CHAPTER - IV

WORLD TRADE TRENDS AND INDIA'S EXPORT PERFORMANCE:

AN AC:GREGATE ANALYSIS

Global trade patterns reflect .he fundamentals of varying economic systems, with the

developed economies dominating the world trade scenario, as in the case of growth and

distribution of GDP. Higher GDP growth rates are followed by corresponding high expon

and import growth rates. As national income increases, there will be exportable surpluses;

and for GDP to have sustainablt: growth rates, there should be adequate imports to

complement domestic production. The phenomena of globalization and liberalization have

helped international trade reach higher growth path (Kt'beger, 1990; World Bank, 1987) But

there were also times of restriction: on international trade, especially on imports, adopted by

many countries with a view to render protection to various sectors of domestic economy.

Liberalization and protection were alternatively made use of by all countries, irrespective of

stages of economic development, according to the contingencies of times. It has been

observed that world output has be1:n higher in times of trade liberalization than in times of

increasing protection.

During the periods of incr(:asing protecti0ni.e. 1930-38, 1973-80, world output and

world trade recorded lower growti rates and during the periods of liberalization i.e. 1953-

1972 and 1980 and after, income and trade showed better growth rates (Table - 4.1).
 Table -4.1: World output and world trade (1930-2005)

/(Without UF:)
(With UR)
( 3.00
3.50
1 :::: 1
1iprojections) I
Source: UNCTAD (2001), UN, Geneva

4.1. Trends in World GDP and Exports

It is evident from the table (Table - 4.2) that exports exhibited lower growth rates compared

Table - 4.2: World Merchandise Exports, Production and GDP, 1950-2001

- (Index: 1990=100)
Year
- Exports (Volume) I Production ( World GDP
1950 91 18 1 19
1955 3 13 24 25
1960 4 18 30 30
1965 6 26 4 1 39
1970 9 41 54 50
1975 26 52 65 61
1980 59 68 78 73
1985 56 75 86 84
1990 100 100 100 100
1991 102 104 100 101
1992 108 109 100 102
1993 108 113 100 103
1994 123 124 103 105
1995 147 133 107 108
1996 153 139 I l l IIi
1997 158 154 116 115
1998 156 161 118 117
1999 162 158 121 121
2000 183 186 127 126
2001
- 175 183 126 127
S Iurce: International Trade Statistics, WTO, Geneva, 2002
to global production and GDP for the period preceding 1980. Even within this period, the

index of export volumes exceeded export values and this is owing to the predominance of

agricultural exports with comparatilrely lower terms of trade in relation to manufacturing

lower. After 1980, the index value of

exports, whose share in global exports was also -

exports reached 175 and 183 in te-ms of value and volume, whereas the index value of

production and GDP recorded values of 126 and 127 respectively. This is indicative of more

of globalization or more of outward xientation of the diverse economies of the world

Table - 4.3: World merchandise exports in current dollars, 1950-2001

- (Index: 1990= 100; and percentage change)

Year I Total merchandise Agri. Products ] Mining products I Manufactures I
I lndex % change 1nde:c % change I lndex % change / lndex % chg.
1950 1 21 71 21 I 1
1955 3 9.4 8
1960 4 13.2 10
1965 6 8.1 12
1970 9 14.3 15
1975 26 4.7 38
1980 59 21.8 71
1985 58 -0.2 83
1990 100 13.0 100
1991 102 1.5 101
1992 108 6.7 108
1993 I06 -0.2 104
1994 123 13.6 119
1995 147 19.4 140
1996 153 4.4 145
1997 158 3.4 133
1998 156 -1.4 136
1999 182 3.9 131
2000 183 12.7 132
2001 175 -4.3 -- 131 -0.5 1 164
Source: International Trade I atistics. W' '0,Geneva, 2002

The index values of man~factures,which was lagging in the period prior to the

eighties, has exceeded those of ag~.icultureand mining in the period after eighties, and this is
one of the main factors for the incices of export values to surpass those of global GDP

values. The increased share of manufactures in the global trade indicates economic progress

made by the developing countries, , ~ h started

o exporting more of processed manufactures

instead of raw materials or intermediites.

4.2. Global Economic Indicators

It is evident from the table (Table - 4.4) that the world share of exports of goods and

services in the world GDP has been on the increase from the year 1980, measured both in

current and constant values of USD. 711e share appeared to remain at the lower level of 19

percent during the 1980's, and thereafter, it went up to 29.88 percent by the year 2001. It

shows increasing outward orientation of the various economies

Table - 4.4: Global Economic lndicators -1

(USD billions; P .tentages)

World Export of Exports of Exports of
GDP (constam 1995 USD) Goods & services goods & goods &
(Current USD) services services
1 I (constant % GDP

19.23
19.98
19.91
19.55
20.16
19.77
20.57
21.55
21.68
22.76
23.10
23.27
2000 3 1500 341CO 7860.00 9400.00 25.55
2001 31100 34500 7630.00 9540.00 29.88
Source: World Development Indicators, World Bank, Washington D.C., 2003.

The growth rates in the econcmic indicators reveal that the growth rates of exports

and imports of goods and services always exceeded the growth rates of world GDP and

world GDP per capita during the period from 1980 to 200 1 (Table - 4.5)
 Table- 4.5: Global Economic Indicators - I1

Year GDP Growth GDP per capita Exports of Imports of

Annual % Annual % Goods & services Goods &services
Annual % Annual %

1980 1.93 0.19 4.66 2.24

1985 3.38 1.68 4.40 4.21
1990 2.76 1.01 5.16 4.90
1991 1.40 -0.22 2.27 0.24
1992 1.86 0.31 3.85 3.44
1993 1.49 0.04 3.45 2.42
1994 3.09 1.62 8.95 8.89
1995 2.77 1.31 8.85 8.89
1996 3.22 1.76 6.93 7.24
1997 3.45 1.99 10.36 9.70
1998 2.18 0.81 4.71 5.23
1999 2.94 1.60 5.42 6.35
2000 3.93 2.62 12.90 12.40
2001 1.10 -0.16 1.46 0.92
Source: World Developn~entIndicators, World Bank, Washington D.C., 2003.

4.3. World Ranking in Exports ant1 Imports

The USA continues to be the lead exporter and importer of the world. It had a share

of 10.7 percent in the world exports and 18 percent in world imports. It is followed by

Germany. China with a share of 5 percent is in the fifth rank in the world in exports and is

Table - 4.6: Leading Exporters and Importers in World Merchandise Trade, 2002

(Billion USD and percentage)

EXPORTS IMPORTS
Rank I Exporters I Valur: I Share Rank I Importers / Value I Share
1 I United States 1 693.5 1 10.7 1 I United States 1 1202.4 ( 18.0
Germany 2 Germany
Japan 3 United Kingdom
France 4 Japan
China 5 France
United Kingdom 6 - China
Canada 8 Canada
S. Korea 14 S. Korea
Singapore 15 Singapore
Malaysia 18 Malaysia
Thailand 22 Thailand
Indonesia 39 Indonesia
1 30 1India 149.30 0.8 1 24 /
India 1 56.6 0.8 1 / 1
Source: World Trade Statistics, WTO, Geneva, 2003
ranked sixth as the world importer. Other Asian countries ranked ahead of lndia, include

South Korea, Singapore, Malaysia, Thailand and Indonesia. lndia is ranked 3othwith a share

of 0.8 percent of the world export trade in 2002. lndia is ranked as 24Ih with a share of 0.8

percent of the global imports.

In global trade in commercial services, the IL'S with a share of 17.4 percent is the

lead exporter, and also the lead importer with a reduced share of 13.3 percent. lndia is

ranked in the 1 9 ' ~position as regards the export and import of commercial services with a

share of 1.5 and 1.4 percent. lndia exported commercial services worth USD 23.5 billion

and imported commercial services \~alued at USD 21.8 billion. In global commercial

services trade, lndia comes after Chitla, but is ahead of Asian counterparts like Thailand,

Indonesia and Malaysia.

Table - 4.7: Leading Exportel-s and Importers in World Trade in

Commercial Services, 2002
(Billion USD and percentage)
EXPORTS IMPORTS
Rank I Exporters I Value I Share Rank I Exporters I Value I Share
1 ( United States ( 272.6 1 17.4 1 I United States 1 205.6 1 13.3
2 United Kingdom Germany
3 Germany Japan
4 France United Kingdom
5 Japan France
10 China 39.4 8 China
11 Canada 36.3 9 Canada
16 S. Korea 27.1 12 S. Korea
17 Singapore
19 lndia
26 Thailand
27 Malavsia
40 1Indonesia
Source: World Trade Ltatistics, WTO, Geneva, 2003
4.4. Global Exports and Developing Economies

The developed market econorlies' share in the global exports and imports continued

to be very predominant, but a decline in their share of global export trade is evident from the

data by the IMF. Their share declined from 73.72 percent in 1970 to 62.17 percent in 2002.

Correspondingly, the share of the dt:vetoping economies in global export trade increased

from 26.28 percent in 1970 to 37.83 percent in 2002. It indicates the increasing outward

orientation and participation of the de./eloping economies in global trade.

Table - 4.8: Share of Global ICxports by Developed and Developing Nations

(USD Billions 8 Percentages)

Year World Exports Share by Eleveloped Share By Developing % Share of (4)
Industrial l?conomies Economies in (2)
(4)
79.39
275.23
684.15
608.73
989.78
1031.82
1 1 13.80
1171.16
1373.12
1659.13
1786.65
1894.60
1778.62
1906.65
2365.16
2257.70
2002 1 6410.25 1 3985.54 2424.7 1
Source: International Financial titatistics, MF, Washington D.C.,

4.5. Intra- and inter- Regional Trade

The regional blocks have become very prominent under the WTO regime and such

groupings based on geographical or political factors have come to stay under WTO

dispensation to have more share of world trade.

 ~nblc-4.9: Intra- and inter. regional merchandise trade. 2001

i s e of total merchandise trade f l o ~ (US$

~ ~ ~ i o n - wbreakup s billion)
Destination North Latin Western Central Africa Middle Asia World
Origin America America Europe Europe/CI S East
North
America 391 164 188 7 13 21 207 99 I
Latin
America 21 1 59 42 3 4 4 22 347
-
West.
Europe 255 58 1677 147 63 65 195 2485
Central
Europe I2 6 158 76 3 8 19 286
Africa 25 5 73 I II 3' 21 141
Middle
East 39 3 39 2 9 18 112 237
Asia 376 40 252 17 24 45 722 1497
World 1308 335 2429 252 127 163 1298 5984

Share of inm- and inter- regional Vade flows in e a h region's total merchandise exports (percentages)

North 39.5 16.5 19.0 0.7 1.3 2.1 20.9 100

America
Latin 60.8 17.0 12.1 0.9 1.2 1.2 6.3 100
Amcrica
Western
Europe 10.3 2.3 67.5 5.9 2.5 2.6 7.8 100
CentralICIS 4.2 2.1 55.2 26.6 1.O 2.8 6.6 100
Africa 17.7 3.5 51.8 0.7 7.8 2.1 14.9 100
Middle
East 16.5 1.3 16.5 0.8 3.6 7.6 47.3 100
Asia 25.1 2.7 16.8 1.1 1.6 3.0 48.2 100
World 21.9 5.6 40.6 4.2 2.1 2.7 21.7 100

Share of intra- and inter-regional trade flows in world merchandise exports (percentages)
North
America 6.5 2.7 3.1
Latin
America 3.5 1.O 0.7
Western
Europe 4.3 1.1 28.0
CentralICIS 0.2 0.1 2.6
Africa 0.4 0. I 1.2
Middle
East 0.7 0.1 0.7
Asia 6.3 0.7 4.2
World 21.9 5.6 40.6

Source: World Trade Statistics, WTO, Geneva 2003

The flows of global trade according to geographical groupings are given above.

(Table - 4.9) It is clear from t h ~above table that nearly half of world trade (49.40%)

emanated from the intra-regional trade (the diagonal sum of the above table is $2984

billions). The Western Europe coristitutes the largest geographical group accounting for its
intra-regional trade nearly 28 percer,t of the world trade, followed by Asia and North

America. The countries in Asia accounted for 48.2 percent of its global trade as intra-

regional trade thus showing more of nter-dependence among the economies of the region.

In the inter-regional trade, the Westr:rn Europe accounted for 41.5 percent of the global
-
trade, and the rest of the world had 40 6 percent of their total trade with the Western Europe.

Table - 4.10: Merchandise Trade of Selected Regional Integration

Arrangements, 1992-02

(Billions US

Total ~ x ~ o r t s 1536
Intra-exports 1066
Extra-exports 470
Total Imports 1560
Intra-imports 1090
Extra-imports 470
EU (15)
Total Exports 1584 2449
Intra-exports 1045 1509
Extra-exports 540 940
Total Imports 1654 2447
Intra-imports 1048 1514
Extra-imports 606 933
NAFTA (3)
Total Exports 629 1107
Intra-exports 274 626
Extra-exports 355 48 1
Total Imports 738 1599
Intra-imports 266 609
Extras-imports 473 990
ASEAN(1O)
Total Exports 186 405
Intra-exports 39 97
Extra-exports 147 308
Total Imports 20 1 353
Intra-imports 37 83
Extra-imports 164 270
Source: World Trade Sta eneva,
 The trade tlows within and be ween major Regional Integration Agreements such as

APEC, EU, NAFTA and ASEAN sl-ows increasing trend in intra-regional trade (Table -

4.10). It is evident that both intra-elports and intra-imports, which are implied by trade

within the regions, are on the increase from the period from 1900 to 2000 for RlAs like

APEC, NAFTA and ASEAN, and f o the

~ EU, there is marginal decline. Accordingly, extra-

exports and extra-imports, which imply trade between regional groups, showed decline for

all except the EU, which showed marginal increase.

4.6. Factors Affecting Global Trad:

During the 1990s, global trade showed a sustained and buoyant growth. Between

1990 and 2000, the world trade in gc~odsand services increased in dollar terms from US$4.3

trillion to US$ 7.8 trillion with an annual averagegrowth rate of 6 percent. Merchandise

goods exports increased to US$ 6.2 trillion in 2000. The ratio of world trade in goods and

services to global GDP had increased from 19 percent in 1990 to 2 5 percent in 2000. The

world trade in the 90s has been a result of several convergent forces, which are rapidly

integrating the trading world. Owir g to the interdependence of global GDP and trade, there

is the rapid transmission of businc.ss cycles abroad, which impact on domestic economies

and on industry level competencie:; (El Agraa, 1997;Comoi-y et. al., 2000). The key factors

influencing world trade have been (i) External Trade and foreign investment, (ii) Relocation

of global manufacturing bases and (iii) Rapid technological developments.

Global trade policies and capital flows in the form of Foreign Direct Investments

(FDls) and Foreign Invested ihterprises (FIEs) have been major determinants of

international trade flows. The impact of global trade policy changes on trade patterns is

generally seen only over the medium term, while changes in capital flows often have

immediate repercussions on year-to-year trade developments.

 Now all sectors of the econonly including services have been brought under the

global trade rules of the WTO. It is shwxn that the Uruguay round tariff cuts has provided an

impetus for world exports. However, there are exceptions, notably in textiles and

agriculture, which are areas where developing countries are export competitive.

The impact of FDI on a host ccunty's economy is widely recognized. FDls and FlEs

grew at almost double the rate of world merchandise trade, benefiting countries like China,

which received substantial boost through inbound capital flow. FDI flows to developing

countries increased more than six fol'j from 1990 to 1998, and their share of global FDI

flows has risen from 25 percent in 15'91 to an estimated 42 percent in 1998. The key FDI

benefits are productivity growth dus to increased access to technology through joint

ventures and licensing, enhanced knowledge of international market conditions and access

to foreign marketing networks. The S ~ u t hEast Asian countries and China have recognized
-
the importance of FDI in key areas to provide an impetus to domestic economy and export

competitiveness.

A substantial proportion of gl8)bal trade in manufactures, especially between OECD

countries, comprises intra-industry trade - the exchange of similar, differentiated products.

Intra-industry trade ratios are freq~entlyabove 0.6 for OECD countries. This is one

reflection of the process of globalisa:ion, which increasingly involves the fragmentation of

production across many different countries.

MNCs increasingly shape trade patterns accounting for about two-thirds of world

trade. About one-third of world trade is intra-tirm trade. l'hus the direction of trade is

directly affected by location strategies and decisions of MNCs. The outward FDI as a

percentage of GDP is more than lhe inward FDI stocks as a percentage of GDP for

developed countries and the contrar) is true of developing nations. There is scope for trade
linked FDI, particularly in services sector for countries like India. Most recently, Indian

MNCS began seeking investment via cross border mergers and acquisitions ~ a r t i c u l a r in
l~

the software industry in countries such as the UK and the US. The need for local presence to

deliver services is one reason underlying the shift of the world FDI stock towards services.

The situation as regards FDI and trade in services is beginning to change under the impact of

the growing transportability of servicc,s,and especially that of information-intensive services

due to advances in telecommunications and information technologies. Thus, while inward

FDI is very important for export of goods and services, outward FDI is also important for

India, particularly in the services sectsr.

Large-scale shift in global manufacturing bases to Asian countries has occurred

-
through the 1990s, with factor costs, especially labour costs, increasing in developed

markets. Initially, low skilled labour based manufacturing shifted.to the Asian countries like

China which had a natural cost advantage. But later on, high skilled labour based

manufacturing such as electronics a so shifted to Asian countries. As a result, skilled labour

and technology based manufacturing: products have increased as a proportion of world trade.

Table - 4.11: Composition of trade (% growth: 1990-96)- SE Asia

lndia Malaysia Korea Singapore Thailand

Resource-based 9.3 10.7 21.7 2.8 7.7

Low technology 11.8 31.3 1.3 8.6 14.4

Medium technology 12.6 28.0 22.2 13.6 12.3

High technology 35.4 14.5 27.0 2 1.4 22.0 24.8

Source: Trade and Development Report, UNCTAD, Geneva, 1999

Relocation of global marufacturing bases, especially in skilled-labour intensive

manufacturing to Asian countrie:; provided a boost to growth of these industries in the

concerned Asian economies. It is evident from the above table that in all countries, high

technology based exports have displ~fedthe fastest growth, which is largely an outcome of

relocation. The growth rate of high technology product exports of lndia is the lowest at 14.5

percent among the above Asian countries. Countries like Malaysia, Korea and Singapore

achieved higher rates of growth of exports of medium technology products than India. In the

case of low technology products exports, lndia registered a growth rate of 11.8 percent as

compared to 31.3 percent for Malayria, and 18.4 percent for China. Given the technological

structure of Indian exports and that of the other major competitors, it is imperative for lndia

to move into high technology, high-value products.

4.7. India's Export Performance v:;. South East Asia & China

An analysis of share of worl'i trade and the share of export contribution of the South

East Asian economies and Chine reveals that India's comparative position vs. these

countries has declined steadily. China achieved the top ranking followed by Hong Kong,

South Korea, Singapore, Malaysi;~,Thailand, Indonesia and lndia. Among the leading

countries in Asia, China expanded ,ts merchandise trade at nearly twice the rate of Asia as a

group in the 1990s, while Japan's trade growth lagged behind. China's exports increased

from $18.10 billion in 1980 to $ 52.09 billion in 1990 and further to $ 249.20 billion in

In 1970, lndia and China hiid almost the same level of exports, but by the year 2002,

China's exports reached USD 328.59 billion, whereas, lndia's exports were USD 49.31

billion. Other Asian economies like Singapore, Thailand, Malaysia and lndonesia had lower

levels of exports compared to Intlia in the year 1970, but by 2002, their share of exports

outpaced that of lndia.

 Table - 4.12: Exports by Asian Countries
(USD Bill
Year Asia China Hkong Sillgap. Malay. Thail. Indo. India ' Philip.
1970 17.11 2.31 2.51 5 6 0.71 1.11 2.03 1.04
1975 53.47 7.69 6.03 5.:18 3.84 2.21 7.10 4.36 2.29
1980 160.39 18.10 19.75 19.38 12.94 6.51 21.91 8.59 5.74
1985 207.52 27.35 30.19 22.81 15.32 7.12 18.59 9.14 4.61
1990 452.30 62.09 82.16 52.73 29.45 23.07 25.68 17.97 8.12
1991 516.54 71.91 98.58 58.97 34.35 28.43 29.14 17.73 8.80
1992 585.97 84.94 119.49 6:,.47 40.77 32.47 33.97 19.63 9.75
1993 646.42 91.74 135.24 74.01 47.13 36.97 36.82 21.57 11.13
1994 768.60 121.01 151.40 96.83 58.85 45.26 40.06 25.02 13.30
1995 932.82 148.78 173.75 1 d.27 73.91 56.44 45.42 30.63 17.50
1996 973.22 151.05 180.75 1:!5.01 78.33 55.72 49.81 33.1 1 20.41
1997 1039.02 182.79 188.06 1'14.99 78.74 57.37 53.44 35.01 24.88
1998 986.25 183.71 174.00 18l9.90 73.25 54.46 48.85 33.44 29.41
1999 1051.93 194.93 173.89 114.68 84.62 58.44 48.67 35.67 36.58
2000 1266.76 249.20 201.86 137.80 98.23 69.06 62.12 42.38 39.78
2001 1182.89 266.10 189.89 121.75 88.01 65.11 56.45 43.35 32.66
2002 1298.87 325.59 200.09 125.18 93.27 68.77 58.12 49.31 36.50

Source: International Financial Statistics, IMF, Washington D. C., 200

India's share of exports in global trade remained low at 0.67 percent while other SE

Asian countries and China showed better performance in 2000. China recorded a share of

3.90 percent of world trade. Betl~een1980 and 2000, India's share of exports to GDP

though doubled to 10 percent, is significantly lower than its competitors in the region.

Table - 4.13: Share of Global trade and Share of Exports

in GDP of Asian countries, 2 0 0 0
-

Count 1I Share of
I
1 ~ x o o r t as
Global trade % bf ~ D P
1980
s 1
1999
1

I
China

36.4

Indonesia
Malaysia
: 48.2
14.0
109.8
Singapore 2.20
Philippinc:~ 0.65 - -
India 0.67 10.1
Gurce: 1ntc:rnational Trade Statistics, WTO, Geneva, 2001
 India's trade with major trade blocks/economic groups such as OECD, NAFTA, EU,

OPEC, ASEAN, SAARC, and LAIA increased for the period from 1996-97 to 2002-03. But

trade with the CIS countries shows stagnation (Table - 4.14).

Table - 4.14: India's Trade with ~ r a d e ~ l o c k s

($ Million)
Trade 1 1996-97 1 97-98 /98-99 00-0 1 01-02 02-03

LAIA
NAFTA
OECD
OPEC
SAARC 1 1703 1
1612 1
1678
Source: Foreign Trade & BOP,CMlE

4.8. India: Foreign Trade and GIIP

According to WTO trade st:itistics, India's export growth rate exceeded global export

growth rate from the year 1995, ext:ept for the year 1998, when there was deceleration of the

growth rates globally and locally (l'abie - 4.15).

Table - 4.15: Export growth rate of India

and the World

Y e a r ' o r l d ' s Exoort I India's exoort

I
rowth rate2(%) growth raie (%)
19.67 22.41

1 2000 1 12.40 16.46 1

Sourcc: In~crnationall'radc Statistics, WTO., Gencva. 200 1

India's share of world expcrts increased from 0.44 percent in 1980 to 0.58 percent in

1995. It further increased to O.BO percent in 2002 (Table - 4.16).

 Table - 4.16: India's Exports as percentage of World exports

1 2002 1 6410.25 1 49.31 1 0.W 1

Source: World Trade Statistics, WTO, Geneva, 2003

The table below shows basic economic indicators like GDP in current USD values,

GDP in constant USD (1995) values, exports and imports of goods and services in current

and constant USD values. There i: a steady increase in all these variables.

Table- 4.17: Economic Indicators - lr~dia

(USD in Billions
GDP Imp. Of
(Current USD) (Constant
1995USD) (current $)
(const. 1995

2000 457.05 467.26 63.76 71.56 75.66 76.66

200 1 477.34 492.49 65.16 78.00 73.65 80.37
Source: World Development Indicators, World Bank, Washington D.C., 2003

'fhc sharc ol'cxports o f goods and scrvices in currcnt lJSD vnlucs increased from

6.18 percent of current USD values of GDP in 1980 to 13.65 percent in 2001. In constant

terms, the increase was from 7.31 percent to 15.83 percent. The import of goods and
services constituted 9.80 and 15.43 percentages in 1980 and 2001 respectively in current

USD values, and 12.46 and 16.32 percentages in constant USD values.

Table - 4.18: GDP and Shares of Exports and Imports of Goods & Services
-
Year Ex. of goods Ex. of goods Imp. of goods Imp. of goods
& services as % & services as % & services as % & services as %
of GDP current $ I
C DP (const. $) GDP (current $)
- GDP (constant $)
Ti%&-&+ 7.3 1 9.80 12.46

1992
1993 10.20
1994 10.23
11.17
1996 10.89
1997 11.01
1 1.47
1999 11.95
2000 13.95
2001 13.65 15.83 15.43 16.32
Source: World Bank, M i d Development Indicators, Washi!gton D.C., 2003

The share of exports to GDP went up gradually from 3.92 percent in 1985-86 to

10.10 percent in 2000-01. Likeuise, the share of imports to GDP increased from 7.07

percent to 11 percent during the same period. The contribution of external trade, as the sum

of exports and imports, to GDP ~t market prices showed increase from 10.99 percent to

21.80 percent during the same period. The share of external trade in merchandise to GDP

doubled in this period. This indicales increasing globalization of the economy.

Table - 4.19: Share of foreign trade

Period Exports as Imports as Foreign trade Exports as

% of GDP % of GDPas % of GDP % of Imports
1985-86 7.07 10.99 55.45

1 2000-01 1 10.10 11.60 / 21.80 1 87.07 1

Source: Economic Survey, Govt. of India, New Delhi (various issues)
 It is further observed that ttle magnitude of the increase is higher during the post-

reform period i.e. after 1991. It is seen that the average annual proportion of foreign trade as

a percentage of GDP is the highest at 18.80 percent during 1995-96 to 1999-2000 followed

by 15.34 percent during 1990-91 to 1994-95. It is only 11.32 percent during the second half

of the 80s.

Although value of imports 2s percent of GDP has been higher than that of exports,

the difference in their percentage share in GDP has narrowed. The financing of country's

imports is increasingly made out of our export earnings throughout the period 1985-86 to

2000-01. The percentage of imports covered by export earnings has increased from 55.45

percent in 1985-86 to 87.07 percent in 2000-01. It implies that dependence on other sources

of foreign exchange to finance imp~xtshas declined during the period. This is a vindication

of the reforms undertaken on the trade front, whereby quantitative restrictions were

gradually removed and import tariffs were reduced in a phased manner.

The average annual growth rates of export volume, import volume, export value and

import value for the sub-periods 1980-90 and 1990-2000 show that growth rates were

remarkably positive and higher during the second sub-period. The net barter terms of trade

was also higher in the second period (Table - 4.20).

Table - 4.20: Ir dia's Growth-Rates of Merchandise Trade

I Parameters 1 1980-90 / 1990-2000 /

Import volume
Export value
l m ~ o r value
t
I
~ ebarter
i terms of trade 79 1
93 1
Source: World Development Indicators, World Bank, Washington D.C., 2003
4.9. Composition of Trade

It is required to examine if any transformation has taken place in the commodity

composition of exports and imports of India. The increasing share of manufactures in

exports is an indication of exports of more value-added products and also decreasing share

of primary commodities. The structire of global merchandise exports reveals an increasing

share of manufactures from 74 percent in 1990 to 78 percent in 2001. A comparison of

world trade basket between 1990 and 2001 reveals that shares of product groups like

agricultural products, mining products;iron and steel have declined in 1990s.

Table - 4.21: Structure of Merchandise Exports

I Parameters I World I India I US 1

2001 1990 2001 1990 2001
6155.80 17.97 43.61 393.59 730.80
Food ( % of total) 13 16 13 11 8
Agri. & raw materials (%) 1 4 1 4 2
Fuels (%) 4 3 4 3 2
Ores & metals (YO) 3 5 3 3 2
Manufactures (%) 74 78 71 77 74 82
I I I I I I I J
Source: World Development Indicators, World Bank, Washington D.C., 2003

The share of manufactures in merchandise exports increased from 71 percent in 1990

in India.
to 77 percent in 2001. This is compa-able to global share of manufactures in world exports.
4

Table - 4.22: Structure of Merchandise Imports

I Parameters World India

0 1990
Merchandise imports ($ bn.) 1 3524.80 1 6357.73 1 23.58 1 49.62
Food (% of total) 9 7 3 5
Agri. & raw materials (%of total) 3 2 4 3
Fuels (% of total) II 10 27 37
Ores/metals I% of total) 4 3 -
8 -5
[ ~anufactures(% of total) 1 71 1 75 51 1 48
Source: World Development Indicators, World Bank, Washington D.C., 2003
 The concentration of manufactured exports was low in the composition of India's

imports. The share has marginally declined during the period from 5 1 percent to 48 percent.

Table - 4.23:Manufactures Exports & Imports as Share

of M6:rchandise Exports & Imports

v p o r t s Manufacture Imports
As % of merchandise Exports As % of merchandise imports
WORLD WORLD
65.92 53.56

12001 178.00 77.00 74.62 48.00

Source: World Development Indicators, World Bank, Washington D.C., 2003

The share of manufacture:; in world exports and imports has shown increasing trends.

The commodity composition of merchandise exports shows that manufactured items

constitute nearly three -fourths of the total traded commodity in the world (Table - 4.26).

India's share of manufactures in :xports compares with the global level, whereas in imports,
-

India's share of manufactures remain at a stagnant level.

Table - 4.24: Structure of Service Exports from India

World India
1990 2001 1990 200 1
Commercial service exports ($ bn.) 750.36 1452.40 4.61 20.39
Transport ($ of total) 28.1 23.2 20.8 10.6
Travel (% of total) 34.1 32.1 33.8 17.9
37.8 44.7 45.4 71.4
Source: World Developtnent Indicators, World Bank, Washington D.C., 2003.
 The structure of export of ~:ommercialservices shows that diversification has taken

place from the traditional major it~:msof travel and transport. The structure of commercial

services import does not show muc? deviation as in the case of exports

Table - 4.25: Structure of Service Imports to lndia

1 Parameters 1 India 1 World 1

Transport (% of total)
Travel (% of total)
I Other services (% of total) 1
35.9 1
45.8 1
35.8 41.21
Source: World Bank, Worltl Development Indicators, Washington D. C., 2003

The data compiled on financial year basis, show steady increase in the USD values

of various components of the merchandise exports (Table - 4.25),

Table - 4.26: Com~nodityComposition of 1ndi.a'~Exports

(USD Million)
Primary produc~s Manufactured Petroleum Total
Year Agri. 62 allied, ores Products Products Exports
and minerals Others
1987-88 3 160.5 8195.1 732.9 12088.5
1988-89 3242.5 101 10.3 617.6 13970.4
1989-90 3883.2 11971.6 757.7 16612.5
1990-91 4324.0 12996.4 824.8 18 145.2
1991-92 4132.2 13148.4 584.8 17865.4
1992.93 3873.5 14038.8 624.9 18537.2
1993-94 4915.7 16656.7 665.9 22238.3
1994-95 5214.4 20404.4 71 1.7 26330.5
1995-96 7256.9 23747.0 791.0 3 1794.9
1996-97 8041.9 24634.1 821.9 33497.9
1997-98 7696.5 26578.6 773.5 35048.6
1998-99 6926.3 25785.6 498.9 33210.9
1999-00 6532.1 29750.6 476.8 36759.5
2000-0 1 7137.8 34391.2 26 18.4 44147.4
200 1-02 7188.0 33483.4 3304.7 43976.1
2002-03 1 8333.4 38452.1 5584.5 52370.0
Source: Economic Survey, Ctovt. of India, New Delhi, 2003
 Based on the data compiled on financial year basis, the increasing component of

manufactures is established (Table - 4.27). The share of primary sector has come down from

26.14 percent to 15.91 percent.. However, petroleum and other products show a fluctuating

trend.

Table - 4.27: Commodity Composition % Share in Total Exports

Year 1 Primam
I sector -
I Manufacturine Sector I Petroleum Products &
I Other Products
All
Commodities
1987-88 1 26.14 67.80 6.06 100

12002-03 115.91 73.42 10.67 100

Source: Economic Survey, Govt. of India, New Delhi, 2003

The major items in the malufactured goods include engineering goods, textiles,

readymade garments, chemicals and related products, leather and leather goods. Between

1999 and 2003, the increase in share is remarkable in textiles and garments compared to

Table - 4.28: India's Exports - Between 1999 to 2003 ($ billion)

-
Items I FY'031% / F Y V 0 2 ( % 1 FY'OI 1 % / FY'OOI% / FY'99I%
Agricultural & allied 1 6.43 / 12.3 1 5.92 / 13.5 1 5.98 1 13.6 1 5.61 1 15.3 1 6.03 1 18.2
products
Ores & minerals
Manufactured goods
Leather & leather goods
Chemicals & related products
Engineering goods
Textiles
Readymade garments
Other manufactured goods
Sub-total
Petroleum & Crude oil
products
Other commodities
Total exports
Source: Foreign Trade & BOP, CMIE. Mumbai, Sept. 2003
other sectors like engineering goods, c~emicalsand other manufactured products, which are
-
stagnant. There is an urgent need to increase technology-intensive products to bring in a

radical shift in composition of trade. There is an increasing share of primary agricultural

commodities, which is a result of various incentives to boost agricultural exports. .

It is seen that there has been a shift in the commodity composition of major items of

imports. The proportion of imports of items that are related to export production has

increased. There has been increase in percentage of imports of pearls, precious and semi-

precious stones, and electronic goods to the total imports.

Table - 4.29: Major imports of India

Import items ( % Share to total imports I

1 1994-95 2000-0 1
Petroleum crude & products 1 20.69 ( 31.53
Pearls, precious & sem -precious stones
Machinery
Organic & inorganic ctiemicals
Electronic goods 4.29 7.06
Gold & silver 2.49 8.92
Source: Foreign Trade & BOP, CMIE, Mumbai, Sept. 2003

There has been a structurill change in the export basket of lndia. The share of
-
manufactured goods in the total exports has increased and correspondingly the shares of

primary sector as a whole have declined. This is an evidence of India's exports moving

away from resource-based product: to manufactures in the post-liberalization period.

4.10. Direction of Trade

The major export destinations of lndia continue to be the developed economies of the

world. The US is the lead buyer. Among the traditional markets, the shares of the UK,

Germany, Japan, Russia and Hontong declined. But at the same time exports to the UAE,

China and Sri Lanka have increased. Export promotion strategies should take into account
 Table - 4.30: Destination of India's Exports
(USD Mn. & Percentages:
Destination 1996-97 974 8 98-99 99-00 00-01 01 -02 02-03
World 33497 35018 33210 36754 44147 43976 52370
USA 6561 6839 7198 8393 9252 8542 10883
UAE 1477 1694 1867 2081 2586 2500 3322
UK 2048 2143 1854 2034 2275 2168 2479
Hong Kong 1864 1934 1880 2493 2635 2374 2450
Germany 1894 1927 1851 1735 1887 1794 2066
China 615 718 427 539 830 955 1966
Japan 2007 1900--1651 1685 1782 1515 1682
Singapore 978 780 517 669 862 975 1426
Sri Lanka 477 489 437 499 630 633 923
Russia 81 1 554 709 948 869 800 699
Canada 353 433 472 578 651 586 692

% Change

World
USA
UAE
UK
Hong Kong
Germany
China
Japan
Singapore
Sri Lanka
Russia
Canada

% Share

World
19.59 15.43

Hong Kong
Germany
China 2.05 2.17
Japan 5.42
Singapore 2.23 2.22
Sri Lanka
Russia 2.42 2.72
Canada 1.05 1.57
-
Source: Foreign Trade & EX umbai, September 2003
developments in the importing couitries. Strategies for diversification of export markets

have succeeded only to a limited ext:nt

Table - 4.31: Destinacon of India's Exports

-
Aeiicultnre & Allied Products
(USD million &percentages
97-98 / 98-99 1 99-00 1 00-01 / 01-02 1 02-03
6634 1 6033 1 5614 1 5982 / 5921 / 6428
USA
Japan
Bangladesh
UAE

World
USA
Japan
Bangladesh
UAE
Malaysia

I
Source: Foreign Trade & BOP,CMIE, Mumbai, Sept. 200:

In the exports of agriculture and allied products, the share of the US has increased

from 9.60 percent to 14.65 percent during 1996-97 to 2002-03. The shares of Japan and

Table - 4.32: Destination of Exports - Manufactured Goods

(USD in Million & percentages:
97-98 1 98-99 ( 99-00 1 00-01 1 01-02 1 02-03
26578 1 25785 1 29750 1 34391 1 33483 1 38542
USA
Hong Kong
UAE
UK
Germany

Worldy l o o l I O O ~ I O O ~ I O O ~ I O O ~ I O O ~ I00
USA 23.35 22.60 24.71 24.75 23.84 22.44 23.51
HongKong 6.80 6.82 7.04 8.18 7.41 6.88 6.06
UAE 4.19 4.60 5.68 5.78 6.07 6.16 6.01
UK 7.03 6.77 6.06 5.70 5.53 5.50 5.25
German 6.82 6.26 6.34 5.08 4.84 4.75 4.51
Source: Foreign Trsde & BOP, CMIE, Mumbai, Sept. 2003
Bangladesh declined and shares ~f UAE and Malaysia increased. In the exports of

manufactured goods, the US retained the top position with 23.50 percent, followed by

Honkong, UAE, UK and Germany.

The tariff barriers have come down as a result of liberalization measures initiated by

the Government after 1990. The si~nplemean tariff came down from 79 percent in 1990 to

30.9 percent in 2001. The same is the case with standard deviation and weighted mean

tariffs. But the share of tariffs wilh international peaks still remains high though there is

reduction from 97.1 to 91 .SO percer t.

Table - 4.33: Tariff Barriers in India - A Comparison

I Pa-ameters (percentages) 1 1990 1 2001

All oroducts 1 Si~nolemean tariff 1 79.0 1 30.9
of tariff rates 43.6 12.4
Weighted mean tariff rates 56.2 28.2
Share of lines with international peaks 97.1 91.8
Share of lines with specific tariffs 0.9 . 0.1
Primary products Simple mean tariff rates 56.2 28.2
W8:ighted mean tariff rates 25.4 28.5
mean tariff rates 79.9 30.6
W':ighted mean taryff rates 70.8 29.0
Source: World Development Indicators, World Bank, Washington D.C., 2003

A number of authors have commented on the impact of the trade policies on the trade

performance. Bhattacharyya, et. al. (1996) has found improvement in various parameters in

the era of liberalization, like t:xports as percentage of tradable sector, net export

specialisation index, and intensity of intra-industry trade. Virmani (2003) has pointed out

that liberalisation of external sector has resulted in the openness of the economy and has

helped in putting BOP on as swtainable path. Khan (1999) has found out remarkable

improvements in trade ratios in tht: post-reforms period. The export instability index for the

post-reforms period was better than that in the pre-reform period. According to Chadha
(1999), India's integration with the world economy was accomplished tenuously, as

reflected in increase in three basic indicators, i.e. Real FDIIGDP ratio, Real TradeIGDP

ratio, and the proportion of manufactures in exports. According to Debroy (1996, 1998), the

Uruguay Round agreements represent liberalization and unilateral reforms introduced in

India since 1991 also signify 1iberalii:ation. Thus, both strands represent a move in the same

direction. Pulapre et. al. (2002) examined impact of trade liberalisation on the market power

and scale efficiency of the Indian industry. There is improvement in scale efficiency, though

not uniform and widespread, and also, surprisingly, an increase in market power. Veeramani

(2001b) has analysed India's int1.a-industry trade under economic liberalisation by

examining changes in the intensit) of multilateral intra-industry trade at various time

periods. The findings confirmed the hypothesis that trade liberalisation biases trade

expansion towards intra-industry trade. There is apparently a greater extent of

complementarity in India's overall intra-industry trade, i.e. within the same industry, there

are imports from one group of countries and simultaneous exports to another. Unlike

industrialized countries, India is fouid to be doing relatively less intra-industry trade with

countries at similar stage of development. India's intra-industry trade is more intense with

high-income countries than with low and middle-income countries.