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Chapter: 11th 12th std standard Indian Economy Economic status Higher secondary school College

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Volume of India's foreign trade

The volume of India's trade has been multiplied. The trade to GDP ratio has gone up from 13 percent in 1980 to 20 percent at present. The increase has been shared both by exports and imports.

Volume of trade

 

 

It refers to size of international transactions. Large numbers of commodities are involved in international transactions. Volume of trade can be measured by adding the money value of all commodities and hence it is also called value of trade. The trends in the value of trade will identify the basic forces at operation in the economy. However, it is necessary to find the changes in the value of trade in relation to i) share of exports and imports in Gross Domestic Product ii) Share of exports and imports in world trade. The share of exports and imports in GDP reflects the nature of trade strategies adopted in the country. The ratio of exports to GDP means supply capability of the economy in regard to exports. It can be called an average propensity to export. The ratio of imports to GDP gives the average propensity of imports.

 

The share of exports in the world trade indicates the importance of the country as a nation in the world economy. It reflects the market thrust areas to be realized in the midst of competitors in the world market. The changes in the value of exports may be compared to the changes in the value of imports. The relationship between the two variables is known as the terms of trade (TT) i.e. the terms at which exports exchange for imports. If the export value in terms of imports value shows an increase, the TT is said to be favourable. It implies that for a given value of exports, the country can import more. The unfavourable TT implies for a given value of imports, the country has to export more.

 

Volume of India's foreign trade

 

The volume of India's trade has been multiplied. The trade to GDP ratio has gone up from 13 percent in 1980 to 20 percent at present. The increase has been shared both by exports and imports.

 

The trends of exports

 

India's total exports have increased by more than 300 times during the last five decades, from Rs.606 crores in 1950-51 to over Rs.2, 91,582 crores in 2003-04. However the increase has not been uniform over the years. Before 1965-66, India's exports were slow. The total exports was 6.8 percent of the NNP in 1950-51, fell to 3.9 percent in 1965-66 indicating that growth in the exports sector lagged behind the growth in other sector of the economy. India's share in the total world exports was 2.2 per cent in 1950-51, touched the low share to 1.1 percent in 1965. After 1965-66, in order to bring domestic prices into alignment with external prices, the Indian rupee was devalued. After devaluation, exports slowly picked up. In 1972-73 a breakthrough change in exports occurred mainly due to substantial growth in the exports of sugar, iron and steel, fruits and vegetables and food products.

 

A welcoming trend appeared in 1986-87 due to liberal import policy. Due to this, exports increased at an annual average rate of more than 25% in rupee terms. The rising trend in exports turned down in 1996-97. Exports witnessed a sharp upward trend in 1999-2000. In the year 2000-2001, there was a 21% growth in exports. But a marked decline in world output, and trade and slackening of global demand, pushed the growth rate of exports downwards. Again exports recorded 20.34% during 2002-03 mainly due to rise in international commodity prices, recovery of the domestic manufacturing sector, depreciation of the rupee and the introduction of various export promotion measures. The upward trend maintained itself in 2003-04.

 

In short, India's exports during the last three and a half decades have shown a mixed trend whereas the rate of growth as measured in terms of past performance or in terms of its share of national income shows an appreciable rise. But it presents a picture of poor performance when measured in terms of the share in world exports.

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