India's Foreign Trade

INDIA’S FOREIGN TRADE

Trends in India’s Exports (Pre-Reform)

Year

Exports (Rs. In Cr)

% ChangeExports US % Change $ 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

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Loss of market in middle east due to gulf crisis

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Political and economic upheavals in Eastern Europe

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Import curbs introduced in 1991

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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 (US bn $)

Imports (US bn $)

% Change Exports

% Change 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 Exports

% Change 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, 200405 - 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

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The shares of traditional items like handicrafts, textiles and related products, gems and jewellery, agricultural products, and leather and manufactures showed reduction.

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Engineering goods, ores and minerals and petroleum products together contributed to 63 per cent of total export growth during 2002-07

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India’s share in world agricultural exports remained constant between 2000 and 2005

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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

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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.

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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).

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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 %)

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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 % )

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Exports were mainly driven by a huge jump in engineering goods, gems and jewellery and petroleum products,

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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

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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%).

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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.

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Engineering goods exhibited substantial deceleration from 37.9 per cent to 21.5 per cent

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

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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).

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During April-January, 2007-08, exports of gems and jewellery registered a growth of 21.0 per cent.

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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

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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,

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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 %).

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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.