i)"tors o Lon0Term In!i"n E)onomi) (erorm"n)e% 1950
2010 +Aver"0e "nnu"# 0ro6t*,
No te2 "t constant prices of 1999000, Iearl9 a#erages0
Sour ce2 Economic )$r#e9 01011, (o#ernment of India, New Delhi
15
)econd @i#e Iear Plan co#ered the 9ears 195354 to 193130 Man9 consider it a real =eginning of
the planed era0
~ 18
~
In 1950, it was estimated that more than 40 per cent of the pop$lation li#ed
in r$ral areas and the agric$lt$re acco$nted for a=o$t 53 per cent of the (DP0 Per
capita income was among the lowest in the world, life e'pectanc9 at =irth was a=o$t
* 9ears and literac9 rate was 17 per cent0 (ross domestic sa#ings were a=o$t 7 per
cent of the (DPG e'ports were ;$st o#er 3 per cent of the (DP0 India was
considered to =e a poor co$ntr9 =9 all standards0 D$ring the period of @@IP, attention
was gi#en to economic polic9 and direction was set which was to =e followed for the
ne't se#eral decades0 It was decided that there sho$ld =e a Ksocialist pattern of
societ9M in which the go#ernment sho$ld ta:e leading role in the econom90 Planning
the role of the state was the foremost o=;ecti#e0 The Planning +ommission set o$tp$t
targets for a wide arra9 of commodities0 In some cases p$=lic sector firms were
esta=lished or e'panded0 In others, it was e'pected that e'pansion wo$ld come from
controlled pri#ate sector firms0
The )econd @i#e Iear Plan !)@IP% was designed to shift the orientation of
ind$stries to the prod$ction of hea#9 ind$str9 and in partic$lar machine =$ilding
13
0 The
in#estment goods needed to set $p this capacit9 were hea#il9 import intensi#e and
ind$stries themsel#es were capital intensi#e0 The plan en#isaged a siHea=le increase in
in#estment0 The com=ination of these factors res$lted in a sharp increase in imports
and with it a =alance of pa9ment crisis in 1953D540 The foreign e'change crisis
de#eloped from this time0 This =ecame the prime impediment to growth0 /ather
than ad;$sting the e'change rate, restricti#e e'change controls were imposed0 "n
import licensing regime was esta=lished $nder which firms had to appl9 for import
licenses, and to demonstrate to the a$thorities that domestic prod$ction capacit9 was
not a#aila=le for these goods whose imports were permitted
14
0
Despite these meas$res, in 1933 there was again a =alance of pa9ment crisis, as
imports needed to carr9 o$t planned in#estments and to pro#ide intermediate goods
and raw materials for new ind$stries reE$ired m$ch more foreign e'change than was
a#aila=le0 "t that time the r$pee was de#al$ed0 <owe#er, d$e to se#eral
13
In 19*7, Nehr$ had stated that Kthe f$ndamental reE$irement of India, if she is to de#elop
ind$striall9 and otherwise, is2 a hea#9 engineering and machinema:ing ind$str9, scientific
research instit$tes, and electric power0 These m$st =e fo$ndations of all planning0 )ee )rini#asan,
T0N0 !000%, Eight Lect$res on India&s Economic /eforms, New Delhi2 >'ford 5ni#ersit9 Press,
p01
14
,hagwati, J0N0 and T0N0 )rini#asan, !1945%, @oreign Trade /egime and Economic
De#elopment2 India, +hapter , The Macmillan +ompan9 of India Limited, Delhi0
~ 19
~
reasons de#al$ation was flawed and in the s$=seE$ent period trade regime =ecame
more restricti#e0 D$ring the 9ears when glo=al prices !in 5) dollar terms% were
sta=le or rising D* per cent ann$all9, Indian inflation was in the range of 5D10 per
cent0 The res$lt was that o#er time r$pee =ecame increasingl9 o#er#al$ed, ma:ing
imports e#er more profita=le for those who co$ld o=tain licenses, and pro#iding lesser
incenti#e to prod$ce for e'port mar:ets0 "s a res$lt, e'ports grew relati#el9 slowl9
and fell as a percentage of (DP from 30 per cent in 1950D51 to *0 per cent of (DP
in 193.D350 India&s share in world mar:et had fallen and contin$ed to fall till
1970s0
The policies adopted =9 the go#ernment of India, aimed directl9 at c$r=ing
imports, wo$ld =9 themsel#es ha#e res$lted in a trade sector diminishing in
importance o#er time0 Incenti#es were highl9 s:ewed towards import s$=stit$tion,
where the Tariff +ommission and import licensing proced$res #irt$all9 ass$red
profita=ilit9 to an9one prod$cing for domestic mar:et0 It was estimated that the
a#erage le#el of nominal protection in man$fact$ring was 10 per cent in 1973, rising
to 1*0 per cent in 199 =efore starting to decline after reform too: place
17
0 These
tariffs were often greater than the price differential =etween domestic prod$cts and
those a#aila=le on the international mar:et, =$t there was a complete prohi=ition on
imports of most cons$mer&s goods, and E$antitati#e restrictions and other nonDtariff
=arriers were the instr$ments effecti#el9 constraining imports0 Ahen the prod$ct
was a#aila=le domesticall9, import licenses were not granted0
,etween the first two =alance of pa9ments crises, the real e'change rate
appreciated as India&s inflation e'ceed world inflation0 There was th$s grad$al
appreciation of the c$rrenc9 in real terms $ntil the 1935D33 de#al$ation episodesG it
thereafter remained fairl9 constant $ntil 1973 after which real depreciation =egan
and accelerated $ntil 199*0 In general, e'ports grew more rapidl9 d$ring the periods of
real e'change rate depreciationG howe#er, the9 were well =elow the le#els that might
ha#e res$lted from relati#e $niform incenti#es for importDcompeting and e'port
prod$ction
19
0 In addition, a n$m=er of other economic policies contri=$ted to
17
P$rsell (0, Fishor N, and ($pta F0 !004% KMan$fact$ring Protection in India since
IndependenceM, "$stralia )o$th "sia /esearch +entre, "$stralian National 5ni#ersit9 /esearch
paper0
19
Joshi,?0, and Little I0M0D0 !199.%, India2 Macroeconomics and Political Econom9, 193.1991,
Aashington D0+0 Aorld ,an:0
~ 20
~
the marginaliHation of India in foreign trade0 The large ind$strial ho$ses, which were
among the more efficient prod$cers of some goods, were highl9 constrained =9 the
go#ernment polic9 and permitted to e'pand onl9 in areas deemed essential where there
were no other E$alified prod$cers0 "t the same time, the go#ernment wanted to protect
smallDscale prod$cers, and adopted a KsmallDscale reser#ationM law which essentiall9
e'tended a n$m=er of special pri#ileges to smallDscale prod$cers in large n$m=er !at
its ma'im$m o#er 100% of ind$stries and prohi=ited other prod$cers from competing
with them0 The e'isting firms with their e'isting capacities were permitted to increase
their o$tp$t onl9 for e'ports
0
0 Most of the smallDscale reser#e ind$stries were la=o$rD
intensi#e0 The small firms were confronted with a choice of sta9ing small or losing
their special pri#ileges0 The large firms were precl$ded to enter these areas0 Three
other sets of policies also deterred efficient prod$ction and e'ports0 There were a
neglect of infrastr$ct$re, reg$lations go#erning the la=o$r mar:et and the Klicense ra;M
itself which imposed high cost on economic acti#it90
India&s infrastr$ct$re was highl9 inadeE$ate0 /oads, railroads and ports were
hea#il9 congested =$t comm$nications were poor0 >#erseas telephone calls were
diffic$lt and o=taining the telephone, too, was diffic$lt and time cons$ming0
Infrastr$ct$re E$antit9 and E$alit9 remains a ma;or pro=lem in man9 areas and these
serio$sl9 affected India&s economic growth and integration into the world econom90
The la=o$r mar:et was highl9 reg$lated0 The firms in the organiHed sector were not
permitted to fire wor:ers0 5nion and wor:er rights were enshrined in law, and
$nion acti#it9 often disr$pted prod$ction0 The Klicense ra;M compelled the pri#ate
sector prod$cers to spend more time for see:ing reE$ired licenses for imports and
e'ports and for capacit9 e'pansion0 E#en when the licenses were granted, there
were dela9s and considera=le efforts had to =e made in o=taining necessar9 permits0
Prior to 1990s economic reforms, se#eral adDhoc efforts were made to
enco$rage e'port growth and rationaliHe the trade regime0 These meas$res had
marginal effects, as =ias of incenti#es toward import s$=stit$tion remained
s$=stantial0 The e#ol$tion of e'ports is gi#en in Table 20 It can =e seen that the9 fell
to a low of less than . per cent of (DP =9 1940s0 The restricti#eness of the regime
0
Mohan, /0 !00%, )mallscale Ind$str9 Polic9 in IndiaG +ritical E#al$ation0 In Fr$eger "0>0
!ed%, Economic Polic9 /eforms and the Indian Econom90 +hicago2 5ni#ersit9 of +hicago
Press0
~ 21
~
intensified with e#en the modest K<ind$ rate of economic growthM as demand for
imports rose with incomes far more rapidl9 than the rate of growth of e'port
s$ppl90 "s a conseE$ence of the policies, o#erall economic growth was relati#el9
slow0 The factor prod$cti#it9 growth in man$fact$ring has =een negati#e $ntil 1970s0
Inefficiencies res$lted from entreprene$r&s efforts to s$=stit$te domestic inp$ts for
those o=taina=le a=road, and, from the fail$re of domestic firms to $tiliHe e#en their
e'isting capacit9 =eca$se of foreign e'change shortage0 Lac: of competition also
contri=$ted0 The s9stem was inefficient and $neconomic in se#eral wa9s0 Dela9s in
getting licenses, spare parts, etc0, res$lted in freE$ent sh$tDdowns e#en in new
factories0 "s the restricti#eness of the regime intensified, incenti#e for sm$ggling and
other e#asions increased which in t$rn led to higher inspection for applications for
licenses for in#estment pro;ects and import consignments0 There was also a #irt$al
monopol9 position for import s$=stit$ting firms dependent on imports of raw materials
and intermediate goods2 e#en if there was more than one prod$cer, each firm&s share
was #irt$all9 determined =9 the import licenses recei#ed0
T"b#e 2
In!i"s E2$orts% E2$ort Gro6t* "n! S*"re in
GD(
Period Eports !Rs. "rores# Annual change !$# Eport as $ of %&P
195051 303 30
193031 3. 005 *09
194041 15*5 904 *03
197071 3411 130* 500
199091 *, 55* 1405 30.
19919 ..,0.1 *50* 405
1999* 5*,377 109 405
199*9. 39,551 909 709
199.95 7,34. 1705 901
199593 103,*5* 703 909
199394 117,714 1104 905
199497 1*0,100 905 100.
199799 1*9,45 40. 704
199900 159,531 1.0 900
00001 0*,541 403 1004
0010 09,017 04 1001
000* 55,1*4 01 110.
00*0. 9*,*34 1500 1103
00.05 *45,*.0 409 1*01
00503 .53,.17 103 1.00
00304 541,449 50* 150*
00407 35573. 1.041 1.0*
00709 7.55*. 70 1509
00910 7.55*. 003 1*049
Source2 Economic )$r#e9, (o#ernment of India, 01011
~ 22
~
,$rea$cratic dela9s were the part of the Klicense ra;M, where o=taining the
license was important to profita=ilit90 The doc$ments and paper wor: was
associated with all acti#ities of the go#ernment0 This was to pre#ent o#erDin#oicing,
$nderDin#oicing and capital flight0 +apital inflows $ntil the 1990s were almost entirel9
official, mostl9 de#elopment assistance !see Table '#0 The go#ernment of India
disco$raged foreign direct in#estment !@DI% =9 prohi=iting it $nless it was deemed
KessentialMT$s$all9 technolog9Twhich was =ro$ght to the co$ntr9 that co$ld not
otherwise =e o=tained0 E#en then, conditions were stip$lated s$ch as less than .0
per cent eE$it9 might =e owned =9 the foreigners, @DI co$ld ta:e place onl9 in
specified Kpriorit9M areas and reE$irement for foreign technolog9 transfer0 These
conditions made @DI $nattracti#e
1
0 "s a res$lt, man9 foreign companies closed their
esta=lishments0
T"b#e 1
Tr"!e "n! C"$it"# A))ount ."#"n)es +'i##ion
>,
Period
Trade
balance
"urrent
account
balance
"apital
account
balance
Eternal
assistance
Pri(ate
flo)s* NR+ deposits
1950s .79 35 13 103 9 0
1930s 9*7 7*1 7.5 75 .7 0
1940s 1*0* 9 315 33 151 75
1970s 4*3* ..1. *9* 1.74 1*9* 11*5
1990s 10,*53 .*37 47 1515 5137 1*7
000s ,**1 157. 1390 41 1*090 5*
00*03 **,074 709 *.0 *.3 17753 17
00304 3147 9535 .3141 1474 .3173 .*1
00407 91.34 154*4 104901 119 7.3*7 149
00709 11950 4915 47*5 475 *0.33 .90
00910 117*4. *7*7* 517. *31 377*9 9.
01011 1*0.34 ..71 54**1 .933 33.*. **0
U )$m of foreign in#estment and commercial =orrowing0
Sour ce2 /eser#e ,an: of India 0100
The import s$=stit$ting firms were dependent on raw materials, intermediate
goods and capital goods in order to prod$ce man9 of the import s$=stit$ting
prod$cts and also to e'pand capacit90 E#en in these cases, the go#ernment str$ggles to
iss$e licenses to ind$strial $sers0 The rapid growth of demand for imports led to
chronic c$rrent acco$nt deficit0 It can =e seen in Table ,0 The trade =alance was
negati#e in all 9ears e'cept 1943D440 It pea:ed as a percentage of (DP in the 9ears
1
"garwal, P0 !00*%, Economic Impact of @oreign Direct In#estment in )o$th "sia0 In Mattoo0 "0 and
)tern /0N !ed%, India and the AT>, Aashington D0+2 Aorld ,an: and >'ford 5ni#ersit9 Press, Pp0
1141.00
~ 23
~
of India&s first postDindependence K=alance of pa9ments crisesM in 1953D54 at .07 per
cent of (DP, remained in the *D. per cent range in the 1930s, rose again as a response
to the oil and commodit9 price increases of the earl9 1940s and again in that range
in the 1970s0 Table ' pro#ides the estimates of trade =alance, c$rrent =alance, and
capital acco$nt =alance =9 decade0 <owe#er, these fig$res do not correctl9 indicate the
magnit$de of the foreign e'change shortage, as import licenses were constrained to a
large degree =9 the a#aila=ilit9 of foreign e'change0 @or most of the period, the trade
and c$rrent acco$nt =alances wo$ld ha#e =een m$ch larger negati#e fig$res had
there =een freedom to carr9 o$t desired transactions at pre#ailing prices0 The
entire capital flow prior to the 1970s was from official so$rces !see Table '%0
T"b#e 3
Evo#ution o In!i"s Tr"!e ."#"n)es +Rs-
Crores,
Period Eports +mports Trade balance Trade balance as
$ of
%&P 19515 413 790 14. 104
195354 305 7.1 *3 .07
19313 3. 11 .70 *04
193334 1154 047 91 *01
19414 1307 175 14 .04
194344 51. 504. 37 001
19717 3411 1,5.9 57*7 *07
197374 10,795 19,357 743* *01
19919 *,55* .*,197 10,3.5 01
199394 117,714 1*7,90 0, 10* 103
199497 1*0,100 15.,143 .,043 104
199799 1*9,45* 147,** *7,570 0.
199900 159, 531 15,*3 55,345 *01
00001 0*, 541 *0,74* 4,*0 10.
0010 09, 017 .5,00 *3,171 104
000* 55,1*4 94, 03 .,039 107
00*0. 9*, *34 *59,107 35, 4.1 03
00.05 *45,*.0 501, 035 15, 45 .0.
00503 .53,.17 330,.09 0*,991 30
00304 541,449 7.0, 503 37, 44 401
00407 355,73. 1,01*,1 *53..7 407
00709 7.0,455 1,*4.,.*3 5**,370 1001
00910 7.5,5*. 1,*3*,4*3 517,0 705
Source2 Economic )$r#e9G Ministr9 of @inance, (o#ernment of India !01011%
In 197., the reform =egan to ma:e its entr9 with the rationaliHation of the
licensing s9stem0 There was a modest li=eraliHation of the licensing s9stem, =oth
~ 24
~
regarding the control of ind$str9 and imports and e'ports regime

0 @or e'ample,
in#estment and imports of less than a specified amo$nt were permitted witho$t the
necessit9 of o=taining a license0 In addition, after 1973 the effecti#e real e'change
rate depreciated steadil9 =9 10. per cent from 1973 to 19900 This real depreciation
enco$raged e'ports d$ring the latter half of 1970s and also facilitated the reforms,
partic$larl9 import li=eraliHation of 1990s0 In the earl9 1990s, tariffs were a far more
important component of protection of domestic ind$str9 than the9 had =een in
earlier 9ears as higher import prices a=sor=ed part of import demand and th$s,
E$antitati#e restrictions had less =ite0

The firms were permitted to prod$ce at least le#els a=o#e those permitted in their ind$strial
licenses and the siHe of the firm needing a license was increased0
~ 25
~
Forei0n Tr"!e (o#i)7 Reorms "ter 1991?92

In 1970s, there had =een some degree of rela'ation in foreign e'change control regime
and also some depreciation of the r$pee0 <owe#er, there were h$ge macroeconomic
im=alances0 The fiscal deficit of the central go#ernment a#eraged aro$nd .D5 per cent
of (DP =9 the end of 1940s and it rose to aro$nd 705 per cent of (DP in 1975D730 It
remained almost at that le#el till earl9 1990s0 The deficit of the state enterprises and
that of the states increased at the same pace0 "s a res$lt, p$=lic de=t =$ilt $p, =oth
internal and e'ternal, and co$pled with rising inflation0 The inflation rate rose a=o#e
10 per cent =9 1991D90 The c$rrent acco$nt deficit rose to o#er * per cent of (DP in
the late 1970s0 "ltho$gh growth d$ring the 1970s rose to an ann$al a#erage rate of
o#er 5 per cent, it was $ns$staina=le in the light of e'pansi#e macroeconomic
policies and =$ild $p of h$ge p$=lic de=t0 Ahate#er the reforms were $nderta:en in
1970s contri=$ted to the accelerating growth in that period, altho$gh the econom9
remained hea#il9 o#erreg$lated and constrained =9 an9 standard0 It was in this
=ac:Ddrop, the economic reform programme was initiated0
In earl9 1991, ma;or economic crises emerged0 The roots of the pro=lem
were mainl9 macroeconomic im=alancesG the precipitating factor was sharp drop in
foreign e'change reser#es0 It was co$pled with c$tDoff in pri#ate foreign lending and
downgrading of India&s credit rating
*
0 Despite the IM@ loan in Jan$ar9 1991, the
sit$ation did not sta=iliHe immediatel90 The new go#ernment was formed with P0?0
Narasimha /ao as Prime Minister0 The new go#ernment was committed to str$ct$ral
reforms =$t first it had to address macroeconomic im=alances0 The IM@ loan
s$pported the reform pac:age which incl$ded 19 per cent de#al$ation of r$pee and
a=olition of e'port s$=sidies
.
0 Tight control on imports was introd$ced0 The res$lt was
that dollar #al$e of e'ports did not immediatel9 increase0 <owe#er, the tight fiscal
sit$ation, with the deficit dropping from 70* per cent of (DP in 1991D9 to 509
per cent of (DP in 199D9*, the slowDdown in (DP growth rate, and the r$pee
*
Joshi ?0 and Little I0M0D0 !1993%, India&s Economic /eforms1991001, >'ford2 +larendon Press0
.
"n e'port entitlement scheme for e'porters was also introd$ced
~ 26
~
de#al$ationD all these factors contri=$ted to a drop in imports, so that the c$rrent
acco$nt deficit fell from *0 per cent to 00. per cent of (DP in the following 9ear
5
0
The polic9 changes effected after 1991D9 went far =e9ond those
accompan9ing earlier =alance of pa9ments crises0 )e#eral factors contri=$ted to this
greater scope and depth0 @irst, there was se#erit9 of crisis itself and it was estimated
that foreign e'change reser#es were no more than two wee:s imports when initial
meas$res were ta:en
3
0 )econd, it was e#ident that fiscal deficit had =een the ma;or
factor contri=$ting to the crisis and had to =e sharpl9 c$rtailed0 Third, o#er time, a
large n$m=er of people e'pressed their discontent with India&s slow growth0 @o$rth,
the disintegration of the )o#iet 5nion f$rther altered perceptions and $ndermined
s$pport for state dominance of economic acti#it90 @ifth and most important, the
economic polic9 team led =9 @inance Minister Manmohan )ingh s$pported =9 Prime
Minister Narasimha /ao was con#inced that economic reform was essential if India
was to impro#e its economic performance0 The crisis pro#ided more than the $s$al
room to change the polic9 regime0 The reform proceeded slowl9 and grad$all90
)tr$ct$ral changes =egan to ta:e place in 1990 The main areas chosen in the initial
phase for reforms were tariffs, e'change rates, nonDtariff =arriers and capital flows0
Man9 of the reforms effected in the capital flows had ma;or impact on domestic
monetar9 s9stem, which was significantl9 li=eraliHed0
In 1991, import licensing on all intermediate inp$ts and capital goods were
a=olished0 ,$t cons$mer goods acco$nting for appro'imatel9 *0 per cent of the tariff
lines remained s$=;ect to licensing0 It was onl9 after a challenge =9 India&s trading
partners in the Disp$te )ettlement ,od9 !D),% of the AT> that these goods were
freed of licensing a decade later in "pril 0010 E'cept for *00 tariff lines of goods
s$=;ect to licensing on gro$nds of en#ironmental, health and safet9 considerations
and few other items s$ch as fertiliHers, cereals, edi=le oils, and petrole$m prod$cts,
contin$e to remain canaliHed !imported =9 the go#ernment onl9%0 "ll other goods
can =e imported witho$t license or an9 other restrictions0 The tariff rates were
raised s$=stantiall9 d$ring the 1970s to t$rn E$ota rents into re#en$e for the
5
The primar9 deficit !the deficit net of interest pa9ments% fell from *0. per cent of (DP in the crisis
9ear to 103 per cent of
3
The rise in the prices of oil and red$ction in wor:ers remittances associated with first ($lf Aar
increased the sense of crisis0
~ 27
~
go#ernment0 The tariff re#en$e share of imports went $p from 0 per cent in 1970D
71 to .. per cent in 1979D90
4
0 In 1991, the highest tariff rate stood at *55 per cent,
simple a#erage of all tariff rates at 11* per cent and import weighted a#erage of tariff
rates at 74 per cent0 Aith remo#al of licensing, these tariff rates =ecame effecti#e
restrictions on imports0 The ma;or tas: set for 1990s and =e9ond has =een to lower
tariff rates0 This has =een done in a grad$al manner =9 compressing the top rates while
rationaliHing the tariff str$ct$re thro$gh a red$ction in the n$m=er of tariff =ands0 The
top rate fell to 75 per cent in 199*D9. and 50 per cent in 1995D93, tho$gh there
were some re#ersals in the form of new, special d$ties and $nification of a low and
high tariff rates in the later period0 The general direction has =een towards
li=eraliHation with top rates coming down to 5 per cent in 00*D0. and f$rther to 0
per cent in 004D070
The 1990s reforms were accompanied =9 the lifting of foreign e'change
control that had ser#ed as an e'tra la9er of restrictions on imports0 "s the part of
1991 reform, the go#ernment de#al$ed the r$pee =9 per cent against the dollar from
0 r$pee to 507 r$pee per dollar0 In @e=r$ar9 199, a d$al e'change rate s9stem was
introd$ced, which allowed e'porters to sell 30 per cent of their foreign e'change in
the free mar:et and .0 per cent to the go#ernment at lower official price0
Importers were a$thoriHed to p$rchase foreign e'change in the open mar:et at the
higher price, effecti#el9 ending the e'change control0 Aithin a 9ear of esta=lishing
this mar:et e'change rate, the official e'change rate was $nified with it0 @rom
@e=r$ar9 199., man9 c$rrent acco$nt transactions incl$ding all c$rrent =$siness
transactions, ed$cation, medical e'penses, and foreign tra#el were also permitted at
the mar:et e'change rate0 These meas$res c$lminated in India accepting the IM@
"rticle ?III o=ligations, which made the r$pee officiall9 con#erti=le on c$rrent
acco$nt0
"t the same time, the restrictions on @DI and portfolio in#estment were
eased
7
0 Initial effect of the reform was a s$rge in pri#ate capital inflows0 @oreign
4
(o#ernment of India !199*%, Ta' /eform +ommittee2 @inal /eport, part II, Ministr9 of
@inance, New Delhi0
7
The capital inflow and res$lting foreign e'change receipts complicated macro polic90 The
a$thorities chose the ris: to ris: inflation and maintain nominal e'change rate, rather than ris:
$ndermining the incipient growth of e'ports0
~ 28
~
e'change reser#es were =$ilt rapidl90 @rom 199*D9. onwards, e'port growth
accelerated, with e'ports increasing =9 0 per cent ann$all90 E'ports as percentage
of (DP rose from 405 per cent at the =eginning of the decade to 100. per cent of (DP
in 1994D970 "fter two 9ears of slow growth, the9 contin$ed to increase and =9 the 9ear
003D04, it was 150* percent of (DP0 "fter the r$pee de#al$ation, the e'change rate
was determined =9 a com=ination of mar:et forces and inter#ention, in s$ch a wa9
that the real e'change rate remained within a narrow range of 10 per cent0 This was
the part of new polic9 pac:age, and relati#e certaint9 a=o$t the f$t$re of the real rate
ma9 ha#e =een as important as the le#el of pro#iding incenti#es for foreign traders0
>ne ma;or change occ$rred in the infrastr$ct$re sector which had a positi#e
effect on the e'ternal sectorDtelecom0 It res$lted in #ast impro#ement in =oth
internal and e'ternal comm$nications0 The dereg$lation, permission for pri#ate entr9
into cellDphone mar:et and separation of the reg$lator from the state pro#ider res$lted
in m$ch impro#ed =$siness en#ironment0 Now, the telecom ser#ices ha#e impro#ed
#astl9 =$t 9et to reach the high le#el achie#ed =9 the de#eloped co$ntries0 "ltho$gh
there ha#e =een efforts to enhance infrastr$ct$re capacit9 in other areas, the rapid
growth of real (DP has meant that congestion and dela9s in all transport modes were
as freE$ent as e#er0 The cost, dela9s and $ncertainties s$rro$nding transport remain a
significant for domestic and foreign trade0 Port congestion was s$=stantiall9 high and
impeded e'ternal trade to a large e'tent0
@or imports, the 1990s saw a #irt$al complete dismantling of controls o#er
prod$cer imports, =$t imports of cons$mers goods remained prohi=ited0 <owe#er, =9
00, import prohi=itions were almost entirel9 remo#ed =9 the AT> r$ling against
India0 Tariffs were grad$all9 red$ced as also some of the nonDtariff =arriers0 There was
some offset to this li=eraliHation, as para tariffs were imposed in some instances, and
the go#ernment =egan $sing antiDd$mping and other meas$res freE$entl9 to raise the
protection le#el0 " special cell in the Ministr9 of commerce was set $p to monitor
*00 sensiti#e import prod$cts to determine whether imports were ca$sing disr$ption
to domestic prod$ction0 )oon it =ecame e#ident that damage from imports was
significantl9 less than anticipated0 The maintenance of a realistic e'change rate and
red$ced costs of prod$ction associated with import
~ 29
~
li=eraliHation ena=led m$ch more ad;$stment than had =een e'pected0 The
monitoring of imports was dropped0 It was decided to =ring down the le#els of tariff
rates to the )o$th East "sian le#els0 In 004, the a#erage protection for
man$fact$ring prod$cts was aro$nd 15 per cent
9
0 <owe#er, Indian tariffs are still
high as compared to the le#els of man9 emerging mar:ets0 The AT> estimated that in
005, the simple a#erage of India&s M@N Tariff was 170* per cent with a =o$nd
a#erage of .907 per cent0 This pro#ides great deal of latit$de to raise tariff rates if
circ$mstances warrant0 ,9 comparison, +hina&s a#erage =o$nd and applied rate was
10 per cent and )o$th Forea&s 110 per cent
*0
0 <owe#er, India&s simple tariff rates
declined to 1 per cent in 010D110
)e#eral other meas$res were ta:en to rela' control o#er foreign trade0 @or
e'ample, there was red$ction in the amo$nt of paper wor: reE$ired to o=tain
e'port finance or permission to e'port0 There were s9stemic efforts to red$ce
paper wor: and control the economic acti#it9 in general0 There was positi#e change
in the attit$de towards the pri#ate sector0 Pri#ate sector was enco$raged to enter into
foreign mar:et0 Prod$ct standardiHation and E$alit9 testing proced$res ha#e impro#ed0
Instit$tional infrastr$ct$re to assist e'porters was made more efficient0 The
pro=lems of the e'porter&s are addressed E$ic:l90 The data collection and
dissemination has impro#ed0
/eforms were rapid d$ring the first few 9ears after 1991, and reform
moment$m contin$ed on a n$m=er of fronts0 There has =een =ac:sliding and the
moment$m for reform was lost to some e'tent after the coalition go#ernment led =9
Manmohan )ingh too: office in 00.0 <owe#er, some reform meas$res ha#e =een
ta:en which are not significant0 India entered into a n$m=er of preferential trading
arrangements !PT"%, mainl9 with )o$th and )o$th East "sian co$ntries0 @ree Trade
"greement has =een concl$ded with )ri Lan:a, Thailand and )ingapore0 PT" is $nder
consideration with +hina0 Now, India&s foreign trade has =een relati#el9
geographicall9 di#ersified0 The decision to enter into PT" has =een defensi#e, as
9
This means m$ch of the red$ndanc9 in has disappeared and man9 of the tariff lines are =inding,
with Indian man$fact$rers facing the fl$ct$ations in international prices of their goods0 ,$t le#els
=o$nd $nder the AT> are m$ch higher than the applied tariff in most cases0
*0
Martin, A0 and "0 Mattoo !007%, The Doha De#elopment "genda2 Ahat is on the ta=leP, Polic9
/esearch Aor:ing paper, No0 .34, Aorld ,an:, Aashington D0+0
~ 30
~
PT"s were proliferating worldwide0 ,oth the share of intraDregional trade and trade
go#erned =9 the PT" remains relati#el9 small
*1
0
In recent 9ears, trade initiati#e has mo#ed towards the )pecial Economic 1ones
!)E1%0 Intention was to ena=le e'porters to a#oid =oth the =$rea$cratic red tape
go#erning transactions and the restricti#e la=o$r laws0 The o=;ecti#e is to promote the
de#elopment of largeDscale man$fact$ring of $ns:illed la=o$rDintensi#e goods0 The
legislations permitting )E1s was passed in 005 and reg$lations for implementation
was prom$lgated in earl9 0030 <owe#er, in 004, licenses granting )E1 stat$s were
s$spended for se#eral months0 This was =eca$se political o=;ections were raised on the
gro$nds that farmers were losing their land and large enterprises were $sing the
legislation to o=tain land inappropriatel90 This pro=lem was addressed0 The )E1
scheme was made more attracti#e thro$gh offers of ta' holida9s to in#estors0 The
Ministr9 of @inance estimates that the re#en$e forgone from the scheme was /s0 5*7
=illion in 003D04, with an additional /s0 1 =illion for )E1s0 The cost effecti#eness
of the schemes in generating incremental in#estment and emplo9ment is open to
E$estion0 The )E1s are attracting capitalDintensi#e ind$stries0
,9 end of 010, a total of 1*0 )E1s are alread9 e'porting0 >$t of this 45 are
information technolog9 !IT% S IT ena=led ser#ices !ITE)%, 13 m$ltiDprod$ct and *9
other sectors specific )E1s0 The total n$m=er of $nits in these )E1s is *1*90 The
ph9sical e'ports from these )E1s ha#e increased =9 11 per cent to .4,971 million
009D10 with a compo$nd a#erage growth rate of 5703 per cent from 00*D0. to
009D10 compared to 190* per cent for the total e'ports of the co$ntr9 for the
same period0 The growth in e'ports was 11 per cent in 009D10, compared to a paltr9
003 per cent growth in total e'ports from India as a whole !for details see table
-#0 >$t of the total emplo9ment of 3,..,04* persons in )E1s an incremental
emplo9ment of 509,*39 !49 per cent% was generated after @e=r$ar9 003 when the
)E1 "ct came into force0 "t least do$=le of this n$m=er o=tains indirect
emplo9ment o$tside the )E1s as the res$lt of the operations of the )E1 $nits0 The total
in#estment in the )E1s at the end of 010 was appro'imatel9 -.,.34 million
incl$ding -.1,590 million !97 per cent% in the newl9 notified Hones0 In )E1s 100 per
*1
E#en for )ri Lan:a, there was Hero d$t9 for 1000 tariff lines, a 50 per cent margin of preference for
all other items e'cept for .9 items on a negati#e list0 @or, te'tiles, the tariff is 5 per cent the M@N
rate, while tariff E$otas applied to tea, garments and #anaspati0
~ 31
~
cent @DI is allowed thro$gh a$tomatic ro$te0 The go#ernment role has =een more as
a facilitator =9 fast trac:ing appro#al rather than pro#iding an9 monetar9
incenti#es0 The )E1s set $p $nder the )E1 "ct of 005 are primaril9 pri#ate
in#estment dri#en0
T"b#e 5
SE@ E2$orts "n! In!i"s tot"# E2$ortsA A
Com$"rison
Period Eports from SE.s Eports from +ndia Share of SE.s
in total
Eports
/alue !crore# %ro)th in $ /alue !crore# %ro)th in $ +n $
00*0. 1*,75. *900 ,9*,*34 .04
00.05 17,*1. *0 *,45,*.0 409 .09
00503 ,7.0 .04 .,53,.17 103 500
00304 *.,315 5103 5,41,449 50* 301
00407 33,3*7 905 3,55,73* 1.04 100
00709 99,379 .903 7,.0455 70 1109
00910 ,0,411 110. 7,.5,5*. 003 301
Source2 Economic )$r#e9, (o#ernment of India, 01011
The remo#al of red$ctions in tariff rates and E$antitati#e restrictions lessened
the restricti#eness of the regime0 There has =een a partial offset =9 the $se of
antid$mping meas$res0 @rom 1995 to 005, India was the largest $ser of antid$mping
meas$res, with a c$m$lati#e .5 initiations0 ,9 contrast, the 5) had initiated *33
cases, the E5 *4 and "rgentina 0. cases0 <owe#er, antid$mping actions ha#e
diminished in recent 9ears
*
0 Now, there were onl9 05 cases on in#estigations at the
end )eptem=er 0100 Largest n$m=er of actions were initiated against +hina =9 India
which amo$nted to 5 per cent of the total meas$res0 )teps are =eing ta:en to align
national standards with international normsG so far some 4* per cent of national
standards for which corresponding international standards e'ist0 These are aligned
with international norms0 )P) proc$res are also =eing streamlined, nota=l9 with the
passage of the food safet9 and standard "ct in 003 to consolidate 1* separate laws
relating to )P) iss$es0 The go#ernment proc$rement polic9 at central go#ernment
le#el has $ndergone reform, altho$gh preference contin$es to =e e'tended to
certain items from smallDscale ind$str9 and stateDowned enterprises0
*
The largest proportion of antid$mping cases was against chemicals and chemical prod$cts !.10
per cent, plastic and r$==er prod$cts were the second largest gro$p !1305 per cent%
~ 32
~
Servi)e Se)tor "n! Reorms

)ince the initiation of reforms in 1991, there has =een opening $p of the ser#ice sector
to pri#ate participation, =oth domestic and foreign0 Man9 ser#ices incl$ding
constr$ction, to$rism, health and comp$ter related ser#ices ha#e =een placed on
a$tomatic appro#al ro$te for @DI0 Telecom ser#ices ha#e e'perienced greater
amo$nt of li=eraliHation0 Now, f$ll9Downed foreign firms are allowed in se#eral
segments of telecom sector, go#ernment monopol9 in long distance telephon9 and
internet has =een eliminated and there are no restrictions on the n$m=er of pro#iders0
In se#eral ser#ices, go#ernment increased the foreign holding limits to 4. per cent
from the earlier ceiling of .9 per cent0 )imilarl9 in financial ser#ices there has =een
some li=eraliHation0 @rom the earlier limit of 0 per cent minorit9 participation for
foreign =an:ing companies or financial companies in pri#ate Indian =an:s thro$gh
technical or thro$gh the @oreign In#estment ,oard ro$te, the limit of foreign
ownership has =een raised to 4. per cent in 00. $nder a$tomatic ro$te0 In
000, the Ins$rance /eg$lator9 ,ill was ratified permitting foreign eE$it9
participation $p to 3 per cent onl9 thro$gh ;oint #ent$res and partnership0 )ince
the limit has =een raised to .9 per cent0 ?ario$s other segments of the financial sector,
incl$ding m$t$al f$nds and capital mar:et ha#e =een opened $p to foreign
participation0 >ther areas s$ch as health ser#ices, constr$ction and engineering
ser#ices an a$tonomo$s li=eraliHation has =een $nderta:en0 )ince 000, the hospital
segment has =een opened to 100 per cent @DI participation on a$tomatic ro$te0 There
are more than *0 foreign firms present in healthcare sector thro$gh #ario$s :inds of
arrangements, incl$ding s$=sidiaries, technolog9, training and ;oint #ent$res0
)imilarl9, in constr$ction sector, the go#ernment has permitted 100 per cent @DI
thro$gh a$tomatic ro$te in ci#il wor:s0
"$tonomo$s li=eraliHation has not ta:en place in certain ser#ices, namel9
ed$cation, retail, acco$ntanc9 and legal ser#ices0 "s a res$lt, opening $p in these
areas has =een limited0 In the higher ed$cation sector, reg$lator9 preDconditions are
reE$ired to s$pport li=eraliHation0 @oreign eE$it9 participation is permitted $p to 100
per cent $nder the a$tomatic ro$te since 000 for entr9 thro$gh franchises, twinning
~ 33
~
arrangements, st$d9 centres, and programme colla=oration0 There is a .9 per cent cap
for research and teaching acti#ities0 <owe#er, the sector remains closed to the
esta=lishment of foreign $ni#ersities, ed$cation testing and training ser#ices0 The
opening $p of higher ed$cation ser#ices has centred aro$nd inadeE$ate reg$lator9
capacit9 and need to =alance meas$res aimed at attaining legitimate p$=lic polic9
o=;ecti#es s$ch as E$alit9 and eE$it9 with pro#ision of s$fficient reg$lator9 a$tonom9
for Indian and foreign higher ed$cation pro#iders0
In the distri=$tion ser#ices sector, $nilateral li=eraliHation has #aried across
segments0 Ahile nonDretail segments s$ch as wholesale trading, e'port trading, cash
and carr9 and franchising are permitted $p to 100 per cent thro$gh a$tomatic ro$te,
retail sector was partiall9 open0 In 003, the go#ernment allowed 51 per cent @DI in
single =rand retailing s$=;ect to @IP, appro#al and s$=;ect to certain other
conditions0 There remains a restriction on m$ltiD=rand retailing altho$gh these
restrictions can =e =9passed thro$gh other channels s$ch as local so$rcing,
man$fact$ring and franchising, hence, this segment is not completel9 closed0 The
opening $p of m$ltiD=rand retail segment to foreign pla9ers was s$=;ect to de=ate as
well as the entr9 of =ig domestic entities0 There is a strong political and domestic
sta:eholder&s interest against f$rther li=eraliHation of retail ser#ices, not withstanding
recogniHed =enefits d$e to increased so$rcing and e'port opport$nities, impro#ed
s$ppl9 management, standardiHation and efficienc9 spillo#ers0
The strong domestic sta:eholder&s sensiti#it9 is present in the case of
acco$ntanc9 ser#ices0 Ma;or international pla9ers in the 5) and the E5 ha#e =een
p$shing for the remo#al of all =arriers to the esta=lished foreign professional
acco$ntanc9 firms in India0 <owe#er, the sector remains closed to @DI and foreign
ser#ices pro#iders are not allowed to $nderta:e stat$tor9 a$dit of the companies in
India0 The Instit$te of +hartered "cco$ntants of India !I+"I% has resisted the
opening $p of the sector to foreign acco$ntanc9 firms $nless the le#el pla9ing field is
created for domestic firms, with amendments in domestic legislation permitting
domestic firms to enter into limited lia=ilit9 partnership, m$ltiDdisciplinar9 wor: and
the remo#al of restrictions on the n$m=er of partners and solicitation of =$siness =9
Indian acco$ntants0 In addition, I+"I has $rged the go#ernment to see: reciprocal
arrangements for domestic acco$ntants of Indian firms in other co$ntries, th$s
~ 34
~
lin:ing @DI li=eraliHation in the sector to greater mar:et access and recognition of
Indian acco$ntanc9 professionals in other co$ntries0 The Indian acco$ntanc9 firms
need reciprocit9 and domestic reg$lator9 reforms0
In legal ser#ices sector, there is a domestic opposition to the opening $p to
foreign commercial presence as well as crossD=order deli#er9 of legal ser#ices0 The
,ar +o$ncil of India has maintained that it is neither interested in accessing
international mar:ets nor in li=eraliHation to foreign law firms0 It is concerned a=o$t
$ne#en pla9ing field, gi#en the domestic reg$lations which pre#ent Indian firms from
ha#ing more than 0 partners, m$ltiDdisciplinar9 practice, limited lia=ilit9 partnerships
and restrictions on ad#ertising =9 Indian law9ers0 It enhanced the recognition of
Indian E$alifications and reciprocal treatment of Indian legal professionals0 There is a
concern that the entr9 of foreign law firms will ma:e it diffic$lt for small Indian law
firms to s$r#i#e and the mar:et segmentation and price effect of s$ch entr90
The approach to a$tonomo$s li=eraliHation #aries considera=l9 across
sectors0 The determining factors ha#e =een domestic lo==ies and sta:eholder&s
sensiti#ities against li=eraliHation on the one hand, and efficienc9, competiti#eness and
technolog9 considerations and o#erall economic and str$ct$ral reform programme
initiated in 1991 on the other0
India is a participant in the AT>D("T) negotiations0 In the 5r$g$a9 /o$nd,
India made limited commitments0 Man9 sectors s$ch as energ9, distri=$tion,
ed$cation and en#ironmental ser#ices to name =$t a few, were not sched$led E#en
important sectors s$ch as financial and telecom ser#ices, :e9 s$=Dsectors and
acti#ities s$ch as ins$rance or international long distance telephon9 were not
committed0 Moreo#er, the commitments t9picall9 =o$nd less than the stat$s E$o create
a gap =etween the e'isting mar:et access conditions and the le#el committed $nder
the AT>0 India&s m$ltilateral commitments in ser#ices reflected a
conser#ati#e approach and no additional mar:et opport$nities for trading partners0
In the Doha /o$nd, ser#ices negotiations which were =ased on =ilateral reE$ests and
offers, India recei#ed reE$est in almost all sectors0 These reE$ests centered on the
e'pansion of India&s commitments to incl$de more ser#ices sectors and acti#ities
within the sched$led sectors and li=eraliHe its commitments0 In response to these
~ 35
~
reE$ests, India s$=mitted its initial offer in 00.0 This offer did not s$=stantiall9
impro#e $pon its earlier 5r$g$a9 /o$nd commitment mainl9 =eca$se there was little
progress in the commitments =9 other mem=er co$ntrie&s sectors in which India
e'pressed its interest0 In its 005 re#ised offer, India significantl9 impro#ed $pon its
5r$g$a9 /o$nd commitment =9 incl$ding se#eral new ser#ices sectors and s$=D
sectors0 India indicated its willingness to remo#e commercial presence restrictions in
:e9 areas which it had a$tonomo$sl9 li=eraliHed earlier0 Its re#ised offer co#ered 11
sectors and 9. s$=Dsectors as opposed to 4 sectors and .4 s$=Dsectors in its initial
conditional offer0 )ome of the new areas incl$ded were ed$cation, distri=$tion,
acco$ntanc9 and en#ironmental ser#ices0 These changes reflected new approach to
India&s negotiating stance0
Aith respect to trade polic9, India has =een a proponent of m$ltilateralism0
<owe#er, in recent 9ears, it has entered into =ilateral and regional negotiations0 India
is a latecomer on the =ilateral and regional scene0 )o far India has signed onl9 one
regional agreement on ser#ices, namel9 IndiaD)ingapore +omprehensi#e Economic
+ooperation "greement !+E+"%0 The agreement came into force in "$g$st 0050
Efforts afoot to e'pand the ser#ice sector agreement to other co$ntries0 )$ch
agreement e'ists with )ri Lan:a, ,a9 of ,engal Initiati#e for M$ltiDsectoral Technical
and Economic +ooperation !,IM)TE+% and Thailand0 +E+" has a positi#e list
approach0 It has a general o=ligations pertaining to recogniHation, domestic reg$lation
and transparenc9 as well as sector specific o=ligations with regard to mar:et access
and national treatment commitments with similar aims and o=;ecti#es as those of
("T)0 Li=eraliHation commitments $nder the +E+" ha#e gone =e9ond those $nder
the ("T)0
The ser#ices sector did pla9 and will contin$e to pla9 an important role in
India&s trade polic90 The ser#ices sector is ena=ling India to integrate with the world
econom90 The polic9 framewor: and approach #aried across different ser#ices s$=D
sectors, the general direction is towards greater opening $p of all :inds of ser#ices0
"t the m$ltilateral le#el, India p$shed its agenda strongl9 in the ("T) negotiations,
=$t to little effect0 It has in part contri=$ted its shift towards comprehensi#e regional
and =ilateral agreements encompassing ser#ices and in#estment iss$es =esides trade0
It is percei#ed that India co$ld achie#e a winDwin sit$ation from regional and =ilateral
~ 36
~
framewor:s co#ering ser#ices and f$lfil the o=;ecti#es of growth and efficienc90 India
can tap trade, in#estment and ser#ices potential within the )o$th "sian region0
)e#eral cl$sters of ser#ices within the )o$th "sian region ha#e similarities and
complementarities, which co$ld ser#e as a =asis for strengthening economic
cooperation0
Year $#ports% &mports 'rade
(a"a!ce
$#port
Gro)t*
+at
&mport
Gro)t*
+at 195051 to
195455 631
8
733
2

1014
5.2
4
(0.63
4.8
8
(6.75 195556 to
195960 626
7
944
7

3180
1.8
8
(1.70
7.3
4
(7.2 196061 to
196465 752
4
12377
4853
4.9
6
(5.00
7.0
8
(7.22 196566 to
196970 856
1
13125
4564
2.0
4
(12.62

5.48
(5.30
~ 37
~
E2$ort?Im$ort Gro6t* S)en"rio

,road trends in the #al$e of e'ports growth for the period 1950D51 to 1939D40
were almost near stagnation with small #ariations =9 9ear to 9ear fl$ct$ations0 The
e'port growth was in the #icinit9 of 107 per cent compo$nd rate per ann$m0 This
was d$e to emphasis on import s$=stit$tion and lac: of attention to e'port stim$lation
meas$res0 >n the other side, imports grew aro$nd . per cent per ann$m0 Import
growth was relati#el9 =etter in midD1950s to midD1930s0 This was on acco$nt of hea#9
emphasis on ind$strialiHation, partic$larl9 that of p$=lic enterprises which emanated
from the Third @i#e Iear plan0 <owe#er, this trend did not contin$e d$e to
de#al$ation in 1933 and its se#ere ad#erse effect on =alance of pa9ments in the
s$=seE$ent 9ears0 Import control regime was tightened with licensing s9stem !see
Table 0#.
T"b#e 8
E2$orts% Im$orts% Tr"!e ."#"n)e "n! Gro6t* R"tes or 195051 to
1989:0 +v"#ue in mi##ion US> B $er)ent"0es,
No te2 1% E'ports incl$des ree'ports also0
% E'ports and Imports are for a total of fi#e 9ears0 (rowth rates are a#erage per ann$m0
*% (rowth rates in =rac:ets are in r$pee terms0
Sour ceA E)onomi) Surve7% 2010-
D$ring this period, India failed to ta:e ad#antage of opport$nities offered =9
the growing world trade0 This is e#ident from the fact that the world trade grew =9
405 per cent per ann$m d$ring 1950 to 19400 India contin$ed to remain the e'porter of
primar9 commodities and world trade di#ersified into a large n$m=er of ind$strial
prod$cts0 The domestic ind$stries were restricted =9 licensing s9stem and
moderniHation was diffic$lt to come a=o$t0 The p$=lic enterprises were in the infant
stage of de#elopment and it co$ld not ma:e a dent in the world mar:et0
~ 38
~
In the 1940s, India&s e'ports grew =9 1709 per cent per ann$m, which was
E$ite impressi#e compared to her performance in the past0 <owe#er, it declined
sharpl9 in 1970&s0 The e'ports grew =9 4075 per cent per ann$m0 The imports also
grew at the ann$al rate of 15079 per cent in 1940s and declined marginall9 to 1105. per
cent in 1970s0
T"b#e :
E2$orts "n! Im$orts in 19:0s "n! 19;0s +E2$orts "n! Im$orts in mi##ion > B 0ro6t*
in C,
Period Eports +mports Trade balance Eport %ro)th +mport %ro)th
194041 to
194.45 1.114 13..5 *7
1:-;2
!19017%
23-18
!5040%
194543 to
194970 *1359 *7.1* 345.
11-;8
!1.0*3%
15-;0
!15043%
197071 to
197.75 .53. 4555* 999
3-38
!1097%
8-18
!1*09.%
197573 to
197990 31*0 79333 7*.3
11-82
+19043%
;-1;
!1509%
Note2 )ee notes of ta=le No0.0 E'ports and imports for a total of fi#e 9ears0 )imilar is the case with
(rowth rates0
The =alance of pa9ments sit$ation eased relati#el9 in the late 1940s, the
go#ernment initiated some meas$res of import li=eraliHation0 )ince midD1970s, a
n$m=er of li=eraliHation meas$res were adopted, which incl$de some dereg$lation of
ind$strial controls, softening of restrictions on monopolies, li=eraliHation of capital
goods imports with the #iew of technological $p gradation and moderniHation of
ind$str9, some shifts from E$antitati#e restrictions to tariffs, greater s$=sidies for
e'ports and polic9 of acti#e e'change rate depreciation0 @or the first time, a longD term
!threeD9ear% importDe'port polic9 !1975D77% was adopted in order to impart sta=ilit9 to
the polic9 framewor:0 The polic9 reforms d$ring the 1970s mainl9 foc$sedon
domestic ind$strial li=eraliHation rather than on foreign trade
li=eraliHation0 ?er9 little was done to open $p Indian ind$str9 to foreign competition0
The import li=eraliHation related mainl9 to inp$ts and components, which increased
the effecti#e protection of final prod$cts0 <owe#er, the a#erage protection le#els
remained =oth high and widel9 differentiated and imports of cons$mer goods were
=anned !e'cept those goods which were considered to =e essential%0 India&s trade
regime was considered most restricti#e d$e to its comple' nat$re and wide n$m=er of
tools $sed as polic9 instr$ments0
~ 39
~
" comprehensi#e economic reform was $nderta:en in 1991 in the wa:e of
se#ere =alance of pa9ments crisis0 "t that time, the foreign e'change reser#es were not
adeE$ate eno$gh to meet e#en 15 da9s of import =ill0 @rom 1975D73 to 1990D91, the
deficit in the =alance of pa9ments ranged =etween -509* =illion to -4013 =illion0 The
e'port, import and =alance of pa9ments pict$re is gi#en in table 10
T"b#e ;
E2$ort% Im$ort "n! ."#"n)e ("7ments rom 199091 to 2009
10
Period
Eports
!million 2#
+mports
!million 2#
Balance of
Trade
!2 million#
Eport
%ro)th
!in $#
+mport
%ro)th
!in $#
199091 to 199.95 10*11* 114*7 1.15
9-9;
!.033%
:-23
!0047%
199593 to 1999000 140*1* 09*55 *90.
:-2;
!1.07%
12-02
!190.0%
00001 to 00.05 77.7. *5*0 3.5.*
1;-12
!19003%
1;-58
!19000%
00503 to 00910 453,37* 1,147,3. .1,9.1
1:-02
!17007%
21-90
+090%
00503 10*091 1.9133 .3045
21-3
!103%
11-;
!*107%
00304 13.1. 1754*5 59*1
22-8
!50*%
23-5
!40*%
00407 13*1* 5135. 775
29-0
!1.04%
15-5
!00.%
00709 17595 *0*393 117.01
11-8
!70%
20-:
!*507%
00910 147,451 77,*4* 7,104
1-5
!003%
+5-0,
!007%
Source2 Economic )$r#e9, (o#ernment of India, 01011
In the 1990s, the e'port growth was s$=;ect to wide ranging fl$ct$ations0 @or
e'ample, e'ports grew =9 007 per cent and also dipped to D501 per cent in 1997D990
The decade of 1990s, 1991D9 and 1997D99 showed negati#e growth rate in e'ports0
>n an a#erage, e'port growth was 1*0** per cent per ann$m0 >n the other side,
imports grew =9 1009* per cent per ann$m and onl9 d$ring 1991D9, it showed
negati#e growth rate of 190. per cent0 >therwise, the import growth rate #aried
=etween 0 to 7 per cent0 The =alance of deficit increased contin$o$sl9 !see Table
3#0 >ne important fact that needs to =e noted is that the =ase of the imports and e'ports
enhanced considera=l9 d$ring the decade of 1990s along with considera=le
di#ersification in =oth e'ports and imports commodit9 =as:ets0
The 9ear 001D0 and 009D10 saw negati#e growth rates, howe#er, =etween
001D0 and 00.D05, e'ports on ann$al a#erage grew =9 1*077 per cent, with o#er
~ 40
~
*0 per cent growth in 00.D050 )imilar was the case with imports, the a#erage ann$al
growth rate was 1*04* per cent0 @rom 005D03 to 004D07, e'ports increased in the
#icinit9 of 5 per cent per ann$m and the imports grew m$ch higher that was o#er
*1 per cent per ann$m0 <owe#er, the gap =etween e'ports and imports widened
and p$shed the =alance of trade deficit to an alarming proportion0 E#er since 1944D
47, India has =een r$nning h$ge deficit in the c$rrent acco$nt of =alance of trade0
The deficit in the =alance of pa9ments =egan in 1995D93 and reached an alarming
proportion of 5)- 1075 =illion in 1999D0000 E#en in the recent 9ears, the deficit in
=alance of trade is growing, it was o#er -117 =illion in 007D090 The =alance of trade
amo$nted to 70.5 per cent of the (DP in 009D100 The recent growth in e'ports is d$e
to an increase in factor prod$cti#it9, rise in world trade, increase in intraD ind$str9
trade and not d$e to the e'ternal sector reforms $nderta:en0 >#er the 9ears, the share
of e'ports and imports to (DP has increased, partic$larl9 from
000D01 to 009D100 The total trade !e'ports C imports% was *3 per cent of the (DP in
009D100 E'ports to (DP were 10040 per cent in 000D01 and ha#e risen to 1*049
per cent in 009D100 )imilarl9, imports increased from 10. per cent to 0. per
cent in respecti#e 9ears0 The e'port growth recei#ed set =ac: in 009D10 d$e to worldD
wide recession and fall in commodit9 prices for which was a main e'porter0 This
$nderlines an increased integration of Indian econom9 with the world0
~ 41
~
Commo!it7 Com$osition o E2$ort "n! Im$ort
."s/et

>#er the last si' decades, the commodit9 composition of e'port =as:ets has altered in
the face of str$ct$ral changes in the Indian econom90 Emphasis on hea#9
ind$strialiHation to a large e'tent was responsi=le for this change0 In the 1950s,
agric$lt$ral and allied commodities, incl$ding farm processed prod$cts dominated
the e'port =as:et0 The share of these prod$cts was *045 per cent0 Man$fact$red
prod$cts, namel9 cotton piece goods, g$nn9 =ags and g$nn9 clothes etc0 composed
of *7075 per cent and minerals s$ch as coal, mica and manganese ore acco$nted for
*03 per cent of the total e'ports0 The =ase of the man$fact$ring was farm prod$cts
which was started on a small scale0 +otton piece goods, tea and g$nn9 =ags and
clothes were the main items of e'ports which formed 510* per cent of e'ports and the
share of these goods increased to o#er 53 per cent of total e'ports in 195.D550
The str$ct$ral change in the commodit9 composition of India&s e'ports co$ld
=e anal9Hed from 1930 onwards d$e to a#aila=ilit9 of data0 The share of agric$lt$re
and allied commodit9 e'ports fell steepl9 d$ring 1930D31 to 009D100 It was ..0* per
cent of the total e'ports and dipped to 1005 per cent0 The sharp fall was witnessed in
the first three decades0 ,efore the economic reform of 1991, the agric$lt$re and allied
commodit9 share declined to 190. per cent in 1990D910 The share of agric$lt$ral
and allied commodities also declined in the total world e'ports0 This trend is
consistent with shrin:age in the share of the sector in (DP of India0 "t the prod$ct
le#el, share of tea, $nman$fact$red to=acco and spices declined in India&s total e'ports
and world e'ports0 >nl9 marine prod$cts showed =oth increase in India&s e'ports and
world e'ports d$ring 1930 to 003 period0 <owe#er, its share declined in 009D10 to
1014 per cent0 Prod$cts s$ch as coffee, cereals, and #egeta=les and fr$its indicated fall
in their share in India&s e'ports and rise in world e'ports0 "t a more detailed le#el,
rice, s$gar and s$gar preparations and feeding st$ffs of animals showed rise in their
share of e'ports0 E'port share of ore and minerals declined and that of their share in
world e'ports increased0 This was partic$larl9 d$e to rise in the share of iron ore0
This was on acco$nt of e'pansion of steel ind$str9 in +hina
~ 42
~
and Japan0 The share of ore and minerals almost remained at the same le#el from
1990D91 to 009D10 and it was aro$nd .03 per cent0
The share of the man$fact$red goods in the total e'ports was nearl9 *9 per cent
in 1950D51 which composed of cotton piece goods, g$nn9 =ags and g$nn9 clothes0
These were =asicall9 agric$lt$reD=ased prod$cts0 <owe#er, detailed data is not
a#aila=le0 Ind$strial =ase was small0 In 1930D31 the share of man$fact$red
prod$cts increased to .50. per cent and prior to economic reforms in 1990D91 it went
$p to 409 per cent and reached its pea: in 000D01 to 47 per cent, thereafter
downward trend was set in and it was 340 per cent in 009D100 )hare of chemicals,
d9es, pharmace$ticals, gems and ;eweller9, iron and steel, machiner9, transport
eE$ipment, electronic goods and clothing prod$cts increased, =oth in total e'ports and
in world e'ports0 <owe#er, the share of man$fact$res of metals declined in total
e'ports =$t enhanced its share in world e'ports0 Leather goods !incl$ding footwear%
and te'tiles showed =oth decline in total e'ports and world e'ports o#er the period of
1930D31 to 004D070 +r$de and petrole$m prod$cts entered in s$=stantial proportions
in 000D01 and reached 1301 per cent of the total e'ports in 009D100 The prod$ct
composition has changed to some e'tent from 000D01 to 010D11 !see table 4#0 E#en
in the man$fact$red categor9, the traditional goods e'ports were ma:ing the wa9 for
new prod$cts0 The str$ct$ral change was relati#el9 minor in the first decade of the
postDreform period0 +hanges occ$rred in the second decade with engineering prod$cts
and chemicals leading the wa90 The petrole$m prod$cts =ecame an important segment
of e'ports with the share of o#er 13 per cent in 009D100 India has =ecome one of the
leading petrole$m refining centre in "sia0 In near f$t$re India is li:el9 to emerge
glo=al h$= of petrole$m refining d$e to its pro'imit9 to the ($lf co$ntries0 "nother
most important concern is the declining share of te'tiles, its share has fallen to less
than 10 per cent of total e'ports0 To a lesser e'tent similar is the case with the gems
and ;eweller90 !See Anneure + A 5B and %raph 1#.
@or 1950D51, the imports are classified into cons$mers Ngoods and prod$cers&
goods0 @$rther, the prod$cer&s goods are classified into raw materials and capital
goods0 The share of the cons$mers goods was 1403 per cent and that of prod$cers&
goods was 5405* per cent and in the categor9 the share of raw material was *.0.4
per cent and that of capital goods was *010 per cent0 In the cons$mer&s goods
~ 43
~
categor9 grains, pl$ses and flo$r were the main prod$cts0 )imilarl9, in raw materials,
raw cotton, oil and raw ;$te were the main items0 +apital goods consist of
machiner9, electrical goods, metals, iron and steel prod$cts0 "t this point of time, India
was importing raw cotton and ;$te to process and e'port g$nn9 =ags and g$nn9
clothes0 This period was more a contin$ation of colonial pattern of foreign trade0
T"b#e 9
C*"n0e in t*e Com$osition o E2$orts 200001 to 201011 +in
C,
Product %roups
Share in total
Eports 2666,61
Share in total
Eports 2616,11
Rise or fall in
percentage points
Engineering (oods 10. *03* 10049
Petrole$m Prod$cts 1033 13059 1.09*
(ems and Jeweller9 13045 1*045 *000
Te'tiles .03 90*. 1.09
"gric$lt$re and "llied Prod$cts 707 3094 107*
>res and Minerals 03 .0. 1070
Electronic (oods 05. *0*3 007
Leather and Leather (oods .0.1 1059 07
Marine prod$cts *013 1014 1099
+hemicals and related Prod$cts 1.001 109* 1007
Source2 Economic )$r#e9, (o#ernment of India0 ?ario$s 9ears0
@rom 1930D31 onwards the imports are classified into three categories2 food
and li#e animalsG raw materials and intermediates, and capital goods0 The share of
food and li#e animals categor9 imports declined sharpl9 from 19 per cent in 1930D31
to * per cent in 1970D71, thereafter it =ecame insignificant0 In this categor9 cereals and
cereal preparations was the main item, its share in total imports declined from
1305 per cent in 1930D31 to 0001 per cent in 009D100 The decline was contin$o$s o#er
the period !see Anneure ++ A 5 B#.
The share of raw materials and intermediates increased from .3093 per cent
in 1930D31 to 3*0.. per cent in 009D100 The share of this prod$ct gro$p increased
sharpl9 in the preDreform period and to$ching 44044 per cent of the total imports in
1970D71, thereafter it dipped0 <owe#er, it #aried =etween 5* per cent to 3* per
cent from 1990D91 to 009D100 +ashew n$t, cr$de r$==er !incl$ding s9nthetic and
reclaimed%, fi=res and iron and steel showed decline in their share of total e'ports0
This decline was contin$o$s in case of iron and steel till 000D01 and thereafter
there was an increase mainl9 d$e to imports of specialt9 steel0 NonDferro$s metals
enhanced its share in total imports =etween 1930D31 to 009D10 and also in the preD
reform as well as postDreform periods0 )imilar is the case with petrole$m, oil and
~ 44
~
l$=ricants0 Its share in the total imports galloped from 3013 per cent in 1930D31 to
*0009 per cent in 009D100 The fact is that its share went $p to nearl9 . per cent in
1970D71 in post second oil crisis the world o#er0 "nimal and #egeta=le oils,
fertiliHers, plastic materials, and pearls and precio$s stones showed rise in 1930D31
to 009D10 and in preQreform period =$t indicated a declining trend in the postD reform
period0 >nl9 nonDferro$s metals showed rising share in total imports d$ring the entire
period as well as in the post reform period0 ,oth nonDelectric machiner9 and electric
machiner9 prod$ct gro$ps showed decline in the share of imports in total, preDreform
and postDreform periods0 The prod$ct of transport eE$ipment share in total imports and
postDreform period and in 1930D31 to 009D10 period increased0
India&s imports were =roadl9 classified into =$l: and nonD=$l: items0 The
prod$ct gro$ps s$ch as food and allied prod$cts, f$el, ores and metals, fertiliHers and
paper, paper =oard and p$lp fall $nder =$l: categor9 and rest of the items in nonD =$l:
categor90 In 1930D31, the share of =$l: items in total imports acco$nted for
.9079 per cent after declining in some 9ears, it reached its pea: in 1970D71 to 3504
per cent and it again declined in 000D01 and f$rther increased to 50017 per cent in
009D100 Main reason for increase was the rise in oil prices0 The trend co$ld =e seen
from the ta=le =elow0 /ise in the cr$de oil prices p$shed $p the share of =$l:
imports, partic$larl9 in 1970D71 and in 009D100 The li=eraliHation episode did not
dramaticall9 alter the =$l: imports altho$gh there was decline in other items of
imports, namel9 food and allied prod$cts and fertiliHers0 Man9 of the restricted and
canaliHed items were remo#ed from E$antitati#e restriction lists0 ,$l: items still
comprise the main proportion of the national import =ill0 The cr$de oil prod$ction has
increased in India after 001D00 Its contri=$tion is less than 17 per cent of domestic
cons$mption !See Table 16#.
T"b#e 10
S*"re o .u#/ Im$orts in Tot"# Im$orts +in
C,
+tems 1406,01 1436,31 1416,11 1446,41 2666,61 2664,16
@ood and allied prod$cts1 19007 15075 *00* 09 037 044
@$el 3013 70** .109. 3077 *0094 *0009
>res and metals 15014 7094 3049 10097 031 1.014
@ertiliHers 4073 1*0* 11074 .010 10*1 0*
Paper, =oard 6 p$lp 1031 04 103* 011 10.* 007*
T>T"L .9079 .403. 3504 .30*3 *9000 50017
Source2 Economic )$r#e9, (o#ernment of India, 007090
~ 45
~
India&s e'ports were highl9 concentrated in >E+D co$ntries and it still
contin$es, tho$gh on a lesser scale0 )hare of the >+ED co$ntries was 33 per cent in
1930D31 and declined to 50 per cent of the total e'ports in 1940D41 and thereafter till
000D001 it #aried in the range of .3 to 55 per cent0 It f$rther fell to .1 per cent0
In case of the E5, the share of e'ports was *3 per cent and it fell sharpl9 in
1940D41 to 17 per cent0 E#en with the e'pansion of E5 co$ntries to 1 per cent till the
end of 004D07, 50F0, (erman9 and @rance were the ma;or e'port destinations in the
1930D31 =$t their share declined o#er the 9ears and other E5 co$ntries ,elgi$m, the
Netherlands and Ital9 emerged from 1970s onwards0 The share of /$ssia !as
5))/% was s$=stantial with r$pee pa9ment arrangements, which declined sharpl9 after
the disintegration of the 5))/ in 1991 and came to less than one per cent at the end
of 004D070 Japan one of the main trading partners also e'perienced a fall in its share
in total e'ports o#er the 9ears0 Man9 new economies emerged as trade partners,
prominent among them =eing +hina, 5nited "ra= Emirates, /P Forea, Mala9sia,
)ingapore, Indonesia, Ital9 and )pain !See anneure +++#0 Most of the co$ntries
emerged as strong trading partners, partic$larl9 after 1995D93 when the trade polic9
reform was getting impet$s0 The glo=al lin: with the prod$ction process was e#ident
after 000D010 Dependence on de#eloped co$ntries contin$e to remain strong d$e to
s$ppl9 of intermediates and India emerged as an e'porter of simple capital goods and
tools and eE$ipments0 This means some of the import s$=stit$ting ind$stries of the
past t$rned to e'ports0 There has =een change in the e'port destination in 010D11 as
compared to 000D010 This is e#ident from table 110
T"b#e 11
'"Dor E2$ort Destin"tion in 200001 "n! 201011 +s*"re in
C,
&estination 2666,61 2616,11
E5 .000 1705*
5) 0.* 10091
Japan .00. 014
"sia and ")E"N *7039 5.073
Latin "merica 0 .07
"frica .009 304
>thers .05* 05*
Most stri:ing feat$re is the growing importance of "sia as an e'port
destination0 "sian share in total e'ports has increased =9 s$=stantial proportion and it
is nearl9 55 per cent in 010D110 This is d$e to India&s KLoo: East Polic9M and
s$stained effort to de#elop strong relations with +hina and the ")E"N0 "t the same
~ 46
~
time declining share of the E5 and the 5)0 +oncerted effort has =een made to de#elop
trade relation with "frica and Latin "merica0
Direction of the imports was almost similar to that of e'ports0 The share of the
>E+D co$ntries in total imports was 47 per cent in 1930D31 and declined
steepl9 to .504 per cent in 1970D710 It increased again in 1990D91 with e'pansion of
E5 to 1 mem=ers, incl$ding 5F, howe#er, the share declined to *705 per cent in
004D070 Now, the E5 share has declined to 17,5 per cent in 010D110 )imilarl9, the
5) )hare also dipped to nearl9 11 per cent in the same 9ear0 The import share of
,elgi$m, (erman9 and 50F0 fell contin$o$sl9 with some a=errations and that of
@rance and the Netherlands increased marginall90 In the last decade, Ital9&s share
increased tho$gh it =ecame an important trade partner in the midD1990&s0 The share of
the 5) and Japan declined o#er the period and that of "$stralia increased0 The share of
/$ssia was at its pea: in 1970D71 at 7 per cent =$t with the disintegration of the
5))/, it dipped to one per cent0 "=rogation of r$pee pa9ment agreement and /$ssian
agreement to sell cr$de oil to E$rope led to decline in imports0 Imports from
)a$di "ra=ia, Iran, 5nited "ra= Emirates, Nigeria, Indonesia, Mala9sia F$wait also
increased d$e to p$rchase of cr$de oil from these so$rces towards the end of
004D070 The most stri:ing fact is that the import share of +hina increased rapidl9
from 000D010 The import share of Ital9, )witHerland, )ingapore and )o$th "frica
also registered rise !see Anneure +/#0 Di#ersification of imports was mainl9 d$e
imports of raw materials, capital goods for moderniHation and e'pansion of
ind$stries0 The Kloo: East polic9 Kof the go#ernment 9ielded some positi#e res$lts0
,oth e'ports and imports increased to some e'tent to East "sia and )o$thDEast "sia
after 1995D930
~ 47
~
F")tor Intensit7 An"#7sis o E2$orts

" classification of prod$cts =ased on their factor intensit9 regarding s:ill, technolog9
and capital to assess the factor content of India&s foreign trade and its e#ol$tion o#er
the last three decades has =een attempted in this section0 The anal9sis presented is
=ased on the classification proposed =9 5N+T"D !1993% and res$lted into the
following prod$ct categories =9 factor intensities2
(ro$p 12 "ll food prod$ctsG
(ro$p 2 "gric$lt$ral raw materialsG
(ro$p *2 Minerals, ore and metalsG
(ro$p .2 @$elsG
(ro$p 52 La=o$r and reso$rce intensi#e man$fact$res
**
G
(ro$p 32 LowDs:ill and technolog9Dintensi#e man$fact$res
*.
G
(ro$p 42 Medi$m s:ill and technolog9 intensi#e man$fact$res
*5
G
(ro$p 72 <igh s:ill and technolog9D intensi#e man$fact$res
*3
G
(ro$p 92 >ther man$fact$res
*4
0
In 1945, all food prod$cts, share in India&s total e'port was *404 per cent
which declined sharpl9 to 009 per cent in 000, then it has rose marginall9 to 0. per
**
La=o$rintensi#e and reso$rce man$fact$res with a lows:illtechnolog9and capital content, or
where $se can =e made of indigeno$s s:ills and technolog9 acE$ired thro$gh earlier handicraft
prod$ction0
*.
Incl$des man$fact$res with a lowtomedi$m le#el of s:ill, technolog9, capital and scale
reE$irements0
*5
Incl$des man$fact$res with medi$m Qto high le#el reE$irements in s:ill, technolog9, capital and
scale0
*3
Incl$des man$fact$res which ha#e the highest reE$irements in terms s:ill, technolog9, and scale0
*4
)pecial categor9 of prod$cts which is important in India&s e'ports and importsG namel9, ;eweller9,
precio$s stones and metals and pearls0
~ 48
~
cent in 0030 @resh, chilled, and froHen fish was the main item in 1970 followed =9
cr$de #egeta=le materials0 The composition changed =9 003, the leading prod$cts in
this gro$p were cr$stceans, moll$scs etc0 <owe#er, cr$de #egeta=le materials
remained at high proportion0 @ish, cr$de animal materials and fi'ed #egeta=le oils
disappeared m$ch =efore 0030 The share of agric$lt$ral raw materials declined
sharpl9 from o#er per cent in 1970 to 503 per cent in 0030 E#en in the
inter#ening period the decline was sharp and it dipped down to as low as 10* per
cent in 19930 E#idences show that India was rapidl9 shifting from primar9 prod$cts0
Aithin the gro$p, the share of rice, #egeta=les, fr$its and n$ts, s$gar, molasses and
feeding st$ffs increased from 1970 to 0030 The share of coffee and s$=stit$tes,
spices and tea declined s$=stantiall90 India&s tea e'ports came down sharpl90 This was
mainl9 d$e to international competition as well as constrains on s$ppl9 and enhanced
domestic cons$mption0
The e'port share of minerals, ores and metals declined from 10* per cent in
1945 to 0 per cent in 000 then again increased marginall9 to 9 per cent in 0030
This was on acco$nt of rise in the e'ports of iron ore, and copper0 The share of
f$els increased s$=stantiall9 from 101 per cent in 1945 to 140 3 per cent in 003, this
increase mainl9 came from rise in petrole$m oils and oil o=tained from =it$mino$s
!not cr$de%0
The share of la=o$r and reso$rce intensi#e man$fact$res increased rapidl9
from 407 per cent in 1945 to 5509 per cent in 000, then it declined to *10 per
cent in 0030 The te'tile 9arn replaced raw cotton e'ports0 In clothing, women&s or
girl&s o$twear of te'tile fa=rics !not :nitted or crocheted%, made $p articles of te'tile
materials and articles of apparel of te'tile fa=rics !whether or not :nittedScrocheted%
=ecame main prod$cts of e'ports0 In footwear, leather and tra#el goods segment,
leather which was a main component of this segment declined sharpl9 and similar
was the case with leather man$fact$res0 The share of wo#en cotton fa=rics, te'tile and
clothing accessories declined rapidl9 d$ring this period0
The share of low s:ill and technolog9 intensi#e man$fact$res increased to
some e'tent in 003 o#er 1945 to 90. per cent =$t it did decline in 1975 and at a
later stage it showed grad$al increase0 This was on acco$nt of rise in the e'ports of
~ 49
~
iron and steel prod$cts, man$fact$res of =ase metals and motor #ehicles and cars,
etc0 )imilar trend was apparent in the case of medi$m s:ill technolog9 intensi#e
man$fact$res0 Its share in the e'port was 504 per cent in 1945 and grad$all9 it
increased to 409 per cent in 0030 )ome new prod$cts s$ch as pol9mers of eth9lene,
plastics in primar9 forms, rotating electric plants and parts got added to the e'port
=as:et, =esides r$==er t9res, internal com=$stion, piston engine, electric apparat$s
for sewing machine and parts and other motor #ehicles contin$e to =e important items0
<igh s:ill technolog9 intensi#e prod$cts had a meagre share of 07 per cent in
e'ports in 1945 and its share increased o#er the 9ears, =$t rise in the share was
slow !see table 12#0 The prod$cts which increased their share were h9drocar=ons
and their deri#ati#es, organic chemicals, medicaments, electric machiner9 and
apparat$s and electric power machiner9 and parts0 <owe#er, there a was significant
fall in the share of car=o'9lic acids, nitrogen compo$nds, medical and pharmace$tical
prod$cts, pesticides disinfectant, a$tomatic data processing eE$ipment and electric
distri=$ting eE$ipment in e'ports !see Anneure /A and B and %raph 27 '. ,#.
T"b#e 12
(ro!u)t Stru)ture o E2$orts o
In!i"
Product %roups 143- 141- 1440 2666 266- 2660
10 "ll food prod$cts *404 50* 1900 009 04 0.
0 "gri0 /aw materials .00 07 10* .09 507 503
*0 Minerals, ores, and
metals 10* 403 *03 0 403 900
.0 @$els 101 300 104 .03 1*0. 1403
50 La=o$r and reso$rce
intensi#e m$nf0 407 .0 .705 5509 *40. *10
30 Low s:ill and tech
intensi#e m$nf0 301 05 30 501 900 90.
40Medi$m s:ill and tech0
Intensi#e m$nf0 504 507 30* 30 40. 409
70 <igh s:ill tech0 Intensi#e
m$nf0 07 .0 703 10* 1000 1001
90 >ther m$nf0 103 03 07 404 307 307
Source2 +alc$lated from data a#aila=le /,I <and ,oo:, #ario$s 9ears0
~ 50
~
F")tor Intensit7 An"#7sis o Im$orts

The factor intensit9 anal9sis also re#eals that the share of primar9 commodities in total
imports o#er the period has fallen0 The share of all food prod$cts has consistentl9
declined from *109 per cent in 1945 to 400 per cent in 0030 In this prod$ct gro$p,
#egeta=les, fr$its and n$ts were the main items of import0 Aheat was the ma;or
item in some 9ears d$e to seasonal factors and the go#ernment polic9 of food imports0
)hare of #egeta=le oils of all forms increased consistentl9 o#er the 9ears0 @i'ed
#egeta=le oils and cotton showed rise in some 9ears =$t were totall9 a=sent in other
9ears0 The import share of minerals, ores and metals increased from
50. per cent in 1945 to 1004 per cent in 0030 This was d$e to rise in iron and steel
scrap, copper ores and concentrates, nonDferro$s metal scrap and sil#er0 There has
=een a rise in the import share of f$els which was hardl9 fo$r per cent in 1945 and it
to$ched 15 per cent in 0030There has =een large increase in 1970, 1975 and 19950
This was on acco$nt of rise in the prices of petrole$m prod$cts0 The domestic
cons$mption of oil also increased0 The share of the petrole$m prod$ct was *3 per cent
in 1945 and rose to 53 per cent in 0030 The share of cr$de oil was 50* per cent in
1990D91 and it went $p to *1 per cent in 000D01 of total import =ill0 It remained
almost at the same le#el in 0030
La=o$r and reso$rce intensi#e man$fact$res were fo$r per cent of the total
imports in 1945 and shot $p to *07 per cent in 000, thereafter it =egan to decline and
it was 1007 per cent in 0030 The main items in this gro$p were p$lp and waste paper,
pearls, precio$s and semiDprecio$s stones0 The share of sil:, wool, animal hair, and
te'tile 9arn declined o#er the 9ears0 The share of low s:ill and technolog9 intensi#e
man$fact$res in total imports fell from 907 per cent in 1945 to *04 per cent in 000 =$t
increased grad$all9 to 1001 per cent in 0030 The main prod$cts in this gro$p
witnessed rise in their share were iron and steel shapes, flat rolled prod$cts, t$=es and
pipes0 There was s$=stantial decline in the share of iron and steel plates !see Table
1'#0
~ 51
~
T"b#e 11
(ro!u)t Stru)ture o Im$orts o
In!i"
Product %roups 143- 141- 1440 2666 2660
"ll food prod$cts *109 70. .03 701 400
"gri0 raw materials 05 *0. .0* *0* 10
Minerals, ores, metals 50. 400 405 503 1004
f$els .0. 303 509 1*0. 1500
La=o$r and reso$rce intensi#e
man$fact$res .00 70 904 *07 1007
Low s:ill and technolog9 intensi#e
man$fact$res 907 709 503 *04 1001
Medi$m s:ill and technolog9 intensi#e
man$fact$res 1507 1400 1303 40. 409
<igh s:ill and technolog9 intensi#e
man$fact$res *00 1400 00. *.04
Source2 +alc$lated from /,I <and ,oo: of #ario$s 9ears0
The share of medi$m s:ill and technolog9 intensi#e man$fact$res in imports
declined from 1507 per cent in 1945 to 409 per cent in 0030 It rose d$ring the
inter#ening period, i0e0, 1975 and 19950 There has =een a rise in the share of ci#il
engineering eE$ipment, te'tile and leather machiner9, printing machiner9, rotating
electric plant0 )hare declined in heating and cooling eE$ipment, p$mps for liE$ids,
and electric machiner90 The import share of high s:ill technolog9 intensi#e prod$cts
increased o#er a period of time, its share was * per cent in 1945 and reached *40* per
cent in 003, howe#er, the rise was #er9 m$ch e#ident from 19770 The prod$ct share
of nitrogen f$nction compo$nd, organic chemicals and elements, medicinal and
pharmace$tical prod$cts, fertiliHers, miscellaneo$s chemicals, transistor and #al#es,
electric machiner9, telephone eE$ipment, a$tomatic data processing eE$ipment,
office machiner9 and parts and switch gear also showed rise in their shares !see
Anneure /+ and %raph -7 07 3#.
~ 52
~
Stru)tur"# <e"/ness o In!i"s Forei0n Tr"!e

)e#eral st$dies ha#e indicated that economic and trade li=eraliHation has not 9et
s$cceeded in =ringing farDreaching changes in the commodit9 str$ct$re of India&s
foreign trade which reflects preDreform strateg9 to a large e'tent0 It is #isi=le that
the inwardDoriented and hea#9 ind$strialiHation strateg9 followed for E$ite a long
time has res$lted in a large and di#erse ind$strial sector0 >#er time, this sector has
acc$m$lated impressi#e technological capa=ilities, =$t these were accompanied =9
wideDspread technological lags and inefficiencies d$e to inadeE$ate access to new
technologies and capital goods, restricted inward in#estment, controls on the growth of
large pri#ate domestic firms
*7
0 +hanges did occ$r after 199 with li=eraliHation of
trade0 Trade li=eraliHation had a stim$lating effect mainl9 in the immediate postD
reform period0 Man$fact$red e'ports accelerated and the share of traditional
e'ports li:e te'tiles tended to decline, whereas new sectors emerged s$ch as
chemicals, pharmace$ticals, and engineering prod$cts !lin:ed to o$tso$rcing strateg9
of firms from ind$strialiHed co$ntries%0 <owe#er, the e'port sector is not s$fficientl9
di#ersified and still dominated =9 simple and $ndifferentiated prod$cts with low
le#els of s:ill and simple technologies, and for which India&s comparati#e
ad#antage lies in cheap la=o$r0 D$e to this specialiHation India e'ports mainl9 those
prod$cts for which international demand is growing slowl9
*9
0 India&s e'ports were th$s
concentrated in low technolog9 prod$cts and slow growing mar:ets0 Its incenti#e
regime fa#o$rs domestic mar:et, protects inefficient ind$stries and s$ffers from
deficienc9 in infrastr$ct$ral facilities0 The following anal9sis =roadl9 confirms the
statement mentioned a=o#e0 It not onl9 $nderscores the sta=ilit9 of India&s comparati#e
ad#antage at prod$ct le#el for nearl9 fo$r decades and its strong specialiHation in
la=o$r intensi#e ind$stries, =$t also it points o$t a slow $pgrading of the technolog9
le#el0 <owe#er, some changes are #isi=le at prod$ct le#el e'ports
from 000D01 onwards =$t it is not s$=stantial0 The la=o$rDintensi#e prod$cts s$ch
*7
Lall0 )0 !1999%, India&s Man$fact$red E'ports2 +omparati#e )tr$ct$re and Prospects, Aorld
De#elopment, ?ol 4, No0 10, Pp0 143914790
*9
)rini#asan, T0N0 !001%, India&s /eform of E'ternal )ector Policies and @$t$re M$ltilateral Trade
Negotiations, Economic (rowth +entre , Iale 5ni#ersit9, +entre disc$ssion paper, No0 7*0, J$ne0
~ 53
~
as te'tiles and leather prod$cts are losing its share in world mar:et =$t capitalD
intensi#e prod$cts are ma:ing dent0
~ 54
~
St"bi#it7 o In!i"s Com$"r"tive A!v"nt"0e

>n the e'port side, fi#e categories of prod$cts ha#e :ept a dominant share and it
amo$nted to o#er 70 per cent in 1940D41 and 1970D710 It declined to o#er 30 per cent
in 1990D91 to 000D01 and f$rther declined to 5* per cent in 004D070 Te'tiles, which
was the most important categor9 till 000D01, share remained in the range of
0 to 5 per cent and dipped to 1 per cent in 004D07 and f$rther To 90*. per cent in
010D110 " decline of nearl9 15 percentage points from 000D01 !See also table 4#0
@ood and agric$lt$re share was o#er .0 per cent in 1940D41 which decelerated
contin$o$sl9 and reached 11 per cent in 004D070 The share of chemicals, machiner9
and iron and steel increased to some e'tent o#er a period of time0 New prod$ct gro$ps
=egan to emerge from 1990D91 with energ9 prod$cts leading along with electric and
electronics0 These co$ld =e seen from Table 1,.
T"b#e 13
Se)tor"# .re"/!o6n o In!i"s E2$orts +in C,
Product %roups 1436,31 1416,11 1446,41 144-,40 2666,61 2663,61 2616,11
Te'tiles *03 004 *09 50* 50* 1104 9013
@ood and agric$lt$re .50. .107 1705 1901 1*0. 1100 9041
+hemicals 0. *05 905 110* 1*0 105 110*9
Machiner9 09 407 300 505 507 907 1503*
Iron and steel 509 404 50* 503 509 405 059
Energ9 007 009 70 501 307 05 130.7
Electric 101 104 10* 03 *03 503 *050
Electronic 004 10* 01 0. 00
Transport EE$ipment 05 09 0 09 0 .00 405
Nonferro$s 007 10 10 105 10. 100
Precio$s, semi
precio$s stones, etc0 04 900 1301 1303 1303 100 1300*
Source2 compiled from /,I <and=oo: of statistics 011
There ha#e =een some changes in the prod$ct composition of imports o#er the
9ears from 1940D41 to 010D110 Energ9, machiner9, and chemicals remained
important0 <owe#er, electronics share grew m$ch faster and food and agric$lt$re share
declined rapidl90 The share of nonDferro$s metals, too, declined along with iron and
steel0 The rise in the share of energ9 prod$cts was rapid d$e to enhanced domestic
cons$mption and also rise in the world cr$de oil prices0 India also =ecame an importer
of coal in recent 9ears0 The energ9 imports were o#er ** per cent of
~ 55
~
the total imports in 010D110 Till the 9ear 1995D93, the share of machiner9 increased
=$t thereafter it tended to decline0 Precio$s and semiDprecio$s stones occ$pied main
share also fell fast0 Aithin the prod$ct gro$p of medicinal and pharmace$ticals there
has =een shift towards more specialit9 prod$cts0 The table 1- pro#ide the pict$re0
T"b#e 15
Se)tor"# .re"/!o6n o In!i"s Im$orts +in C,
Product "ategories 1436,31 1416,11 1446,41 144-,40 2666,61 2663,61 2616,11
Energ9 70* .0 150* *00 **0 *.0* *07
+hemicals 1107 1003 1001 1307 1004 503 3071
Machiner9 1507 704 1*07 1704 100. 1105 3011
Electricals .0* 01 0* .00 100 10 1000
Electronics 401 40* 703 3010
@ood and agri 1*00 *00 10* 509 09 103 03*
Nonferro$s metal 40* *07 *0 *0* 101 10. 101.
Iron and steel 900 307 401 501 103 *05 09
Te'tiles 405 101 10. 103 10 100 0074
?ehicles 009 *07 10. 105 009
Precio$s and semi
precio$s stones 105 *0* .09 504 905 *014 7074
Transport
eE$ipment .01 *07 0 *00 10. 700 *01
Source2 +ompiled from /,I <and=oo: of statistics 0110
"t the o$tset, India&s comparati#e ad#antages are located in te'tiles, food and
agric$lt$re, ;eweller9 and iron and steel0 <owe#er, some shift has occ$rred in recent
9ears, more specificall9 after 000D01, with chemicals, petrole$m prod$cts and
transport eE$ipment mo#ing towards the comparati#e ad#antage gro$ps0 The main
disad#antages in man$fact$ring ind$str9 is located in machiner9, =$t within this
ind$str9 a$to parts is =eing shifted to comparati#e ad#antage gro$p0 >ther prod$cts in
comparati#e disad#antage gro$ps are cr$de oil, comp$ter hardware,
telecomm$nication eE$ipment, =asic organic chemicals, nonDedi=le agric$lt$ral
prod$cts, specialiHed machines and precision instr$ments0
@rom the commodit9 composition of e'ports, it appears that high s:ill,
technolog9Dintensi#e prod$cts of India are made of chemicals and pharmace$tical
prod$cts0 Ahereas in case of other "sian co$ntries comp$ter eE$ipment and electronic
components dominate !see Table 10#. This trend was pre#alent in 001 and it has
changed to some e'tent in case of India with the prod$ction of electronics and
comp$ter eE$ipment0 <owe#er, in most of the other co$ntries s$ch as Thailand,
Mala9sia, and +hina, e'ports of electronics and comp$ter eE$ipment goods are
~ 56
~
strongl9 lin:ed to prod$ction sharing with the ind$strialiHed co$ntries which
prod$ce and e'port parts and components0 The "sian co$ntries import components
and assem=le them and e'port final goods0 This process has not ta:en place in India0
T"b#e 18
Commo!it7 Com$osition o E2$orts 6it* Hi0* S/i## "n! Te)*no#o07 Intensit7 b7 In!i"
"n! Ot*er Asi"n Countries in 2001 +inC o tot"# m"nu")ture! e2$orts o e")*
)ountr7,
+ndia Thailand Philippines 8alaysia "hina
,asic organic chemicals 3 0 1
Pharmace$ticals * 0 0 0 1
Paints 0 0 1 0
Toiletries 1 1 0 1 0
+omp$ter eE$ipment 1 14 3 5 10
Precision instr$ments 1 1 1 1 1
,asic inorganic chemicals 1 0 0 0 1
Electronic components 0 9 .0 3 1
Telecomm$nication
eE$ipment 0 . . 7 5
>ptics 0 1 1
+loc: ma:ing 0 1 1 0 1
+ons$mer electronics 0 * 1 9 .
Total 15 .0 4. 4. 4
Source2 )ophie +ha$#in and @rancoise Lemoine !00*%, KIndia in the Aorld Econom92 Traditional
)pecialiHations and Technolog9 NichesM, "EP++, No0 0*09, "$g$st0
It appears that India&s man$fact$ring ind$str9 has remained on the sidelines of
glo=aliHation0 This phenomena e'plains the slow str$ct$ral changes and technological
$pgradation of the foreign trade0 India&s position in international trade is =9 and large
=ased on KhoriHontalM specialiHation which confirms that India&s comparati#e
ad#antage in most sectors co#ers the whole process of prod$ction !from $pstream to
downstream stages%0 In case of +hina, most sectors shift from comparati#e ad#antages
in $pstream stages of prod$ction to a comparati#e ad#antage in final goods
prod$ction0
India was one of the first in "sia to recogniHe the importance of effecti#eness
of the E'port Processing 1one !EP1% model in promoting e'ports0 The first EP1 was
set $p in Fandla in 19350 <owe#er, the EP1&s were not a=le to emerge as the
effecti#e instr$ments for e'port promotion d$e to m$ltiplicit9 of controls and
clearances, a=sence of world class infrastr$ct$re and an $nsta=le fiscal regime with a
#iew to o#ercome these defects and attract larger @DI0 Th$s the EP1 schemes were
altered and the )pecial Economic 1ones !)E1&s% polic9 was anno$nced in 0000 The
)P1 "ct was passed in0050 This scheme was intends to ma:e )E1&s an engine for
~ 57
~
economic growth s$pported =9 E$alit9 infrastr$ct$re, complimented =9 an attracti#e
fiscal pac:age with singleDwindow clearance mechanism0 The concept was =ased on
the e'portDled ind$strialiHation strateg90 The spinDoff effect wo$ld =e the creation of
emplo9ment and de#elopment of infrastr$ct$re0
In the span of last fo$r 9ears, the formal appro#al has =een granted for setting
$p of 541 )E1&s, o$t of which *.3 ha#e =een notified0 " total of 105 )E1&s are
e'porting at present, o$t of these 35 are information technolog9 !IT% and
information technolog9 ena=led ser#ices !ITE)%, 15 m$ltiDprod$ct and 5 other sectorD
specific )E1&s0 The total $nits in these )E1&s is 4310 >$t of the total emplo9ment of
.09 la:h persons in )E1&s, an incremental emplo9ment of *053 la:h persons was
generated after @e=r$ar9 003 when the )E1 "ct came into force0 "lmost the do$=le
the n$m=er o=tain indirect emplo9ment o$tside the )E1&s as res$lt of the
operations of )E1 $nits0 The e'port from )E1&s ha#e increased =9 110. per cent to
/s0 ,0,411 crores in 009D11 !see table 13#.
T"b#e 1:
E2$orts rom S$e)i"# E)onomi) @ones-
9ears
/alue of Eport
!Rs. "rores#
%ro)th Rate o(er
pre(ious year !in $#
Share in Total Eports
!in $#
00*0. 1*,73. *9 .04
00.05 17,*1. * .079
00503 ,7.0 5 5000
00304 *.,315 5 3005
00407 33,3*7 9* 10013
00709 99,379 50 11073
00910 ,0,411 110. 301
Source2 Economic )$r#e9, 01011, (o#t0 of India0
The relati#e performance of India&s )E1&s is poor as compared to other East
and )o$thDEast "sian co$ntries and +hina in partic$lar0 The e'ports of )E1&s grew at a
higher pace that is in the #icinit9 of 59 per cent per ann$m =etween 00*D0. to
009D10, =$t their share in the total e'ports reached 301 per cent in 009D100 The
emplo9ment generation has not =een satisfactor9 =$t @DI remained low0 In +hina
the )pecial Economic 1ones !and the special open areas% acco$nted for *3 per cent
of total e'ports in 0100 The $nimpressi#e performance of )E1&s in India was mainl9
d$e to locational factors and inadeE$ac9 of infrastr$ct$ral facilities0 Their capacit9 to
attract @DI has remained low0 India&s geographical location is also constrains the
growth of )E1&s0
~ 58
~
"n anal9sis =ased on narrower definition of highDtech goods confirms that
highDtech contents of India&s foreign trade is relati#el9 low0 In 1994D99, high goods
acco$nted for . per cent of India&s total e'ports, a proportion m$ch smaller than
+hina&s e'ports !9 per cent%
.0
0 <ighDtech content proportion increased to nearl9 7 per
cent in 004D07, whereas the same increased in +hina to 1 per cent in 004
.1
0 The
reason can =e fo$nd in the nat$re of India&s imports0 The two categories of prod$cts
which are the main channel of high technolog9 transfer in international trade are
parts and components of capital goods, the9 occ$p9 onl9 904 per cent of imports in
004D070 India&s imports are largel9 dominated =9 semiDfinished prod$cts0 Their
specialiHation in highDtech goods follows different sectoral pattern0 +hina&s highD
tech e'ports are concentrated in I+T prod$cts2 electronic goods and comp$ter
eE$ipment which was 75 per cent of its highDtech e'ports in 00.0 India&s highDtech
e'ports are concentrated in chemicals, in fact pharmace$tical prod$cts !See table 11#0
T"b#e 1;
In!i" "n! C*in"A (ro!u)t Com$osition o Hi0*te)*
E2$orts
+in C o *i0*te)* e2$orts,%
2003
Product categories +ndia "hina
/adio, T0? 6 telecom0 eE$ipment 10 31
>ffice machiner9 and eE$ipment 3 5
Medical, precision 6 optical eE$ipment 7 3
+hemical and chemical prod$cts 34 .
>ther hightech prod$cts 9 *
Source2 @rancoise Lemoine and DeniH 5nalFesenci !004%, K+hina and India in International Trade2
from Laggards to LeadersPM +EPII, No000419, No#em=er0
India&s specialiHation in highDtech prod$cts has followed a different pattern
from man9 other co$ntries0 In the wa:e of legislation passed in the 1940&s, which
ended the application of international law on patents, and replaced it =9 legislation
aimed at facilitating the acE$isition of foreign technolog9, India has de#eloped
powerf$l domestic companies in pharmace$tical sector, with strong presence in =oth
domestic and foreign mar:ets0 India has =ecome the world&s top e'porter of generic
medicines !4 per cent of the glo=al mar:et% and Indian companies ha#e capt$red the
local mar:et in pharmace$tical prod$cts !o#er 40 per cent%0 This ind$str9 is =ased on
highl9 E$alified personnel integrated into international networ:s, high E$alit9 p$=lic
.0
)ophie +ha$#in and @rancoise !00*%, India in the Aorld Econom92 Traditional )pecialiHations and
Technolog9 Niches, +EPII, No0 0*09 "$g$st0
.1
"ccording to Aorld =an: !ADI data =ase%, hightech goods acco$nted for *0 per cent of +hina&s
man$fact$red e'ports in 00. and India&s share was 5 per cent in the same 9ear0
~ 59
~
research instit$tion and =enefits from the large domestic mar:et0 The local
pharmace$tical ind$str9 !incl$ding =oth national and foreign companies% meets 71
per cent of the domestic demand for dr$gs and e'ports nearl9 * per cent of domestic
prod$ction0 In 005, Indian patent law was re#ised and p$t in line with the T/IP&s
agreement, a change that ind$ces the pharmace$tical firms to mo#e =e9ond imitation
towards inno#ation0 The new legislation stim$lates the de#elopment of /6D and
inno#ation in the pharmace$tical ind$str9 =oth in Indian companies and foreign
affiliates0 The /6D e'penses of Indian pharmace$tical firms, on an a#erage are
still low, which is aro$nd . per cent of sales0
~ 60
~
Rise o Servi)es Se)tor E2$orts
Ahile India&s man$fact$ring e'ports lag far =ehind those of other "sian emerging
economies =oth in E$alit9 and E$antit9, =$t in ser#ices, India&s e'ports are rapidl9
catching $p0 The share of India in world e'ports of ser#ices increased from 003 per
cent in 1990 to 10 per cent in 001 and went f$rther $p to 07 per cent in 007, while
d$ring the same period, its share in glo=al e'ports rose from 005 per cent in
1990 to 004 per cent in 001 and to 101 per cent in 0070 The rapid growth of
ser#ice sector o=ser#ed in the domestic econom9 has th$s =een associated with an
increased competiti#eness in world mar:ets0 )er#ices acco$nted for 0 per cent of
India&s e'ports in 1990 and in 007 it has accelerated to 590 per cent0 Indian
ser#ices e'ports ha#e =een dri#en =9 =$siness ser#ices !incl$des software% and
acco$nt for 3407 per cent of the total ser#ice e'ports in 007 !see Table 14#0 )ince
1999, India is the second largest e'porter of =$siness ser#ices among the emerging
"sian economies0
T"b#e 19
In!i"s Tr"!e in Servi)es +US >
mi##ion,
"redit &ebit Balance
1446 2661 1446 2661 1446 2661
Transport 930 11*17 *.14 1*337 .54 *50
Tra#el 1554 117* *9* 930* 113. 9
,an:ing 6 ins$rance 1* 5304 *.5 .339 9*7
,$siness ser#icesU 1937 35559 1413 1951. 5 .30.5
>ther ser#icesUU 13 .* 19 100. 0* 1.19
Total .3. 934*9 3090 .7.57 1.33 .771
Source2 /,I, <and=oo: of )tatistics, 009
No tes2 U incl$des software also
UU incl$des comm$nication ser#ices0
)ince the midD1990s, software and comp$ter ser#ices ha#e =een the most
d9namic components of Indian e'ports0 ,9 007D09 software acco$nted for .30. per
cent of the total ser#ices e'ports or 307 per cent of merchandise e'ports0 In 004,
India&s share in world comp$ter ser#ices acco$nted for 009 per cent, ne't to that of
E5 !e'tra%0 India now has =ecome the leading e'porter of software ser#ices, ahead
of Ireland and the 5)0 )oftware e'ports ta:e different channels0 >nDsite ser#ices are
deli#ered on the +lient&s site itselfG offDsite software ser#ices are de#eloped in India
~ 61
~
and then e'ported, either in ph9sical terms !dis:s% or for the =$l: of them, on nonD
ph9sical terms !satellites or eDmails%0 The =$l: of e'port ser#ices ta:es place in the
latter form0 Ahile ph9sical software e'ports are reported as part of the merchandise
e'ports, nonDph9sical e'ports !onDsite and offDsite ser#ices% as part of the nonDfactor
ser#ices in the =alance of pa9ments0
The IT and ,P> ind$stries ha#e a large growth potential0 The addressa=le
mar:et in glo=al offDshore IT ind$str9 is estimated to =e the order of -0D50
=illion and in the ,P> segment to =e -130D190 =illion0 The worldwide technolog9
and related ser#ices spending crossed -103 trillion in 004 and it is li:el9 to cross
-0 trillion in 0110 The growth in glo=al o$tso$rcing is e'pected to o$t space
growth in spending and is e'pected to rise to -10D1.0 =illion in 0110 Indian ITD
,P> re#en$e ma9 achie#e the target of -30 =illion in e'ports and the domestic mar:et
ma9 add another -1*D15 =illion to it0 The direct emplo9ment has risen from
*0,000 in 1997D99 to nearl9 million in 004D07 of which e'port segment
acco$nted for o#er 105 million0 IT and ,P> ser#ice re#en$e has risen to o#er . per
cent of the (DP in 004D070 This e'plains the phenomenal growth of this ind$str9 in
=$ilding $p India&s ser#ice econom90
~ 62
~
Re#"tions*i$ .et6een E)onomi) Gro6t* "n! E2$ort
Gro6t*

The relationship =etween e'ports and economic growth is an important iss$e from the
point of #iew of economic polic9 and str$ct$ral changes in the econom90 It is =eca$se
if e'ports ca$se growth !e'port led growth or EL(% thro$gh e'port promotion
policies s$ch as e'port s$=sidies or e'change rate depreciation will enhance
growth0 The positi#e e'ternalities promote economic growth0 The re#erse side of this
arg$ment is that economic growth promotes e'port growth relies on the fact that gains
in prod$cti#it9 gi#e rise to comparati#e ad#antages in certain sectors that lead to
e'port growth0
The foreign sector till 1990 constit$te a small segment of the Indian
econom90 This indicates a minor role to e'ports in economic de#elopment0
<owe#er, it is important to recogniHe that the siHe of the e'port sector in India does
not =9 itself e'cl$de the possi=ilit9 of e'port led growth0 The relationship =etween
e'port performance and growth does not arise merel9 =eca$se e'ports are part of (DP0
<owe#er, to some e'tent the e'port relie#es a press$re on =alance of pa9ments cr$nch0
The li=eral trade regime helps the econom9 to reap the =enefits of comparati#e
ad#antage0 India till 1975 followed the strict import s$=stit$tion polic90 This polic9 in
effect failed the ind$strial polic9 and the rapid escalation import =ill and =alance of
pa9ment deficits0 This sit$ation compelled India to shift to an e'portD oriented and
o$twardD loo:ing strateg90
The e'portDled growth h9pothesis, as it pertains to India has =een e'amined =9
Nandi and ,iswas !1991%
.
, )harma and Dha:al !199.%
.*
, Mallic: !1993%
..
,
Dhawan and ,iswal !1999%
.5
, Nid$gala !001%
.3
and "nwar and )ampath !000%
.4
0
.
Nandi, )0 and ,0 ,iswas, !1991%, KE'port and Economic (rowth in India2 Empirical E#idenceM,
Indian Economic Jo$rnal, Pp0 5*59
.*
)harma, )0 and D0 Dha:al,!199.%, K+a$sal "nal9ses ,etween E'ports and Economic (rowth in
De#eloping +o$ntriesM, "pplied Econimics, 3,Pp11.511540
..
Mallic:, )0F0 !1993%, K+a$salit9 =etween E'ports and Economic (rowth in India2 E#idence from
+ointegration ,ased Error ModelsM, Indian Jo$rnal of Economics, 43, *0, Pp0 *04*0
.5
Dhawan, 50 and ,0 ,iswal !1999%, K/ee'aming E'portLed (rowth <9pothesis for India2
~ 63
~
Nid$gala finds that e'ports had a cr$cial role in infl$encing the (DP growth in the
1970&s0 "nwar and )ampath finds that e'ports and economic growth in India are
cointegrated =$t do not find an9 strong e#idence of ca$salit9 from e'ports to economic
growth or #iceD#ersa0 /a;$ and F$rien
.7
with (ranger ca$salit9 test on timeDseries
data finds that E'ports and (DP are Kwee:l9Mcointegrated for the period
1930D199, which is a preDli=eraliHation period0 The e'port performance was an
important ca$se of growth does not =9 itself e'plain how e'ports co$ld ha#e
contri=$ted to economic growth in India directl9 =9 relie#ing se#ere import
constraints, especiall9 in #ital capital goods ind$stries0 Indirectl9 e'ports ma9 ha#e
eased the =alance of pa9ments cr$nch to some e'tent and $nderta:e str$ct$ral
ad;$stment programmes in response to trade shoc:s of the 1940s and 1970s0 There is
no definite concl$sions for the whole period of 1950 to 0070
The (DP growth rate and e'port and import growth rates do not show an9
consistent positi#e relationship d$ring the period 1951D5 to 1959D300 The e'port
growth rate for the period on an a#erage was 1005 per cent and import was 309* per
cent0 "t the same time, (DP grew =9 *04* per cent0 E'port =as:et consists of mainl9
primar9 prod$cts0 The sit$ation was more or less the same for which grew =9 *091 per
cent on an a#erage in the period 1930D31 to 1939D400 <owe#er, the e'port growth
pic:ed little more and it was *05 per cent and imports declined to 0070 per cent in the
a=o#e mentioned period0 In the ens$ing period 1940D41 to 1949D70, the (DP growth
rate declined to * per cent and whereas e'ports and imports grew =9
13 per cent and 0 per cent per ann$m on an a#erage respecti#el90 The decade was
=eset with n$m=er of pro=lems namel9 first oil shoc:, glo=al recession and e'change
rate insta=ilit9 to mention a few0 It was the period India =eg$n e'porting man9 new
prod$cts, partic$larl9 the engineering items0
/estricti#e import polic9 and e'port pessimism did not help the e'port growth
in the decade 1970&s0 <owe#er, there was a grad$al depreciation of r$pee
M$lti#ariate +ointgration "nal9sisM, "pplied Economics, *1, Pp0 555*00
.3
Nid$gala, (0F0 !001%, KE'port and Economic (rowth in IndiaG "n Empirical In#estigation,
Indian Economic Jo$rnal, .4!*%, Pp0 34470
.4
"nwar, M0)0 and /0F0 )ampath !001%, KE'ports and Economic (rowth& Indian Economic
Jo$rnal, .4!*%, Pp0 49770
.7
/a;$ )0 and Jaco= F$rien, !005%, K E'ports and Economic (rowth in India2 +ointegration ,
+a$salit9 and Error +orrection in ModelingM, The Jo$rnal of Economics and ,$siness, J$ne, 0050
~ 64
~
which ena=led e'ports to pic: $p some e'tent0 The (DP growth =ro:e awa9 from
K<ind$ rateM growth and grew in the #icinit9 of 505 per cent per ann$m on an
a#erage =$t e'port and import growth rate fell to 7 per cent and 4 per cent respecti#el90
<owe#er, the c$rrent acco$nt deficit increased0 In the decade of 1970s ratio of e'ports
to imports decreased 003. from 0074 in 1940s0 The lowest e'port to import ratio was
registered in1970D71, 1971D7 and 1975D73 !see Anneure '#0 Decade 1990s saw
rise in (DP, e'port and import growth rates with grad$al and cali=rated economic
reforms on trade polic9 front0 The (DP, e'ports and import growth rates f$rther
accelerated in 000s0 This can =e seen from the following table
260
T"b#e 20
GD(% E2$ort "n! Im$ort Gro6t* R"tes Durin0 De)"!es +in
C,
Periods %&P Eport +mport
19515 to 195930 *04* 1005 309*
193031 to 193940 *091 *050 0070
194041 to 194970 *00 1507. 0007
197071 to 197990 50.3 700. 4014
199091 to 1999000 504 703* 903.
00001 to 00709 409 000 *00*
Source2 Data from Economic )$r#e9 00910, (o#ernment of India0 "lso see "nne'$re ?II and (raph
7
and 9%
In the post reform period, =oth rise in e'ports and imports growth rates
contri=$ted to the enhancement of (DP0 D$ring period 000D01 to 007D09, the
high e'port and import growth rate p$shed $p the (DP growth rate to o#er 4 per cent
from the pre#io$s le#el of 504 per cent0 This fact is also e#ident from the share of
e'ternal trade to the (DP0 It ma9 o=ser#ed from table 260 The share of e'ports to
(DP was 30* per cent in 1990D91 and it shot $p 13 per cent in 007D09 and that of
imports in the same period increased from 70*9 per cent to .0*4 per cent0 The import
growth has =een faster in the decade 0000 This clearl9 indicates that E'port and
import growth has a positi#e effect on (DP0
T"b#e 21
S*"re o e2$orts "n! Im$orts to GD( +in
C,
Period Eports to %&P +mports to %&P Total trade to %&P
199091 30* 70*9 1.041
199593 907 110** 1015
00001 10057 11099 054
00709 13007 309 .0*4
Source2 +alc$lated from data from Economic )$r#e9, 009100
~ 65
~
Iet other important feat$re of India&s foreign trade is the lagging e'ports in
relation to imports from 1950D51 to 007D09 e'cept for the 9ears 194D4* and
1943D440 @or these two 9ears the ratio was 1003 and 1001and for the 9ear e'port to
import ratio was lowest in 1970D710 The =alance of pa9ments deficit has =een rising
alarmingl9 in the recent 9ears !see Anneure /+++ and %raph :#.
~ 66
~
Re#"tions*i$ bet6een Tr"!e "n! Em$#o7ment

The trade and emplo9ment literat$re shows that there are two direct channels thro$gh
which trade can affect emplo9ment0 The import of intermediate inp$ts ma9 affect
emplo9ment0 Trade li=eraliHation facilitates the import of large #erities of inp$ts
and it increases the elasticit9 of s$=stit$tion with respect to all other inp$ts0 This is
called the Ks$=stit$tion effectM
.9
0 Increased e'ports ha#e also a positi#e effect on the
le#el of o$tp$t, tending to increase emplo9ment
50
0 This second channel is called
Kscale effectM, which helps to increase emplo9ment0 There are #ario$s st$dies which
ha#e come to different concl$sions =ased on the sit$ation in which the
econom9 was placed d$ring the trade li=eraliHation period0
The iss$e of trade and emplo9ment did not recei#e m$ch attention in the
past0 There are limited attempts to address the emplo9ment iss$e with trade
reforms0 /ashmi ,anga
51
fo$nd that e'portDorientation of ind$str9 ha#e significant
positi#e effect on emplo9ment0 The period of st$d9 is limited to 1991D9 to 1994D970
)en !009%
5
did not find an9 significant effect of e'port orientation and import
penetration on emplo9ment for the period 1945D19990 <e concl$des that international
trade ma9 ha#e m$ch less positi#e impact on man$fact$ring
emplo9ment and ma9 not to =e the ma;or so$rce of ;o= creation for Indian $ns:illed
la=o$r0 (older !009%
5*
fo$nd that trade li=eraliHation raises la=o$r demand elasticit9
in Indian ind$stries, the estimated elasticit9 for postDreform period is fo$nd to =e
lower than that for the preDreform period0 The st$d9 of 5ma )han:aran, ?ino;
.9
<asan, /ana, D0 Mitra and F0?0 /amaswam9 !004%, KTrade /eforms, La=o$r /eg$lations
and La=o$r Demand Elasticities2 Empirical E#idences from IndiaM, The /e#iew of
Economics and )tatistics, 79!*%, Pp.33.71
50
)en F$nal !007%, KInternational Trade and Man$fact$ring Emplo9ment >$tcomes in India "
+omparati#e )t$d9, /esearch Paper, No2007S74, 5N5AIDE/0
51
/ashmi ,anga !005%, Li=eraliHation and Aage IneE$alit9 in India, A0P00No0153, Indian +o$ncil for
/esearch on International Economic /elations, New Delhi0
5
)en, F$nal, !009%, Trade Polic9, IneE$alit9 and performance of Indian Man$fact$ring, /o$tledge
"d#ances in )o$th "sia
5*
(older, ,0 !009!, KTrade Li=eraliHation and La=o$r Demand Elasticit9 in Indian Man$fact$ringM,
Economic and Political Aee:l9, ?ol0 BLI?, No0 *., "$g$st 0
~ 67
~
"=raham and F0J0 Joseph !009%
5.
confined to the li=eraliHation period of 1991 to
00.D05 indicates that in the preDreform period, there was a decrease in
emplo9ment growth =9 00*9 per cent per ann$m d$ring 1970D71 to 1979D900 <owe#er,
d$ring the same period India&s e'ports showed higher growth of 1704 per cent and
imports 704 per cent !see table 11#0 The postDreform period shows that increased
emplo9ment growth of 0040 per cent per ann$m d$ring 1990D91 to 00.D
050 D$ring this period e'port growth has red$ced and import growth has increased0
Ahen these periods are s$=Ddi#ided all #aria=les change !see table 11#. In the initial
phase 1990D91 to 1993D94 emplo9ment has increased =$t in the latter period 1994D
97 to 00.D05 it has declined to D003*
T"b#e 22
In!i)"tors o In!i"s '"nu")turin0 Em$#o7ment% E2$ort "n! Im$ort
(erorm"n)e
Period
A(erage annual gro)th rates
Employment Eports +mports
197071 to 197990 00*9 1704 7041
199091 to 00.05 0040 110*9 10.
199091 to 199394 *0.. 1*00. 140*0
199497 to 00.05 003* 15047 13019
Source2 5ma )han:aran !009%0
5ma )han:aran&s anal9sis of emplo9ment growth of two digit ind$stries
indicate that growth has =een widel9 #ar9ing across ind$stries !see table 14#. "mong
the ind$stries 4 shows negati#e emplo9ment growth =etween 1990D91 to 00.D
050 These se#en ind$stries acco$nt for *3 per cent of the emplo9ment in the period0
/emaining 15 ind$stries show positi#e emplo9ment growthG 3 of them fall $nder less
than one per cent growth and 9 ind$stries emplo9ment growth rate is more than
one per cent per ann$m0 This acco$nted for 5 per cent of emplo9ment share0 Table
22 shows that in 1* ind$stries import growth is higher than e'port and ha#ing lower
emplo9ment growth0
The te'tile ind$str9 which has 14 per cent emplo9ment share among the
man$fact$ring ind$stries and la=o$r intensi#e shows 15 per cent growth in imports
which higher than e'port growth of 907* per cent and negati#e emplo9ment growth of
D00* per cent per ann$m0 This ind$stries la=o$r intensit9 also declined 0039 per
5.
)han:aran, 5ma, ?ino; "=raham, and F0J0 Joseph, !009%, KImpact of Trade Li=eraliHation
on Emplo9ment2 The E'perience of India&s Man$fact$ring Ind$striesM, Mimeo, +entre for
De#elopment )t$dies, Tri#andr$m0
~ 68
~
cent and capital intensit9 increased =9 1074 per cent0 )imilar is the case with food and
=e#erage ind$str90 In the postDli=eraliHation period Indian ind$stries are mo#ing from
la=o$r intensi#e e'ports to capital intensi#e e'ports which red$ces la=o$r demand0
T"b#e 21
In!ustr76ise Annu"# R"tes o Gro6t* in Em$#o7ment "n! Em$#o7ment
E#"sti)it7 in
'"nu")turin0 In!ustries +199091 to 2003
05,
N+" "odes +ndustries Employment Real Eport Real +mports
15 @ood 6 ,e#erages 0099 !00*0% 50*7 13044
13 To=acco 007 !000.% 507* 1701
14 Te'tiles 00*1 !0017% 907* 15001
17 Aearing "pparel 704. !109% 4055 *0005
19 Leather *014 !00.% 1019 19059
0 Aood 0. !0095% 300 1090
1 Paper 10** !007% 053 9053
P$=lishing and Printing 07 !0011% 0051 7044
* +o:e 6 refined petrole$m 101 !0010% .0* 09
. +hemicals 104. !0.% 1503 703*
5 /$==er and Plastics .0*. !00..% 1.0** 1403
3 >ther nonmetallic minerals 0073 !0019% 1501 1*001
4 ,asic Metals 103 !0013% 14051 19003
7 @a=ricated metal prod$cts 0001 !0000% 1.030 1.00
9 Machine and EE$ipment 0074 !0015% 15013 *093
*0
>ffice acco$nting,
+omp$ters 04* !009.% 1091 505.
*1 Electric Machiner9 0079 !00.% 14033 1.090
* /adio and Tele#ision 10.. !00*5% 1*04 0.1
**
Medical, precision, and
optical eE$ipment 103 !0014% 1079 1*001
*. Motor #ehicles, trailers etc0 *057 !00..% 103* 1007
*5 >ther transport eE$ipment 504 !100% 1010 1403*
*3
@$rnit$re man$fact$ring
n0e0c 509* !0051% .0.7 **0*5
"ll Ind$stries 0040 110*4 10.
Source2 5ma )han:aran, opp0 )ited0 Note2 fig$res in parenthesis are emplo9ment elasticit90 It e'press
the percentage in emplo9ment growth for a percentage change in growth of o$tp$t0
In case of negati#e emplo9ment growth it ma9 =e o=ser#ed that other
transport eE$ipment !NI+ *5% and office, acco$nting and comp$ting machiner9 !NI+
*0% are the sectors that shows the first and second largest emplo9ment red$ction =9
D504 and 04* per cent per ann$m d$ring 1990D91 to 00.D050 These ind$stries ann$al
a#erage import growth of 1403* and 505. per cent is higher than their e'port growth
of 1010 and 1091 per cent and their la=o$r intensit9 has decreased to 003. and 005.
respecti#el90 The ind$stries which are ha#ing higher e'port growth than import growth
did not reflect in their emplo9ment growth0 The case in point is co:e, refined
petrole$m prod$cts and n$clear f$el !NI+ *%0 These ind$stries e'port did
~ 69
~
not indicate the emplo9ment growth0 ,esides these ind$stries o$tp$t fall $nder high
technolog9 and low la=o$r intensi#e ind$str90 Therefore, the capital intensi#e nat$re of
the prod$ction of this ind$str9 ma9 ha#e lead to contraction in emplo9ment e#en
tho$gh the e'ports performed well0 )imilar is the case with paper and paper
prod$cts !NI+ 0%0 The capital intensit9 increased in this ind$str9 too0 It appears that
increased glo=al competition compelled ind$stries to mo#e awa9 from la=o$r intensi#e
method of prod$ction to capital intensi#e method of prod$ction0
In#estigating the impact of li=eraliHation /ashmi ,anga !005% o=ser#es
that the Indian trade li=eraliHation does not ha#e significant impact on man$fact$ring
ind$stries emplo9ment d$ring the period 1991D9 to 1994D970 Emplo9ment ma9 =e
affected =9 man9 factors s$ch as technological change, la=o$r mar:et
infle'i=ilities and macroeconomic changes etc0 The st$d9 of Das, Aadhawa and Falita
!009%
55
shows that d$ring the one and a half decade of economic reform period, the
relati#e importance of la=o$r intensi#e ind$stries in o$tp$t has declined0 The9 find a
contin$o$s decline in la=o$r intensit9 across all la=o$r intensi#e ind$stries0 La=o$r
intensit9 ratio for the selected ind$stries declined from 004 in 1990D91 to 00*0 in
00*D0.0 In fact, the la=o$r intensit9 ratio declined =oth for capital intensi#e and
la=o$r intensi#e ind$stries as well in the postDreform period0 This ma9 =e d$e to access
capita and new la=o$r technologies0
5ma )han:aran !010% in her st$d9 finds that import penetration has a
significant negati#e impact on emplo9ment !18 increase in import penetration leads
to D000*98 red$ction in ind$stries total emplo9ment%0 This is d$e to s$=stit$tion
effect0 +ontrar9 to the theor9, the relationship =etween e'port intensit9 and
emplo9ment are negati#e !18 increase in e'port intensit9 red$ces emplo9ment =9
000938%0 The negati#e effect of e'port intensit9 on emplo9ment is the increased
capital intensi#eness or high technolog9 nat$re of e'ports of man$fact$red prod$cts0
The organiHed man$fact$ring sector which co$ld pro#ide sec$red ;o=s are facing
;o=less growth in the postDli=eraliHation period0 The ;o=less growth is coincided with
India&s integration with the glo=al econom9 and ind$ced trade li=eraliHation efforts of
the AT>0 The $ns:illed la=o$r is not getting a=sor=ed in the man$fact$ring sector
55
Das, D0F, Deepi:a Aadhwa, and ($na;it Falita, !009%, KThe Emplo9ment Potential of
La=or Intensi#e Ind$stries in India&s >rganiHed Man$fact$ringMA0P0No0*3, I+/IE/,
NewDelhi0
~ 70
~
=eca$se the process of prod$ction mo#ing toward capital and technolog9 intensi#e
method of prod$ction0
~ 71
~
C"n In!i" S/i$ In!ustri"#i4"tion (*"se=

E#er9 so often a E$estion is posed2 whether can India s:ip the ind$strialiHation phaseP
Man9 reasons s$pport this #iew that it is =oth desira=le and possi=le that Indian
economic growth contin$es to =e dri#en =9 ser#ices in the long r$n
53
0 India en;o9s a
strong comparati#e ad#antage in man9 areas, partic$larl9 in software0 Man9 of the
ser#ices areas to =e =$ilt, sho$ld do so on their intrinsic strength and e'ploit the
enormo$s growth potential ser#ices, gi#en the e'panding domestic and world demand,
dri#en =9 demand of $pper income gro$ps and o$tso$rcing strateg9 of firms associated
with the splintering of the prod$ction process and li=eraliHation of international trade0
<owe#er, the E$estion arises whether India sho$ld maintain in the f$t$re the growth
pattern it has followed in the last twent9 9ears0 @irst, past growth has failed to generate
an increase in emplo9ment !;o=less growth%0 The fast growing ser#ices ha#e =een
those with low potential for emplo9ment as well as those with high prod$cti#it9
and efficienc9 gains0 The sectors with large potential for emplo9ment ha#e recorded a
relati#el9 low growth0 )econd, India&s re#ealed comparati#e ad#antage in ser#ices
ma9 well =e the res$lt of the distortions in the economic s9stems and str$ct$res0 The
de#elopment of ser#ices has =enefited from the fact that the sector was less reg$lated,
more open to @DI and less constrained =9 lac: of infrastr$ct$res0 @inall9, there is a
ris: that the demand for s:illed la=o$r is rapidl9 growing and e'portDoriented ser#ices
ma9 impede the #er9 de#elopment of la=o$rDintensi#e sectors =eca$se of the shortage
and high wages of the s:illed la=o$r
54
0
"t the o$tset, it appears that India needs a more =alanced economic growth that
will pro#ide ;o=s to the large n$m=er of low s:illed wor:ing pop$lation and wo$ld =e
compati=le with less ineE$alit9 in income distri=$tion, a#oid the ris: of inflation and
=alance of pa9ment deficit0 The s$staina=le growth reE$ires largeDscale
53
)rini#asan, T0N0 !003%, India, +hina and the Aorld Econom9, )tanford +entre for International
De#elopment, Aor:ing Paper, No2 73, J$l90
54
Fochhar, F0, 50 F$mar, /0 /a;an, "0 )$=ramanian and I0 To:atlidis !003%, Vndia&s Pattern of
De#elopment2 Ahat <appened and Ahat @ollowsPMIM@ Aor:ing paper, APS03S0
~ 72
~
in#estment in infrastr$ct$res !roads, railwa9s, ports, comm$nication, irrigation, power,
$r=an and r$ral reconstr$ction%, which wo$ld directl9 a=sor= large n$m=er of
wor:ers0 This will also remo#e some disad#antages faced =9 the prod$cers in
agric$lt$re and ind$str9 and raise the allocati#e efficienc9 of in#estment and reso$rce
$se0 This polic9 wo$ld fa#o$r the growth of ser#ices with strong =ac:ward and
forward lin:ages and ma:e the de#elopment of ser#ices and ind$str9 complementar90
The 11
th
@i#e Iear Plan !004D01% is in line with this #ision and aims at
achie#ing a faster, more =roadD=ased and incl$si#e growth0 Ta:ing into acco$nt the
acceleration of economic growth since 00*, it targets an a#erage growth of 9 per cent
a 9ear from 004 to 010 The plan considers that India cannot afford to
neglect man$fact$ring ind$str9 and place the growth rate of this sector 1 per cent per
ann$m in the 11
th
@i#e 9ear Plan0 To o#ercome the o=stacle to the ind$strial growth,
plan emphasises the need to phase o$t the reser#ation of man9 la=o$rD intensi#e
ind$stries from the smallDscale sector, to impro#e s:ill formation and ph9sical
infrastr$ct$res0 The in#estment rate which has risen from . per cent in
000 to *404 per cent in 007 and has $nderpinned ind$strial growth, is e'pected to
sta=iliHe at this le#el and large share of in#estment sho$ld =e de#oted to the
de#elopment of ph9sical infrastr$ct$re0
The wor:ing age of pop$lation will contin$e to increase $p to 0*5 in case of
India, which $nderlines the need for a la=o$rDintensi#e growth and larger
emplo9ment opport$nities need to =e created in ind$strial sector0 The s:ill
formation is a prereE$isite0 It is li:el9 that India ma9 contin$e to =enefit from low
la=o$r costs0 India ma9 not follow the +hinese model to =ecome the Kwor:shop of the
worldM0 The +hinese model is associated with hea#9 energ9 and en#ironment costs
and social strain which is incompati=le with Indian democratic s9stem0 India needs to
grow faster and ens$re that the growth is emplo9mentDintensi#e0 In an econom9 with
large s$rpl$s la=o$r and rapidl9 growing la=o$r force, the o=;ecti#e of the
de#elopment sho$ld =e emplo9ment generation0
~ 73
~
Con)#usions

The preDreform period did not see m$ch of str$ct$ral changes in the foreign trade
partic$larl9, the e'port sector0 <owe#er, there has =een some significant changes in
import, specificall9 high imports of petrole$m prod$cts and machiner9 and
eE$ipments0 The postDreform period witness significant changes in the trend, pattern
and str$ct$re of e'ternal trade0 The ascertain that trade li=eraliHation wo$ld help
di#ersification of the str$ct$re of e'port sector and o$tp$t in fa#o$r man$fact$red
goods has not materialiHed0 The changes in the pattern of specialiHation in e'ports is
more or less in conformit9 with changes in pattern of prod$ction0 The share of the
man$fact$ring has marginall9 fallen in the (DP and significantl9 declined in the share
of e'ports !see Anneure /+++#. The growth of ser#ices was more prono$nced in (DP
growth and is reflected in the increasing share of ser#ices in e'ports0 The share of
primar9 prod$cts has fallen in e'ports and that of petrole$m prod$cts showed an
increase0 This #er9 fact indicates that in near f$t$re India ma9 emerge as an "sian
Kpetrole$m h$=M0 "nother nota=le aspect of India&s recent e'port growth is the relati#e
poor performance of the te'tile sector0 This shows that India is not a=le to get f$ll
=enefits from the remo#al of the M@"0 India ma9 its comparati#e ad#antage to other
de#eloping co$ntries0 In the postDreform period, imports grew at a faster rate than
e'ports and leading to h$ge deficits in c$rrent acco$nt pa9ments0
There has =een little change in India&s merchandise e'port str$ct$re till 1995D
93 =$t some significant changes ha#e occ$rred in the later 9ears0 The shift has not
=een drastic0 The share of primar9 commodities has declined and share of clothing
chemicals and engineering prod$cts has increased, howe#er, these shifts are not farD
reaching0 @o$r reso$rce and la=o$rDintensi#e prod$cts food prod$cts, nonDmetallic
mineral man$fact$res !gems and ;eweller9%, te'tiles and clothing ;ointl9 contin$e to
acco$nt for a=o$t half of India&s merchandise e'ports0 This str$ct$re indicates earl9
stages of ind$strialiHation0 The n$m=er of important trade polic9 reforms ha#e =een
implemented after 1991, the main changes =egan to occ$r after a decade and some
of them are 9et to occ$r0
~ 74
~
India&s two polic9 instr$ments, namel9 price controls and reser#ing mar:et
segment for smallDscale firms ha#e had considera=le, =$t widel9 #ar9ing impact on
the composition of e'ports0 It is often arg$ed that relati#el9 small share of la=o$rD
intensi#e man$fact$res in India&s e'ports is partl9 d$e to reser#ing of mar:et segments
for small firms0 The small firms in la=o$rDintensi#e man$fact$ring sectors are
neither inno#ati#e nor agents of ind$strial di#ersification0 This relegated India to mass
mar:ets that reE$ire long prod$ction r$ns and goods of standard E$alit90 "s a res$lt,
the share of clothing in e'ports has remained relati#el9 small0 In spite of this relati#e
a=$ndant s$ppl9 of lowDs:illed la=o$r gi#es it a comparati#e ad#antage for the
prod$ction of la=o$rDintensi#e man$fact$res0
The introd$ction of priceDceilings on the domestic mar:et seems to ha#e had a
positi#e impact on e'ports of pharmace$ticals0 These ceilings tends to ma:e
e'ports more profita=le and pro#ide an incenti#e for domestic pharmace$tical firms to
engage in e'port acti#ities0 It helped to =oost inno#ation =eca$se local firms that
man$fact$re new medicines on the =asis of indigeno$s technologies were e'empted
from price controls for fi#e 9ears0 Domestic inno#ati#eness in pharmace$tical
ind$str9 owes most to the Indian Patent "ct of 19400 The act facilitated the acE$isition
of foreign technolog9 as it protected prod$ction processes =$t not prod$cts !it
permitted re#erse engineering, where=9 molec$les can =e reconstr$cted $sing
prod$ction techniE$es that are different from the in#entors techniE$e%0 This ena=led
India to =ecome the world&s leading e'porter of generic medicines0 The e'port
prospects for India&s pharmace$tical ind$str9 depend to a large e'tent on the effects of
the new Patent !third amendment% "ct 0050 India changed the patent legislation to
compl9 with its AT> o=ligations $nder the AT> agreement on Trade /elated
"spects of Intellect$al Propert9 /ights !T/IP&s%0 The new "ct pro#ides for the
granting of prod$ct patents0 <owe#er, it onl9 affects newl9 in#ented medicines,
whereas specific reg$lations appl9 to those medicines that were in#ented =etween
1995 and 0050 India was allowed to dela9 the patenting of pharmace$tical prod$cts
$ntil 005, =$t had to esta=lish a s9stem !mail =o'% for recei#ing and filing patent
applications starting in 19950 If the applications are accepted the companies can
prod$ce s$ch medicines after ma:ing a pa9ment to the patent holder0
~ 75
~
In a n$m=er of prod$cts, India does hold a higher /+" !re#ealed comparati#e
ad#antage% #al$e =$t her share in the world e'ports of these prod$cts are lower0 It
indicates that the comparati#e ad#antage does not a$tomaticall9 translate into high
mar:et shares if there are some impediments in f$ll9 e'ploiting its comparati#e
ad#antage 0 This signifies the str$ct$ral changes occ$rred in India are not #er9 high0
This shows that certain =ottlenec:s !s$ch as poor ph9sical infrastr$ct$re% and polic9
ind$ced rigidities in the factor mar:ets !s$ch as those in the organiHed la=o$r
mar:et% stand in the wa9 of reso$rce allocation process and e'port acti#ities in India0
These constraints notwithstanding, e'ports of large ma;orit9 of prod$cts ha#e
e'panded since 1990s from India0 This is mainl9 d$e to growing intraDind$str9
specialiHation $nder trade li=eraliHation0 The reso$rce allocation $nder trade
li=eraliHation is not ca$sing a polariHation wherein certain ind$stries are forced to
#anish while certain other ind$stries gain prominence0 (reater intraDind$str9
specialiHation wo$ld impl9 that trade li=eraliHation entails a lower ad;$stment costs
than what generall9 percei#ed0 >ne point strongl9 emerges is that India failed to ta:e
ad#antages of growing international fragmentation of prod$ction process in
man$fact$ring ind$stries0 The opport$nities are missed =9 India d$e to
infrastr$ct$ral =ottlenec:s and rigidities in the la=o$r mar:et0 The polic9 reforms are
called for in la=o$r mar:et, facilitation of in#estment in infrastr$ct$re and f$rther
red$ction in nonDtariff =arriers0 These polic9 changes are imperati#es to ind$ce
MN+s to cond$ct @DI of the K#ertical t9pe Kand a$gmenting the process of
integrating the Indian ind$str9 with fragmented str$ct$re of glo=al prod$ction
acti#ities0
Indian econom9 has not 9et f$ll9 opened to international trade and @DI as
compared to emerging "sian economies and +hina0 It is characteriHed =9 a shallow
integration with the world econom90 This ma9 =e attri=$ted to se#eral factors0 The
=elated opening $p polic9 at least partiall9 e'plains wh9 India&s foreign trade lags
=ehind0 The =arriers to trade ha#e remained relati#el9 high, =esides, in the domestic
econom9, instit$tional o=stacles !reser#ation polic9% and str$ct$ral factors !high
energ9 costs and lac: of infrastr$ct$re% ha#e dampened the rise of competiti#e
ind$stries and attracti#eness of @DI0 E#ent$all9, its geographic location does not
pro#ide d9namic regional en#ironment and :eeps awa9 from strong regional
integration process0
~ 76
~
,9 and large, Indian man$fact$ring ind$str9 has remained on the peripher9 of
glo=aliHation0 India has not ta:en the ad#antage of international segmentation of
prod$ction process which has reshaped the ind$strial specialiHation of man9
co$ntries in "sia0 India&s foreign trade in man$fact$ring $nderwent limited str$ct$ral
changes o#er the last twent9 9ears or so =$t it is still =ased on traditional
complementarities0 E'ports are still hea#il9 dominated =9 la=o$rDintensi#e prod$cts,
characteriHed =9 a slow growing international demand and protected mar:ets0
The technolog9 content of India&s trade is low =9 international standards, =$t
it has =$ilt $p a strength in technolog9 niches0 India&s highDtech man$fact$red e'ports
are concentrated in chemical and pharmace$tical ind$stries0 The e'port
competiti#eness in pharmace$tical prod$cts is =ased on strong domestic capacities
to assimilate and replicate foreign technolog9 and on its endowment in s:illed la=o$r0
,esides, India has made a =rea:thro$gh in international trade in IT and software
ser#ices and is now competing with de#eloped co$ntries0 In contrast with "sian
latecomers, India&s highDtech e'ports rel9 mainl9 on domestic technical capa=ilities
and on local h$man capital, and not on assem=l9 of highDtech components into final
prod$cts0
~ 77
~
Anne2ure
I+A,
Com$osition o In!i"s E2$orts 195051% 198081 "n! 19:0:1 +s*"re in
C,
Product categories 14-6,-1 1406,01 1436,31
1 "gric$lt$ral and allied prod$cts .031 ..07 *1041
101 +offee 1010 103
10 Tea and mate 1*0*7 190* 9035
10* Edi=le oil and oil ca:e .0* 015 *059
10. To=acco 05 01
105 +ashew :ernels 10.* 094 *04.
103 )pices *0. 034 051
104 )$gar and molasses .0.3 109
107 /aw cotton 007* 1073 009.
109 /ice 00*.
1010 @ish and fish preparations 004. 109
1011 Meat and meat preparations 0015 000
101 @r$its, #egeta=les and pl$ses !e'cl$ding cashew :ernels and
processed food and ;$ices% 0094 0049
101* Miscellaneo$s processed foods !incl$ding processed fr$its and
;$ices% 0015 00*0
>res and minerals *059U 7071 10037
0 Iron ore 034 403*
* Man$fact$red goods .3005 .50* 5004
*01 Te'tile fa=rics and man$fact$res !e'cl$ding carpets handmade% 1904 110*4 90.5
*0 101 +otton 9arn, fa=rics, made $p etc, 10010 903
*010 /ead9made garments of all te'tile materials 109
*0 +oir 9arn and man$fact$res 0093 007.
*0* J$te man$fact$res 17015 100* 10.1
*0. Leather and leather prod$cts 5075 .0*7 50
*05 <andicrafts !incl$ding carpets handmade% 1041 .04*
*0501 (ems and ;eweller9 090
*03 +hemicals and allied prod$cts 101 109
*04 Machiner9, transport and metal man$fact$res !incl$ding iron
and steel% *0. 1075
.0 Mineral f$els and l$=ricants !incl$ding coal% 101 007.
Note2 U @or 195051 incl$des coal, mica and manganese ore0 @rom 193031 onwards coal is e'cl$ded0
Sour ce2 /,I <and=oo: 1955*, 1933* and 1944*0
Product Cate-ories 1980,
81
1990,
91
2000,
01
2007,
08
2008,
09 I Agriculture and allied products of
!ic!
30.65 19.41 14.04 9.93 9.13
1.1 "o#ee 3.19 0.78 0.58 0.29 0.27
1.2 $ea and %ate 6.34 3.29 0.97 0.31 0.32
1.3 &il ca'e 1.86 1.87 1.01 1.24 1.21
1.4 $o(acco 2.10 0.81 0.43 0.29 0.41
1.5 "as!e 'ernel 2.09 1.37 0.93 0.34 0.35
1.6 )pices 0.17 0.73 0.79 0.66 0.74
1.7 )ugar and %olasses 0.59 0.12 0.25 0.86 0.53
1.8 *a cotton 2.46 2.60 0.11 1.35 0.34
1.9 *ice 3.33 1.42 1.45 1.79 1.31
1.10 +is! and preparations 3.23 2.95 3.13 1.05 0.83
1.11 ,eat and preparations 0.82 0.43 0.72 0.57 0.63
1.12 +ruits- .egeta(les- pulses 1.19 0.66 0.79 0.62 0.66
1.13 /rocessed foods and 0uices etc- 0.53 0.65 0.54 0.33 0.37
II &re and %inerals (e1cl. "oal2 6.16 4.60 2.03 5.55 4.17
2.2 Iron ore 4.53 3.22 0.80 3.56 2.55
III ,anufactured goods of !ic! 55.83 72.92 78.95 64.13 66.44
3.1 $e1tile fa(rics and %unf. 13.89 20.98
3.1.1 "otton 3arn- fa(rics- %adeup 6.08 6.45 7.87 2.85 2.22
3.1.2 *ead3%ade gar%ents 8.20 12.32 12.52 5.94 5.90
3.2 "oir 3arn and %nuf. 0.26 0.15 0.11 0.10 0.08
3.3 4ute %unf. 4.91 0.92 0.46 0.20 0.16
3.4 5eat!er and leat!er %unf. 5.81 7.99 4.38 2.08 1.87
3.5 6andicrafts (incl. !and%ade
carpets2
14.19 18.94 2.507 0.88 0.57
3.5.1 8e%s and 0eeller3 9.22 16.12 16.57 12.06 15.09
3.6 "!e%icals and allied products 3.47 6.48 11.23 10.65 10.06
3.7
,ac!iner3- transport- %etal
%anf. (incl.
Iron and steel2
12.31 11.89 15.56 22.82 25.45
4 ,ineral fuels and lu(ricants (incl.
"oal2
0.41 2.91 4.33 17.80 14.94
~ 78
~
Anne2ure
I+.,
Com$osition o In!i"s E2$orts 19;0;1 to 200;09 +s*"re in
C,
~ 79
~
Anne2ure
II+A,
Com$osition o In!i"s Im$orts 195051% 198081 "n! 19:0:1 +s*"re in
C,
Product categories 14-6,-1 1406,01 1436,31
10 @ood and li#e animals !e'cl$ding raw cashew% 150.7U 19007 1.075
101 +ereals and cereal preparations 1093UU 13015 1*00.
0 /aw materials and intermediate m$nf0 *3054UUU .3093 5.0*9
01 +ashew n$ts !$nprocessed% 1070
0 +r$de r$==er !incl$ding s9nthetic and reclaimed% 0097 00*
0* @i=res *075 9001 4044
0*01 )9nthetic regenerated fi=res !manmade fi=res% 0053
0*0 /aw wool 0090 0007 009*
0*0* /aw cotton 13014 40*1 3003
0*0. /aw ;$te .0. 004
0. Petrole$m, oil and l$=ricants 3035 3013 70**
05 "nimal and #egeta=le oils 00. 0*3
0501 Edi=le oil 00*. 10.*
03 @ertiliHers and chemical prod$cts *05* 4073 1*0*
0301 @ertiliHers and fertiliHer m$nf0 1055 50*
030 +hemical elements and compo$nds 10.7 *0.7 .013
030* D9ing, tanning and colo$ring materials 005 0007 0053
030. Medical and pharmace$tical prod$cts 1030 0079 10.7
0305 Plastic materials, regenerated cell$lose and artificial resins 0071 0051
04 P$lp and waste paper 003. 004.
07 Paper, paper =oard and m$nf0 1003 105*
09 Nonmetallic mineral m$nf0 0055 00.
0901 Pearls, precio$s and semiprecio$s stones, wor:ed 6
$nwor:ed 0007 105*
010 Iron and steel 10093 7094
011 Nonferro$s metals .01 40*1
*0 +apital goods *010 *1045 .040
*01 Man$fact$res of metal 0*0 00. 0041
*0 Nonelectric machiner9, machine tools etc 1.00. 17010 15044
*0* Electric machiner9, apparat$s etc, 105 5010 .0*0
*0. Transport eE$ipment 309 .004
Notes2 U incl$de fr$its and #egeta=les and spices0
UU incl$des grains, p$lses and flo$r0
UUU incl$des te'tile man$fact$res, dr$gs and medicines and raw hides and s:ins0
Product cate-ories
1980
,
81
1990
,
91
2000
,
01
2007
,
08
2008
,
09 I +ood and li.e ani%als 3.03
1.1 "ereals and preparations 0.80 0.42 0.04 0.28 0.02
II
*a %aterials and inter%ediate
%anufactures 77.7
7
59.2
5
53.3
7
54.5
6
57.54
2.1 "as!e nut (unprocessed2 0.07 0.31 0.42 0.17 0.19
2.2 "rude ru((er 0.25 0.52 0.30 0.31 028
2.3.1 )3nt!etic and regenerated fi(res 0.77 0.13 0.12 0.05 0.05
2.3.2 *a ool 0.35 0.42 0.20 0.11 0.07
2.3.3 *a cotton 0.51 0.09 0.12
2.3.4 *a 0ute 0.01 0.05 0.04 0.02
2.4 /etroleu%- oil and lu(ricants 41.9
4
25.0
4
30.9
7
31.6
8
30.07
2.5.1 9di(le oils 5.40 0.76 2.64 1.02 1.13
2.6.1 +ertili:ers and fertili:er %unf. 6.52 4.09 1.31 2.01 4.27
2.6.2 "!e%ical ele%ents- co%pounds 2.85 5.30 0.67 0.65 0.69
2.6.3 ;3eing- tanning- colouring %et. 0.16 0.39 0.38 0.30 0.27
2.6.4 ,edicals- p!ar%aceutical pro. 0.67 1.08 0.75 0.67 0.62
2.6.5 /lastic %aterials 0.9 2.53 1.10 1.47 1.30
2.7 /aper and aste paper 0.14 1.06 0.56 0.31 0.26
2.8 /aper- paper(oard- %unf. 1.49 1.06 0.87 0.57 0.58
2.9 <on%etallic %unf. 4.42 0.34
2.9.1 /earls- precious and se%iprecious
stones
3.32 8.65 9.57 3.17 5.45
2.10 Iron and steel 6.79 4.89 1.55 3.46 3.12
2.11 <onferrous %etals 3.81 2.55 1.07 8.50 9.07
III "apital goods 15.2
2
24.2
3
10.9
5
19.0
3
15.50
3.1 ,anufacture of %etals 0.71 0.70 0.77 1.06 1.07
3.2 <onelectrical %ac!iner3-
appliances- tools
8.68 9.82 7.33 8.77 7.82
3.3 9lectrical %ac!iner3- apparatus 2.07 3.94 0.96 1.20 1.21
3.4 $ransport e=uip%ent 3.76 3.87 1.89 8.0 4.35
~ 80
~
Anne2ure
II+.,
Com$osition o In!i"s Im$orts +s*"re in
C,
~ 81
~
Anne2ure
III
Dire)tion o In!i"s E2$orts 198081 to 200:0; +S*"re in
C,
1406,01 1436,31 1416,11 1446,41 2666,61 2660,63 2663,61
>E+D 3301 .001 .303 5*05 504 ..00 .10*
E5 *30 170. 103 405 04 10* 10
50F 309 1101 509 305 50 .0. .01
(erman9 *01 01 504 407 .0* *0 *01
@rance 10. 10 0 0. 0* 104 103
,elgi$m 007 10* 0 *09 *0* 07 0.
Netherlands 10* 0091 0* 00 00 01 *0
Ital9 09 03
)weden 103
50) 1300 1*05 1101 1.04 009 1.09 104
+anada 04 107 009 009 105 009 007
"$stralia *05 103 10. 100 009 00 004
Japan 505 1*0* 709 90* .00 0 0.
/$ssia .05 1*04 170* 1301 00 004 003
Iran 007 104 107 00. 005 10 10
F$wait 00. 005 00.
)a$di "ra=ia 107 00 0*
)ingapore .07 .05
Mala9sia 0.
Indonesia 109
+hina 303 303
/0Forea 00 107
5"E 905 903
<ong Fong *04 *09
Source2 Economic )$r#e9, (o#ernment of India, ?ario$s 9ears0
~ 82
~
Anne2ure
IE
Dire)tion o In!i"s Im$orts 198081 to 200:
0;
1406,01 1436,31 1416,11 1446,41 2666,61 2660,63 2663,61
>E+D 4700 3*07 .504 5.00 *909 .000 *705
E5 *401 1903 100 90. *909 .000 *705
5F 190. 407 507 304 30* 0 00
(erman9 1009 303 505 700 *05 304 *09
@rance 109 10* 0 *00 10* 0 05
,elgi$m 10. 004 0. 30* 504 0 104
Netherlands 009 10 104 107 009 003 007
Ital9 10. 103
)weden 100 007
)witHerland .07 *09
50) 90 404 109 101 300 303 70.
+anada 107 40 03 10* 007 007 007
"$stralia 103 0 10. *0. 01 *03 *01
Japan 50. 501 300 405 *03 0. 05
/$ssia 10. 305 701 509 100 101 100
Iran 03 503 1004 0. 00. 00. .0*
F$wait 04 007 00 *01 *01
)o$di "re=ia 10* 105 .0* 304 10 400 50.
Nigeria *04 *00
)o$th "frica 10* 10.
)ingapore 09 *0
Mala9sia 07 0.
Indonesia 0 109
+hina 901 1007
5"E .05 404
Source2 Economic )$r#e9, (o#ernment of India, ?ario$s 9ears0
~

8
3

~
Anne2ure
E+A,
E2$ort F")tor Intensit7
Grou$<ise
S*"re o !ierent )ommo!ities in tot"# e2$orts
+$er)ent"0e,
1416 1411 1413 1411 1440 1443 2666 2661 2662 266' 266, 266- 2660 2663
"ll @ood Prod$ct 4015 70*. 301. 50* 30*5 305 0091 501 .07. *0*9 049 041 0.* 0*
"gric$lt$ral /aw Materials 0* *03. 1505 1049 15013 1*019 .091 90* 70*5 403. 30. 5045 503 503
Minerals, ores and Metals 7043 3097 50** 303* *074 *0 019 *015 .0 .0. 405. 403 7097 704.
@$els 00.1 00.1 .0.. 041 104. 1013 .054 5091 5094 303 1000* 1*0. 14031 19077
;abour, and resource,intensi(e
manufactures *9051 *50.9 .9093 51014 ..0.. .7007 55073 5003* .90. .5001 *7039 *40*7 *101 *107
;o),s<ill and technology,
intensi(e manufactures *051 *09 10.7 1079 50*3 50.4 5051 30* 701 901 1004 9001 90. 7041
8edium,s<ill and technology,
intensi(e manufactures .077 50*5 *0. *05. *0 04 30. .01 .03* 30.9 400* 40. 4079 30.3
=igh,s<ill and technology,
intensi(e manufactures . .019 3059 70*3 11075 10*5 1015 904 709* 10007 901. 9093 1001 90*7
>ther manufactures 9055 10*1 40*7 4057 7001 4055 4035 5039 505. 40* 403* 3043 3049 4007
~ 84
~
1980 1988 1996 2000 2001 2002 2003 2004 2005 2006 2007
All +ood
/roduct 7.
2
5.
4
6.
4
0.
9
5.
2
4.
9
3.
4
2.
8
2.
7
2.
4
2.3
Agricultural
*a
,aterials
22.
5
12.
9
15.
3
5.
0
9.
4
8.
4
7.
7
6.
5
5.
8
5.
6
5.6
,inerals-
ores
and ,etals
8.
9
6.
7
3.
9
2.
2
3.
2
4.
3
4.
5
7.
6
7.
6
9.
0
8.7
+uels 0.
4
2.
7
1.
8
4.
7
6.
0
6.
0
6.
7
10.
1
13.
5
17.
6
19.
9 'e#ti"es 3.
4
2.
0
8.
1
9.
8
4.
5
4.
4
4.
2
3.
0
3.
5
3.
8
4.0
C"ot*i!- 21.
2
20.
0
16.
2
26.
3
24.
0
22.
7
20.
5
16.
3
16.
4
13.
6
12.
5 Foot .ear/
0eat*er a!d
'rave"
Goods
6.
8
6.
8
4.
4
3.
9
4.
1
3.
5
3.
4
2.
9
2.
6
2.
4
2.5
o!,
meta""ic
mi!era"
ma!u1actu
8.
5
22.
7
16.
2
16.
8
18.
5
19.
3
17.
4
16.
9
15.
0
11.
4
12.
8 &ro! a!d
2tee"
1.
0
0.
7
3.
3
2.
3
2.
9
4.
7
5.
0
7.
0
5.
4
6.
0
6.5
Fa3ricated
meta"
produc
ts
1.
2
0.
6
1.
2
2.
6
2.
4
2.
2
2.
4
2.
1
1.
9
1.
8
1.8
2imp"e
tra!spor
t
e4uipme
1.
3
0.
6
0.
9
0.
7
1.
1
1.
3
1.
8
1.
8
1.
7
1.
6
0.4
)!ips and
(oats 0.
0
0.
0
0.
0
0.
0
0.
0
0.
3
0.
2
0.
4
1.
1
1.
0
1.1
+u33er a!d
p"astic
produc
ts
0.
3
0.
4
0.
0
1.
1
1.
6
1.
8
1.
8
2.
1
1.
5
1.
7
1.5
o!,
e"ectrica"
mac*i!er5
0.
9
0.
6
0.
0
1.
0
0.
4
0.
4
0.
7
0.
9
0.
9
1.
2
1.3
$"ectrica"
mac*i!e
r5
e#c"udi!
-
1.
2
1.
2
0.
4
0.
7
0.
0
0.
0
0.
8
0.
7
1.
0
1.
2
1.3
+oad motor
ve*ic"es 1.
4
0.
7
1.
9
1.
8
1.
3
1.
5
2.
1
2.
2
2.
6
2.
4
2.4
&!dustria"
c*emica"s 0.
7
2.
1
4.
5
3.
5
3.
1
3.
4
4.
1
3.
9
4.
4
4.
3
4.3
P*armaceut
ic
a"s
1.
6
2.
4
4.
6
4.
5
4.
6
5.
0
4.
7
4.
1
4.
1
4.
1
4.5
)!ips-
(oats(inclu
din g
!o.ercraft2
and >oating
structures
0.
0
0.
0
0.
0
0.
0
0.
0
0.
3
0.
2
0.
4
1.
1
1.
0
1.1
$"ectro!ics 0.
6
1.
0
0.
0
1.
2
0.
7
0.
7
0.
6
0.
5
0.
5
0.
5
0.0
Computers
a!d o6ce
mac*i!es
7"ess parts
t*ereo18
0.
3
2.
2
2.
1
2.
4
1.
4
0.
0
0.
3
0.
3
0.
4
0.
6
0.6
Parts a!d
compo!e
!ts
0.
9
0.
8
0.
8
0.
7
0.
0
0.
0
0.
5
0.
4
0.
5
0.
6
0.0
&t!er
,anufacture
s
9.
7
7.
6
8.
1
7.
8
5.
8
5.
6
7.
3
7.
8
8.
0
8.
2
7.1
Anne2ure
E+.,
E2$ort F")tor Intensit7Commo!it7
6ise
198
0
198
1
198
7
198
8
199
6
199
7
200
0
200
1
200
2
2003 200
4
200
5
200
6
200
7 All +ood
/roduct 9.7 8.7 8.9 8.3 4.8 5.4 8.1 10.5 10.6 10.6 7.5 5.6 7.0 17.
3 Agricultur
al
ra
%ateria
0.0 0.3 1.4 2.0 1.2 1.5 3.3 4.3 1.4 2.0 1.8 1.4 1.2 3.3
9i!era"s/
ores
a!d
meta"s
6.3 6.3 7.2 7.7 8.6 13.3 5.6 6.9 4.4 4.3 5.9 6.5 10.7 25.
8 +uels 50.4 48.7 21.7 18.9 33.5 27.3 13.4 12.0 12.6 9.6 13.4 15.9 15.1 44.
9 5a(our
and
resource
intensi.e
%anufact
ur es
9.0 9.2 7.8 6.6 14.9 17.3 5.6 13.1 13.6 5.6 24.8 5.8 24.2 25.
1
5os'ill
and
tec!nolog
3
intensi.e
%anufact
ur es
6.5 8.5 6.9 7.3 4.4 4.2 3.7 3.8 3.1 7.1 7.2 9.4 10.1 8.6
,ediu%
s'ill and
tec!nolog
3
intensi.e
%anufact
ur e
7.2 8.6 12.1 9.5 9.9 9.4 7.4 4.1 5.4 5.7 6.0 7.2 7.9 13.
2 6ig!s'ill
and
tec!nolog
3
intensi.e
%anufact
ur es
12.7 11.9 28.7 30.7 27.0 27.7 34.7 34.9 37.6 38.5 37.0 38.1 37.3 44.
7
~ 85
~
Anne2ure
EI+A,
Im$ort ")tor Intensit7Grou$
6ise
1980 1988 1996 2000 2001 2002 2003 2004 2005 2006 2007
All +ood /roduct 9.7 8.3 4.8 8.1 10.5 10.6 10.6 7.5 5.6 7 7.3
"otton 0 0.4 0 1.2 1.9 0 0 0 0 0 0
*u((er 0 0.3 0.4 0 0 0 0 0 0 0 0
"or' and ood 1.3 0.7 2.1 2.3 1.4 2 1.8 1.4 1.2 1.4
,inerals- ores
and
%etals
1.9 4.5 2.5 1.2 3.6 2.6 2.4 3.8 4.5 8.9 7.8
,etalliferous ores
and %etal scrap 0 0.4 2 0 0 0 0 0 0 0 0
<onferrous
%etals
4.4 2.8 4.1 4.4 3.3 1.8 1.9 2.2 2 1.8 3
+uels 50.4 18.9 33.5 13.4 12 12.6 9.6 13.4 15.9 15.1 18.9
$e1tiles 1.9 1.4 1.1 0 1.2 1.2 0 0 0 0 0
"or'-ood and
paper product 0 1 0.7 1.3 1.3 1.3 1.2 1 0.9 0.9 0
<on%etallic
%ineral
%anufactur
es
5.3 13.1 8.9 22.4 20.9 22.6 20.9 20.2 14.9 10 0
7.2 4.2 13.2 4.3 10.7 11.2 4.4 23.8 4.9 23.4 25.1
Iron and )teel 6.4 6.8 3.6 2.2 1.3 1 3.1 3.5 5 6.5 0
s!ips and (oats 0.1 0.5 0.8 1.6 2.6 2.1 4.1 3.8 4.4 3.6 3.6
<onelectical
%ac!iner3 2.1 1.9 0.6 2.4 0 0 0 0 0 0 0
9lectical
%ac!iner3-e1clu
ding electronics 5.1 7.6 9.3 5 4.1 5.4 5.7 6 7.2 7.9 13.2
Industrial
c!e%icals
10.5 14 13.3 15.8 15.5 13.5 14 13.7 14.1 13.9 15.4
9lectronics 0.6 3.4 1.6 4.1 4.2 4.3 4.1 3.4 3.1 3.2 3.5
"o%%unications
e=uip%ent(les
s parts
t!ereof2 and
!ouse!old
e=uip%ent
0.3 1.7 0.7 3 3.9 7.6 9 8.7 9.6 9.4 11.2
"o%puters and
o?ce %ac!ines
(less parts
t!ereof2
0.8 4 4.5 8.7 7.9 8 8.1 7.9 8.1 7.6 8
/arts and
co%ponents 0.4 7.6 6.9 3.1 3.4 4.2 3.4 3.3 3.2 3.2 6.7
~ 86
~
Anne2ure EI
+.,
Im$ort F")tor Intensit7Commo!it7
6ise
~ 87
~
Anne2ure
EII
GD(% E2$ort "n! Im$ort Gro6t* R"tes% 195152 to 200;09 +in
C,
Period %&P Eport +mport Period %&P Eport +mport
195051 05 140. .5,5 197071 40 307 .00
1955* 09 1704 005 19717 505 03 .0.
195*5. 301 701 1*01 1977* 03 .03 03
195.55 .0 1004 1*07 197*7. 407 *07 *05
195553 04 *0. 110* 197.75 *07 .05 509
195354 504 10* 700 197573 .0 909 1105
195457 10* 400 *0. 197374 .0* 90. 01
195759 405 .01 100 197477 *0* .01 901
195930 00 100 300 197779 907 1503 1*03
193031 400 00 1304 197990 301 1709 707
19313 *00 03 *01 199091 500 90 1*05
1933* 00 .01 .00 19919 10. 105 190.
193*3. 501 150. 407 1999* 50. *07 10
193.35 405 05 1000 199*9. 509 000 305
193533 *04 005 .04 199.95 305 170. 09
193334 100 *07 004 199593 40* 007 700
193437 700 03 901 199394 701 50* 304
193739 04 104 50. 199497 .05 .03 300
193940 305 .0. 1309 199799 304 501 0
194041 500 707 *05 1999000 30. 1007 140
19414 100 300 1*00 00001 .00 100 104
1944* 00* 170. 101 0010 300 103 104
194*4. .04 507 5504 000* .00 00* 190.
194.45 10* *001 5004 00*0. 705 101 40*
194543 901 1107 40. 00.05 405 *007 .04
194344 10* *0* 304 00503 905 *0. **07
194447 403 907 *09 00304 904 03 .05
194749 505 1005 1700 00407 903 900 *505
194970 500 1*09 *30. 00709 307 1*03 004
Source2 Economic )$r#e9, 00910, (o#ernment of India0
$#port
s
&mport
s
'rade (a"a!ce
+atio o1 $#port
to
&mpor
195051 1269 1273 @4 0.9969
195152 1490 1852 @362 0.8045
195253 1212 1472 @260 0.8234
195354 1114 1279 @166 0.8710
195455 1233 1456 @223 0.8468
195556 1275 1620 @345 0.7870
195657 1259 1750 @491 0.7194
195758 1171 2160 @989 0.5421
195859 1219 1901 @682 0.6412
195960 1343 2016 @674 0.6662
196061 1346 2353 @1007 0.5720
196162 1381 2281 @900 0.6054
196263 1437 2372 @935 0.6058
196364 1659 2558 @899 0.6486
196465 1701 2813 @1111 0.6047
196566 1693 2944 @1251 0.5751
196667 1628 2923 @1295 0.5570
196768 1586 2656 @1071 0.5971
196869 1788 2513 @726 0.7115
196970 1866 2089 @223 0.8933
197071 2031 2162 @131 0.9394
197172 2153 2443 @290 0.8813
197273 2550 2415 134 1.0559
197374 3209 3759 @549 0.8537
197475 4174 5666 @1492 0.7367
197576 4665 6084 @1420 0.7668
197677 5753 5677 77 1.0134
197778 6316 7031 @715 0.8983
197879 6978 8300 @1322 0.8407
197980 7947 11321 @3374 0.7020
198081 8486 15869 @7383 0.5348
198182 8704 15174 @6470 0.5736
198283 9107 14787 @5679 0.6159
198384 9449 15311 @5861 0.6171
198485 9878 14412 @4534 0.6854
198586 8904 16067 @7162 0.5542
198687 9745 15727 @5982 0.6196
198788 12089 17156 @5067 0.7047
198889 13970 19497 @5526 0.7165
198990 16612 21219 @4607 0.7829
199091 18143 24075 @5932 0.7536
199192 17865 19411 @1546 0.9204
199293 18537 21882 @3345 0.8471
199394 22238 23306 @1068 0.9542
199495 26330 28654 @2324 0.9189
199596 31797 36678 @4881 0.8669
199697 33470 39133 @5663 0.8553
199798 35006 41484 @6478 0.8438
199899 33218 42389 @9171 0.7836
~ 88
~
Anne2ure
EIII
Tren!s in E2$ort% Im$ort% Tr"!e ."#"n)e "n! R"tio o E2$ort to
Im$ort
~ 89
~
Eports +mports Trade Balance
Ratio of Eport to
+mport
1999000 *37 .9341 Q17.9 004.1*
00001 ..530 505*3 Q5943 007714
0010 .*74 51.1* Q4573 0075.
000* 5419 31.1 Q739* 00757.
00*0. 3*7.* 47150 Q1.*04 007139
00.05 7*5*5 111513 Q497 004.91
00503 10*09 1.9134 .3043 003911
00304 13*31 1754.9 59*77 00370*
00407 1390. 51.*9 775*5 003.49
00709 17595 *0*393 117.01 003101
Source2 Director (eneral of +ommercial Intelligence 6 )tatistics a (rowth rate on pro#isional o#er
re#ised =asis and =ased on Department of +ommerce methodolog90
No te2 !a% @or the 9ears 195354, 195457, 195759 and 195930, the data are as per the @o$rteenth
/eport of the Estimates +ommittee !19414% of the erstwhile Ministr9 of @oreign Trade0
!=% E'port, Import and Trade ,alance are in 5) - million0
Anne2ure
IF
'"nu")turin0 E"#ue A!!e! +'EA,% In!ustr7% "n! E2$orts +in
C,
9ears 8/A?+ndustry 8/A?%&P Eports?%&P 8unf. eports?Total Eports
194041 7104* 103 00* 5*0**
194543 4907* 1071 004* 510
197071 490* 1*07 1005 59035
197573 4407* 1.0. 10*. 57034
199091 45050 1.095 *000 4103
199593 430** 1301 4031 4.039
00001 430*4 1503 1009 44005
00503 43055 1507 140.5 400*9
00304 440.5 13001 1909* 3400
00407 47015 13014 10*1 3004
00709 4705 1503. 5035 3300
00910 47054 1301* *099
Source2 <and=oo: of statistics on Indian Econom9, /,I, 00709 6009100
~ 90
~
Gr"$* 1
E2$ort Tren!s in F")tor
Intensit7
Gr"$* 2
E2$ort Tren!s in F")tor intensit7 o Foo! $ro!u)ts "n! A0ri)u#tur"# R"6
m"teri"#s
~ 91
~
Gr"$* 1
Tren!s in E2$orts o 'iner"# Ores "n! 'et"#s "n!
Fue#s
Gr"$* 3
Im$ort ")tor Intensit7 Tren!s in A## oo! $ro!u)ts "n! A0ri)u#ture R"6
m"teri"#s
~ 92
~
Gr"$* 5
Im$ort F")tor Intensit7 in 'iner"# ores "n! 'et"#s "n!
ue#s
Gr"$* 8
Im$ort F")tor Intensit7 Tren!s in A## /in!s Te)*no#o07
'"nu")tures
1416 1411 1440 2666 2661 2662 266' 266, 266- 2660 2663
share of primar9 e'ports
to total e'ports 904 170 104 509 1.05 1*0* 1101 90* 705 700 409
share of man$fact$ring
e'ports to total e'ports 400* 7107 470* 9.01 7505 740 790* 9103 9*04 9.00 9.0*
~ 93
~
Gr"$* :
S*"re o (rim"r7 E2$orts "n! S*"re '"nu")turin0
E2$orts
1416 1411 1440 2666 2661 2662 266' 266, 266- 2660 2663
Primar9 Imports as 8
of total imports 904 100* 300 110. 1.07 100 105 90 400 70 704
Man$fact$ring
imports as 8 of total
imports 9405 9*07 1040 909 9509 990 9107 11.05 9409 1150 1130.
Gr"$* ;
S*"re o (rim"r7 "n! '"nu")ture Im$orts in Tot"#
Im$orts
~ 94
~
Gr"$* 9
Gro6t* o E2$ort% Im$ort "n! GD( !urin0 195152 to
200;09
Gr"$* 10
E2)*"n0e R"te A$$re)i"tion +G,% De$re)i"tion +,% E2$ort "n! Im$ort Gro6t*
R"te +C,
~ 95
~
Gr"$* 11
GD( "n! E2$ort Gro6t*
R"tes
~ 96
~
Reeren)es

":so9, M0"0 and @0M0 Ettori, !199%, Protection and Ind$strial )tr$ct$re in India, Polic9
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De#elopment, Aile9DIndia, New Delhi0
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@ni(ersity
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4,
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+handa, /0, !005a%, KTrade in @inancial )er#ices2 India&s >pport$nities and +onstraintsM,
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50 Decem=er
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Ec:a$s, /0)0 and F Pari:h !1937%, Planning for (rowth, +am=ridge2 MIT Press0
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Mattoo, "0 and Pierre )a$#e !007%, K/egionalism in )er#ice TradeM !ed0% " Mattoo,
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5ma )an:aran, ?ino; "=raham and F0J0 Joseph !004%, KImpact of Trade Li=eraliHation on
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