INDIA’S FOREIGN TRADE

Trends in India’s Exports (Pre-Reform)

Year Exports % ChangeExports US % Change
(Rs. In Cr) $ bn
1986-87 12,451.95 +17.6 9.74 +9.4

1987-88 15,673.66 +25.9 12.09 +24.0

1988-89 20,231.50 +29.1 13.97 +15.6

1989-90 27,681.47 +36.8 16.62 +19.0

1990-91 32,553.34 +17.6 18.14 +9.0

Reasons for major slowdown in export growth in 1990-91
 Volume of world trade growth declined from 7.3% in 1989
to 4.2% in 1990 and further to .9% in 1991

 Recessionary conditions in US, UK, Canada and Australia

 Loss of market in middle east due to gulf crisis

 Political and economic upheavals in Eastern Europe

 Import curbs introduced in 1991

 Movement of exchange rate became adverse

Major Policy Reforms
Devaluation of Re (21.95 to 23.12 to 25.95)
 It was 19%. Market determined exchange rates were
introduced.

Introduction of LERM System

 It consisted of free market rate along with official rate set
by RBI
 Import transaction through official exchange rate
included crude and diesel oil, kerosene, life saving
drugs, raw material for fertilizer and govt transaction
 Exchange rate was unified in 1993 and determined on
demand and supply (Rs 31)

Revision of Industrial Policy

 Liberalization of policy related to FDI, foreign technology
agreement, and delicencing of industries.
Liberalization of FDI
 Automatic approval for FDI upto 51% of equity in 34
priority sector which was extended to 48 sectors.
 NRI can invest upto 100% in these sectors.
 In telecommunication (49%), airlines (40%), bulk drugs
producing pharmaceutical sector (51%)

Relaxation of External Commercial Borrowings Policy

 ECB permitted within an annual ceiling that is consistent
with prudent debt management, keeping in view BOP
position.

Liberalization of EXIM Policy

 TRENDS IN EXPORT & IMPORT
Year Exports Imports % Change % Change
(US bn $) (US bn $) Exports Imports
1991-92 17.86 19.41 -1.5 -19.4
1992-93 18.54 21.88 3.8 12.7
1993-94 22.24 23.31 20.0 6.5
1994-95 26.33 28.65 18.4 22.9
1995-96 31.80 36.68 20.8 28.0
1996-97 33.47 39.13 5.3 6.7
1997-98 35.00 41.48 4.6 6.0
1998-99 33.22 42.39 -5.1 2.2
1999-00 36.82 49.67 13.2 11.4
2000-01 44.56 50.53 21.0 1.7
TRENDS IN EXPORT & IMPORT
Year Exports Imports % Change % Change
Exports Imports
2001-02 43.83 51.41 -1.6 1.7

2002-03 52.71 61.41 20.3 19.4

2003-04 63.84 78.14 21.1 27.3

2004-05 53.50 73.65 23.4 33.6

Reasons for growth (1993-94 to 1995-96)
 World trade have grown by 8.1% and 10.5 % in dollar
value.
 India’s GDP was 7% during this period
 Re depreciated at an average by 4% in 1995-96.
 Favorable govt policies

Reasons for Decline (1996-97 to 1998-99)

 Recessionary conditions around the world ( world
economy slowed from 3.2% in 1997 to 1.9% in 1998)
 Economic contraction in the east Asian countries (Sharp
decline in import demand)
 Decline in imports by advanced countries. (declined from
18.2% in 1995 to 2.1% in 1997)
 Indian Re depreciation was less compared to South East
currencies.
 Infrastructural bottlenecks
Reasons for Recovery (1999 -00 to 2000-01)
 Increase in global demand, improvement in
world output, revival of world trade after Asian
currency crisis.
 In 2001-02 global downturn in IT, 9/11 episode,
appreciation of Re and low global demand.

Rising Exports (2002-03 to 2004-05)

 Export growth in volume terms(21.7)
 Improved global growth
 Improvement in competitiveness in Indian Export
TRADE PERFORMANCE DURING APRIL-MARCH, 2004-
05 - EXPORTS

(i) High to Moderate growth (40% and above)

 Iron Ore (134%),
 Petroleum Crude & Products (90%),
 Plastic & Linoleum Products (68%),
 Primary & Semi-finished Iron & Steel (51%)
 Transport Equipments (45%).

(ii) Negative to Low growth (less than 15%)

 Cotton yarn, fabrics, made-up etc.(-6%),
 RMG Cotton including accessories (-5%),
 Marine products (-5%)
 Electronic goods(1.6%),
 Man made yarn, fabrics, made-up (6%)
 Drugs, pharmaceuticals and fine chemicals(12%),
Among the top 15 countries for exports, Singapore
recorded the highest growth (79%) followed by China
(55%), UAE (38%), Belgium (35%) and France (26%).
Bangladesh PR recorded negative growth rate.
TRADE PERFORMANCE DURING APR-MAR 2005-06 (EXPORTS)

Moderate to high growth (30% and above)

• Petroleum: Crude & Products (65%),
• Transport Equipments (61%),
• Dyes/Intmdtes & Coal Tar Chemical (35%)

(ii) Low & Negative growth (less than 15%)

 Gems & Jewellery (13%),
 Cotton yarn, fabrics, made ups etc(12%),
 man made yarn, fabrics, made ups(-2.21%),
 Plastic & Linoleum products(-9%),
 Primary & semi-finished Iron & Steel(-15%).

Among the top 15 countries for exports, Korea RP recorded the

highest growth (75%) followed by Netherlands (53%), Sri Lanka
(43%) UK (40%), Singapore (39%).
India’s Foreign Trade: 2006-07 (April-March)

Cumulative exports during April-March 2007 stood at US $ 124.6 billion

(20.9 % growth

Changing Structure of Exports

 Petroleum products, engineering products and ores and minerals

emerged as the major drivers of export growth

 The shares of traditional items like handicrafts, textiles and related

products, gems and jewellery, agricultural products, and leather and
manufactures showed reduction.

 Engineering goods, ores and minerals and petroleum products

together contributed to 63 per cent of total export growth during
2002-07
 India’s share in world agricultural exports remained constant
between 2000 and 2005

 The share in world exports of machinery and transport equipment,

fuels and mining products and chemicals showed an
improvement.

 Government policies towards strengthening India’s trade sector

and recovery in global investment provided a conducive
environment for stimulating technology oriented engineering
goods exports from India

 India’s exports of textiles and apparel to the US during 2006-07

(April-March) in value terms decelerated to 4.0 per cent (24.2 per
cent in 2005-06), and in quantity terms to 12.3 per cent (18.6
percent in 2005-06).
 Gems and jewellery, the cumulative exports during 2006-07
(April-Jan) registered a modest growth of 2.0 per cent as
against a negative growth till April- Nov 2006.

 Exports of petroleum products (POL) recorded 62.2 %

growth during 2006- 07 (April-Jan), on top of 66.8 % a year
ago, facilitated by increase in both price and volume. In
volume terms, POL exports registered sharp increase at
46.9 % during April-Jan 2006-07 (15.2 % a year ago).

 Destination-wise, the US remained the major market for

India’s exports during 2006-07 (April-Jan) with a share of
15.2 % followed by UAE (9.7 %)
 China (6.3 %), Singapore (4.7 %) and UK (4.5 %).
However, exports growth decelerated in almost all major
markets during the period, with the exception of UAE,
recording a growth of 44.2 %
India’s Foreign Trade: 2007-08 (April-March)
 Cumulative value of exports for the period April-March,
2008 was US$ 155.5 bn registering a growth of 23.02 %
in Dollar terms over the same period last year,
marginally higher than a growth registered in the
previous fiscal (22.6 % )

 Exports were mainly driven by a huge jump in

engineering goods, gems and jewellery and petroleum
products,

 Of the total exports, agriculture and allied products,

engineering goods, gems and jewellery and petroleum
products alone contributed 68 per cent of the export
growth during April-January FY'08
 Among primary products, agricultural and allied products
decelerated to 20.9 % during April-October, 2007
(23.0%), while ores and minerals picked up substantially
(from 10.2 %to 19.6%).

 Manufactured goods maintained the export growth, but

with slight moderation, as most of its principal
components such as engineering goods, chemicals,
textiles, leather goods exhibited lower growth rates.

 Engineering goods exhibited substantial deceleration

from 37.9 per cent to 21.5 per cent
 Chemicals and related products showed sharp
moderation in export growth (from 22.2 per cent to 11.8
per cent)

 Textiles and textile products continued its deceleration

with growth dipping to 3.0 per cent during April- October
2007 (9.2 per cent a year ago).

 During April-January, 2007-08, exports of gems and

jewellery registered a growth of 21.0 per cent.

 Growth in exports of petroleum products sharply

decelerated to 36.7 per cent as compared to 66.7 per
cent in the year-ago period
 While India's exports to US declined to 13.3 % during the
April-January period as against 15.1 % a year back,
China was the major source of imports in FY 08
constituting 11.6 % of total imports,

 The other important destinations for exports were the

UAE (10.3 %), Singapore (4.4 %), the UK (4.2 %), Hong
Kong (4.1 %) and Germany (3.1 %).

 Of these, the shares of the UAE and Hong Kong in the

overall exports during April- October, 2007 increased
over corresponding period during previous year, while
the shares of Singapore and the UK declined, and the
share of Germany remained the same.