Global Financial Crisis and its Impact on India’s

Trade Flows
By
* Andalib zaihra
**Dr. Zeba Sheereen

*Research Scholar, Dept. of Economics, Aligarh Muslim University,

Aligarh(andalib.zehra@gmail.com)
**Associate Professor, Dept of Economics, Aligarh Muslim University, Aligarh

Global Financial Crisis and its Impact on India’s

Trade Flows
 Abstract

The current global financial crisis is rooted in the sub-prime crisis which surfaced
in 2006 in United States of America. The speed and intensity with which the US sub-
primes crisis that appeared in the mid 2007 transformed itself into a global financial
crisis and then into a global economic crisis has attracted the attention of all . This
global crisis has been adversely affecting all the world economies and the
magnitude of its impact is exceeded by that of Great depression of 1930s. This crisis
is unique not only in terms of its depth but also in the extent of its reach: virtually
no economy has remained unaffected. Contrary to ‘Decoupling Theory’ emerging
economies has been hit by the crisis. Economy like India where the financial sectors
were not as integrated with the global financial system, was spared the first round
adverse effect of the crisis and its banks were mostly unaffected. However it could
not be escaped the second round adverse effects of global meltdown. India’s
integration with the world economy with high trade/ GDP ratio and increased
dependence on external capital flows had made it vulnerable to global crisis. The
turmoil into the financial markets in the advanced countries spilled over into India
through financial channels, through reversal of capital flows especially portfolio
investments and though trade flows despite sound macroeconomic fundamentals and
banking system. The immediate effects were steeply plummeting stock prices, loss of
forex reserve, and depreciation of Rupee and tightening of domestic liquidity.
India’s export import sector has been badly hit by the global slowdown. The
government and Reserve Bank of India took aggressive measures, monetary policy
and fiscal stimulus, to combat global crisis and to boost domestic demand.
This paper analyses (a) Impact of financial crisis on India’s trade flows and (b)
Policy responses of the government to tackle the crisis.

INTRODUTION

A financial crisis refers to a loss of confidence in a country’s currency or other financial

assets causing international investors to withdraw their funds from the country. Economists
 have offered theories about how financial crisis develop and how they could be prevented,
however financial crises are still a regular occurrence around the world. The current
financial crisis is rooted in the sub-prime crisis which surfaced in 2006 in United States of
America. The current crisis in US appeared through indiscriminate lending of housing loans
in country’s sub-prime mortgage market. From the financial sector it moved to the real
sector in the US market and then into the international market. The impact of financial
sector turmoil on real activity has become increasingly evident propagating beyond its initial
epicenters to affect other advanced economies and emerging markets economies (EMEs).

The followers of ‘Decoupling Theory’ believe that because of strong GDP

growth of many developing countries especially of China and India, their market will
remain bullish even at the time of US recession”. In fact emerging market Economies
(EMEs) remained largely insulated from the first round effects of global financial meltdown.
However as the crisis deepened in advanced economies, the complex and wide ranging
interaction between the financial and the real economy began to have an impact on EMEs.
Most Asian markets are now in big recession after the crash of Dow John’s. Indian economy
looked insulated from the current financial crisis. But when the collapse of Lehman Brothers
on 23rd September 2008 morphed up the US financial meltdown into global financial
meltdown, the impact on Indian economy was immediate. This paper analyses impact of
global financial crisis on India’s trade flows and policy response of the government to tackle
financial crisis and to boost the domestic demand.

Origin of the crisis

As distinct from most recession in the past current deep recession is a combination of many
factors
(1) Credit crisis- The recent market instability was caused by many factors, chief among
them is a dramatic change in the ability to create new lines of credit, which dried up the
flow of money and new economic growth and buying and selling assets. Credit crisis is
the direct outgrowth of fall in housing prices that began in 2006 in sub-prime mortgage in
the US. This hurt individuals, business and financial institutions were left holding
mortgage backed assets that had dropped precipitously in value and weren’t bringing in
the amount of money needed to pay for the loans. This dried up their resumes cash and
restricted their credit and ability to make new loans.
(2) Boom in housing market- Sub-prime borrowing was major contributor to an increase
in house ownership rates and the demand for housing. New buyers of housing entered
into the markets “sub-prime borrowers”. The influx of these new borrowers who could
traditionally not have had access to loans further increased housing demand. Increase in
house purchases during the boom period eventually led to surplus inventory of houses
causing house prices to decline in the summer of 2006. Once housing prices started
depreciating moderately in many parts of the US, refinancing became more difficult.
Some houses owners were unable to refinance their loans reset to higher interest rates and
payment amounts. Excess supply of houses places significantly downward pressure on
prices. As prices declined more houses owner were at risk defaults and foreclosure.

Global financial crisis and its impact on world economy

The world economy experienced a sustained period of growth with only moderate
fluctuation coupled with low inflation, a phenomenon popularly known as the “great
moderation’ till the precipitation of global financial crisis. The speed and intensity with
which the US sub-primes crisis that appeared in the mid 2007 transformed itself into a
global financial crisis and then into a global economic crisis has attracted the attention of
all. The crisis is unique not only in terms of its depth but also in the extent of its global
reach; virtually no economy has remained unaffected. Even economies that are expected to
grow this year, such as those of China and India, are slowing down significantly from the
previous year of rapid growth.

A comparison of recent crisis with the various episodes of crisis in the past reveals that
some semblance can be found amongst them with regard to the underlying causes. As in the
past, the main causes of the recent crisis are linked to systematic fragilities and imbalance
that contributed to inadequate functioning of the global economy. However, what makes
the current crisis exceptional is that it emerged at the very epicenter of global capitalism,
the US and its contagion spread very quickly to the entire global economy, unlike previous
crisis that were usually confined to a region or a small number of countries. Economies like
India and the Peoples Republic of China, where the financial sectors were not as integrated
with the financial system, were spared the first round adverse effects of the current crisis
and their banks were mostly unaffected. However these giant economies and their Asia
 neighbors could not escape the second round effects that severely impacted their trade
flows due to the collapse of output and trade in advanced economies.
Table 1: World Output Growth, (2006-2009)
(Annual percentage change)
Region/Country 2006 2007 2008 2009
World 3.9 3.7 2.0 -2.7
Developed 2.8 2.5 0.7 -4.1
countries
Japan 2.0 2.4 -0.6 -6.5
United States 2.8 2.0 1.1 -3.0
United Kingdom 2.9 3.1 0.7 -4.3
South-East 7.5 8.4 5.4 -6.2
Europe and CIS
Russian 6.7 8.1 5.6 -8.0
Federation
Developing 7.2 7.3 5.4 1.3
countries
Africa 5.7 6.0 5.1 1.2
Latin America 5.8 5.8 4.2 -2.0
and the Caribbean
Asia 8.0 8.1 5.9 2.6
China 11.1 11.4 9.0 7.8
India 9.7 9.0 7.3 5.0
South-East Asia 6.2 6.4 4.1 -0.8
West Asia 5.8 5.0 4.5 -1.3
Source: UNCTAD Trade and Development Report, 2009

The bursting of the housing bubble in a number of countries, the sub-prime financial crisis in
the United States, rising commodity prices and in several countries restrictive monetary
policies led to the global economy to the brink of recession in the first half of the 2008. After
slowing down from 3.7% in 2007 to 2% in 2008, global gross domestic product (GDP) is
expected to fall by more than -2.7 % in 2009. (Table1)
World trade
World trade slowed down in 2007 and 2008 and has been shrinking at a fast rate since
November 2008, in both volume and value. Trade volume growth decelerated first in the
United States and other developed countries. Indeed in 2008 import volume growth actually
turned negative in the United States (-3.7%) and Japan (-0.8%). Trade expansion was more
resilient in developing and transition economies. In particular countries that have benefited
from terms of trade gains until mid 2008(i.e. mainly countries in Africa, Latin America and
the Caribbean and West Asia) were able to increase their imports significantly, Although in
some cases volume of their exports slowed down or even declined.

Figure 1: Volume of Export and Import of goods by region, (2007-2008)

(Annual Percentage Change)

Source: Calculated from UNCTAD Trade and Development Report, 2009

Fiscal stimulus
As the financial crisis spilled over into the real sectors, a wide consensus emerged that the
effects of automatic stabilizers would not be sufficient to stop the downturn in aggregate
demand. Consequently government in developed and emerging market economies (EMES)
reacted with discretionary fiscal stimulus and support measures, such as debt financed
increases in public spending and tax cuts to counter the increasingly dramatic downturn in
final demand, outputs and employment.

The need for fiscal support to financial institutions was much larger in advanced countries
than in EMEs. The sizable bail out operations and provision of large amount of liquidity by
several central banks and government prevented a breakdown of financial systems. But these
measures even combined with sharp interest rate reduction were not sufficient to return the
financial system back to normal functioning and fully restore credit availability to non
financial sector. Similarly while an expansionary monetary policy is essential for keeping the
financial and economic crisis under control, it is not sufficient on its own to bring about
recovery. Therefore in order to stimulate demand, countercyclical fiscal policy measures that
have a direct effect on aggregate demand, are indispensable. Developed countries granted
3.7% of their Fiscal stimulus packages to bail out those financial institutions those were most
vulnerable. While developing countries granted 4.7% of their GDP for carrying bail out
operation.

Table 2: Financial stimulus and financial support to the financial system

in selected Economies
(Per cent of GDP)
Support for the Years to spend Fiscal
Fiscal stimulus Financial Sector Stimulus
Developed Countries 3.7 48.5 -
Japan 4.7 22.2 3
United States 5.5 81.1 3
United Kingdom 1.9 81.7 3
Developing Countries 4.7 2.9 -
Brazil 5.6 1.5 1
India 1.8 6.4 3
China 6.2 0.5 2
South Africa 7.4 0.0 3
Transition Economies 5.8 7.4 -
Russian Federation 5.4 8.0 2
Source: UNCTAD Trade and Development Report, 2009

Global financial crisis and its impact on Indian economy

For more than a year since the outbreak of the crisis, it appeared that the Emerging Asian
Economies, especially China and India, would not only remain insulated from the crisis, but
also play a major role in moderating the global slowdown and paving the way for worldwide
recovery in a year or so. While the overall policy approach has been able to mitigate the
potential impact of the turmoil on domestic financial markets, with the increasing integration
of the Indian economy and its financial markets with the rest of the world, there is
recognition that the country does face some downslide risk from these international
developments. With increased linkages with world economy it could not be decoupled from
the global financial crisis. The contagion effect of global financial crisis spread from
advanced economies to Indian market during the latter half of 2007 through three distinct
channel (a) Financial channel (b) trade channel and(c) confidence channel. Financial channel
includes the banking sector and major channel of capital flows such as FDI, portfolio inflows,
external commercial borrowings (ECBs), trade credits, overseas borrowings of banks and
remittances. Given the prudent regulation and proactive regulation, the Indian banking sector
has remained more or less unaffected, at least directly by the global crisis. Only one of the
larger private sector banks ICICI bank was partly exposed but it managed to counter the crisis
through a strong balance sheet and timely government action. During the crisis global
financial institution withdrew significant part of portfolio investment from India like other
EMEs. The sharp fall in portfolio investment was due in large part to the need for repairing
the balance sheet of developed country’s financial firm. The sudden withdrawal of portfolio
investment from the Indian stock market brought about a crash in the market in January 2008.
The reversal of capital flows led to a fall in the value of rupee despite substantial running
down of foreign currency assets by Reserve Bank of India. A sharp contraction in India’s
corporate borrowing significantly impacted domestic investment activity. Moreover the
continued buoyancy of FDI suggests that confidence in Indian growth prospects remains
healthy.

Impact of global financial crises on India’s Trade flows

The most straight forward transmission of global financial crisis to the Indian economy has
been the steep decline in demand for India’s exports in its major markets. Gems and jewelry
were first to feel pressure in the very bigning of global slowdown. In November 2008, it
witnessed a sharp decline in export order from US and Europe which resulted in a
retrenchment of more than 30,000 workers. A sharp deceleration in export growth not only
affects the economic growth through the text book type multiplier process, but is also likely
to cause debt default, bankruptcies and severe cutbacks in investments in the pipeline with all
their adverse implication encompassing both the financial and real sectors. Given the share of
export at around 22% of GDP, the quantitative impact of slowdown export on domestic
demand is far from negligible.
During the 2008-09 the deceleration was however modest in the case of manufacturing
goods. As result share of non oil exports as well as manufacturing goods exports in total
exports increased by around 8 percentage points during 2008-09 over the past year. At a more
disaggregated level the major commodities that witnessed a decline in exports during 2008-
09 were handicraft (from 0.5 to0.3 US$ billion), petroleum products (from 28.4 to 26.8 US$
billion), ores& minerals (from 9.1 to 7.8 US billion) and agricultural and allied product (from
18.4 to 17.5US$ billion). The global crisis however had a more pronounce impact on India’s
export during 2009-10(April-October). All sectors including engineering, chemicals, gems
and jewelry and petroleum exports witnessed a decline in export growth.

Table 3: Global Financial Crisis and India’s Exports

Commodity Amount (US $ billions) Growth April-October
2006-07 2007- 2008-09 2007-08 2008-09 2009-10
08
(1)Primary 19.7 27.6 25.3 40.0 -8.0 -22.7
Product
Agriculture and -12.7 18.4 17.5 45.3 -4.3 -25.5
Allied Products
Ores & minerals 7.0 9.1 7.8 30.2 -14.5 -16.1
(2)Manufactured 84.9 103.0 122.8 21.3 19.6 -20.9
goods
Chemicals & 17.3 21.2 22.6 22.3 7.1 -15.8
Related Products
Engineering 29.6 37.4 47.3 26.4 26.5 -28.7
Goods
Gems & jewelry 16.0 19.7 27.7 23.2 42.1 -38.2
Handicraft 0.4 0.5 0.3 16.0 -40.8 -38.2
(3)Petroleum 18.6 28.4 26.8 52.2 -5.4 -35.8
Products
(4)Others 3.2 4.0 7.7 26.4 148.9 -13.2
Source: RBI’s Report on Currency and Finance, 2009

Geographical diversification of India’s export

The regional diversification of India’s export also experienced significant changes between
2000 and 2008. The slowdown in global GDP growth has constituted by far the most
important factor constraining the country’s export. Since the world income elasticity for
India’s export appears to be quite high, the negative impact of global economic meltdown on
country’s export earnings would tend to be correspondingly large. India’s export share in
traditional market such as EU and North America witnessed a significant decline. The
depreciation of rupee is the reflection of these external vulnerabilities. India has had to draw
down its foreign exchange reserve through the last quarter of 2008 and first quarter of 2009
largely in defense of the rupee. While India’s reserve are dominated in a basket of
currencies , the United States dollar is the principal foreign currency in which India’s external
transaction are denominated.
There was a structural shift in the share of India’s export in the favour of Latin ASEAN, West
Asia, and South Asia. India’s export to OECD countries was also decelerated during 2008-09.
The US led the deceleration in the export to OECD countries; nevertheless US continued to
be the single largest contributor to India’s export.

Figure2: Geographical diversification of India’s Exports

Source: RBI’s Report on Currency and Finance, 2008-09

Export of services
Like merchandise exports of services are also facing a rather steep downturn. During the
third quarter of 2008-09 growth in service export declined to mere 5.9% compared to
34.0% in the corresponding period a year back. The earnings from travels, transportation,
insurance and banking services have contracted, while the growth rate of software exports
has declined more than 21 percentage points.

Figure 3: Export of services

Source: Calculated from Reserve Bank of India (2009c)

 Impact through Imports
The growth in India’s import plunged sharply during the third quarter of 2008-09. A
weakening of imports was witnessed in the case of crude oil, capital goods, and gold and
silver. Crude oil perhaps the most crucial intermediate input required for sustaining the
production process, is the single most important item of India’s merchandise import,
accounting for around one third of the total changes in international oil prices, It is thus no
wonder, have major consequences for the Indian economy. The surge in international oil
prices led to an increase in India’s crude import bill to $5.6 billion in July 2007 to $10.96
billion in August 2008, with the share of oil in total import bill rising from 30.5% to 36.6%
over this period (Mihir Rakshit2009). Bulk import bill has increased from 112.7US$ billion
to 135.7 US$ billion in 2008-09. Non bulk import bill increased from 138.7 US$ billion to
155.8 US$ billion in the same period. Total imports bill increased from 251.4 US$ billion to
291.5 US$ billion in 2008-09.

Table 4: Global Crisis and India’s Imports

Commodity US $ billion Growth (%)
2006-07 2007-08 2008-09 2007-08 2008-09
1.Bulk Imports 84.2 112.7 135.7 33.8 20.3
Petroleum & 56.9 79.6 91.3 39.9 14.6
Petroleum
Products
Edible Oil 2.1 2.6 3.4 21.4 34.4
Fertilizers 3.1 5.4 13.6 71.9 151.2
Iron & Steel 6.4 8.7 9.4 35.2 7.8
2. Non Bulk 101.5 138.7 155.8 36.6 12.3
Imports
Capital Goods 47.1 70.1 70.5 49.0 0.6
Export Related 17.9 20.8 29.7 16.2 43.1
Items
Pearls, 7.5 8.0 14.4 6.5 81.1
Precious& semi
Precious stone
Chemical, 7.8 9.9 12.2 26.4 22.8
Organic-
Inorganic
 Others 36.6 47.8 55.5 30.8 16.1
Total Imports 185.7 251.4 291.5 35.4 15.9
Source: RBI’s Report on Currency and Finance, 2009

Geographical Diversification of India’s Import

Geographical diversification of India’s import experienced significant change during 2007-08
and 2008-09. Traditional key trading partners in advanced countries like EU. , and US have
subsided in terms of their market share and new import partners from East Asia (especially
China) have emerged. Another important development has been a gradual dissipation of the
East European countries as a major source of India’s imports. The high share of OPEC
countries in the recent period reflects the magnitude of crude oil imports due to the rising oil-
intensity of the Indian economy and high oil prices. Imports from OPEC countries has
increased from 25.3% in 2005-08 to 32.6% of total imports in 2008-09. Imports from China
have increased significantly during recent years from almost minuscule level in 1the early
1990s.Imports from China has increased from 9.6% in 2005-08 to 10.8% of total imports in
2008-09

1
 Figure 4: Geographical diversification of India’s import

Geograpfical Diversification of India's Imports

120

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80

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2005-08
40 2007-08
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Source: Calculated from RBI’s Report on Currency and Finance, 2008-09

Impact on overall growth

India’s gross domestic product (GDP) growth had started slowing down in the first quarter of
2007-08, nearly six months before the outbreak of the US financial turbulence and
considerably ahead of the surge of recessionary tendencies in all developed countries from
August-September 2008. India’s GDP growth for 2008-09 was estimated at 6.7% as
compared to growth posted in previous year 9.2%. All the three segments of GDP namely
agriculture, Industry and services were seen to record growth of 1.6%, 3.1%and 9.3%
respectively in the 2008-09 against the growth of 4.7%, 9.3% and 10.4% respectively in
2007-08.

Table 5: Growth in GDP at Factor Cost

Sector 2007-08 2008-09 2009-10
Agriculture & Allied 4.7 1.6 0.2
Industry 9.3 3.1 10.4
Services 10.0 9.3 8.3
Total 9.2 6.7 7.4
Source: RBI’S Report on Currency and Finance, 2008-09
Policy Responses

Monetary Policy
Reserve Bank policy response was aimed at containing the contagion from the outside – to
keep the domestic money and credit markets functioning normally see that the liquidity stress
did not trigger solvency cascades. In particular monetary policy of RBI targeted three
objectives:
(1)To maintain a comfortable liquidity position
(2)To augment foreign exchange liquidity
(3)To maintain a policy framework that would keep credit delivery on track so as to arrest
moderation in growth.
From mid September to till end- October 2008 the economy was in the grip of a serious
liquidity crisis and credit crunch. The Reserve Bank of India acted aggressively from mid
October to ease the situation by a series of rate cutting and liquidity injecting measures. RBI
brought down Cash e Reserve Ratio (CRR) from 9% to 5%, Statutory Liquidity Ratio (SLR)
25% to 24% and Repo rate from 9% to 4.75% and Reverse Repo rate from 6 to 3.25%.

Unconventional measures taken by the Reserve Bank of India are a Rupee- Dollar swap
facility
For Indian banks to give them comfort in managing their short term foreign funding
requirement, an exclusive refinance window for supporting NBFCs and expanding lendable
resources available to apex finance institutions for refinancing credit extended to small
industries, housing and export.

Taken together, the measures put in place since mid September 2008 have ensured that the
Indian financial markets continue to function in an orderly manner.

Fiscal Stimulus
The fiscal policy responses of the Indian government to the financial crisis was to stimulate
demand for the country’s output and to bailout those group and industries those were most
vulnerable to the crisis. The central government announced three successive fiscal stimulus
packages one in early December 2008, the second one in early 2009 and the last one in early
March 2009.

The fiscal stimulus packages amounting to about 3% of GDP, included additional public
spending, particularly capital expenditure, government guaranteed funds for infrastructure
spending, cuts in indirect taxes expanded guaranteed cover the credit to micro and small
enterprises and additional support to exporters. The loans that were in default in farming
sector were waived by the government. Pay structure were revised to increase salaries of
government employees. All of these measures were implemented to stimulate the demand in
the economy.

Conclusion
The current global financial crisis, which started in 2008, has been adversely affecting all the
world economies and the magnitude of its impact is exceeded by that of great depression of
1930s. India’s integration into the world economy with a higher trade/ GDP ratio and
increased dependence on external capital flows made it more vulnerable to global crisis.

The immediate effects were plummeting stock prices, loss of forex reserve, and depreciation
of Indian rupee, reversal of capital flows and sharp tightening of domestic liquidity. Foreign
investors withdrew money from the Indian markets and this situation created fear among the
investors about the stability of stock market. India’s real GDP has shown strong sign of
slipping. Export sector has been badly hit by global economic slowdown. Gems and jewelry
were the first to feel pressure of this slowdown. Declining export and rising imports resulted
in a larger current account deficit in 2008-09. The major commodities that witnessed a
decline in export during 2008-09 were handicrafts, petroleum products, ores, minerals and
agriculture and allied products. Like merchandise export services also faced rather steep
downturn.
The regional diversification of India’s export also experienced significant changes. India’s
export share in traditional market such as EU and North America witnessed a significant
decline. There was a structural shift in favour of Latin America. ASEAN, West Asia, North
America and south Asia.
Merchandise import also caught global downswings in the second half of the 2008-09. A
massive weakening of imports was witnessed in case of crude oil, capital goods and gold and
silver. The surge in international oil prices led to increase in India’s crude import bill.
Geographical diversification of India’s import also experienced significant change during
2007-08 and 2008-09. . Traditional key trading partners in advanced countries like EU. , and
US have subsided in terms of their market share and new import partners from East Asia
(especially China) have emerged

However India’s banking system has been considerably less affected by the crisis because of
strong macroeconomic fundamentals and well regulated financial system.

The overall impact of the crisis in India has been less than in some other countries not only
because of government stimulus packages but also because Indian financial system is only
partially integrated into the world financial system and because of sound macroeconomic
fundamentals and well regulated financial system. Due to many monetary and fiscal measures
initiated during 2008-09 the economy is back to rapid economic growth.

References

 Bahaduri, Admit (2009): “Understanding the financial crisis”, Economic &Political

Weekly Vol. XLIV No.13, 28 March
 Baru, Sanjaya: (2009): “Strategic implication of Global Economic Crisis for India,”
(IS AS) Institute of South Asian Studies, working paper no.77, 27 July
 Joseph, Mathew: “Global Financial Crisis: How India was Impacted,” (ICRIER)
Indian Council for Research and International Economic Relation, New Delhi
  Jha Raghubander: The global financial crisis and short run prospect India, ASARC
working paper 2009/01
 Kumar Rajiv: “Global Financial and Economic Crisis; Impact on India and policy
response.” (ICRIER) Indian council for Research and International economic
Relation, New Delhi.
 Kuma, Rajiv. and Vashisht, Pankaj: “The Global Economic Crisis: Impact on India and
Policy Responses,” ADBI Working paper series no. 164, New Delhi.
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remarks prepared for IMF-FSF High-Level Meeting on the recent Financial turmoil
and Policy Responses at Washington D.C., October 2008.
 Prasad, A. and Reddy, C.(2009): “Global Financial Crisis and its Impact on India”,
College of Engineering, Andhra Pradesh.
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Vol XLIV No 13, 28 March.
 RBI’s Report on currency and Finance, 2000-09
 Singh, Sumanjeet: “Global Financial Crisis and Indian Economy: Impact Assessment
Policy Responses and Recovery,” University of Delhi.
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 UNCTAD Trade and Development Report, 2009

Appendix
Table 1: Volume of Export and Import in World Economy
Region/Country Volume of Exports Volume of Imports
2007 2008 2007 2008
World 5.5 4.3 6.4 4.0
Developed countries 3.7 3.2 3.6 0.7
Japan 6.8 4.8 0.8 -0.8
United States 6.8 5.5 0.8 -3.7
South East Europe and 7.1 18.6 26.4 22.5
CIS
Developing countries 8.3 4.7 10.4 8.5
Africa 6.9 1.5 10.0 18.6
Latin America & 2.3 -1.0 11.7 6.7
Caribbean
China 21.9 12.5 14.2 7.7
India 12.8 9.5 12.2 17.7
South East Asia 6.9 6.4 7.1 11.1
West Asia -1.4 4.2 16.1 11.5
Source: UNCTAD Trade and Development Report, 2009

Table2: Geographical Diversification of India’s Exports (share in pre cent )

Region/Country 2007-2008 2008-2009
Advanced Economies 39.5 37.5
UK 21.2 21.0
US 12.7 11.3
Other OECD 5.6 4.7
OPEC 16.6 21.2
Saudi Arabia 2.3 2.7
UAE 9.6 13.1
Other OPEC 4.7 5.4
Developing Countries 42.5 37.6
Asia 31.6 28.1
China 6.6 5.1
Hong Kong 3.9 3.6
 Africa 7.5 6.3
Latin America 3.4 3.1
Others 0.4 2.7
Source: RBI’s currency and Finance Report, 2008-09

Table3: Quarterly year on year growth rate of services export

2007-2008Q3 2008-09Q3 2008-09Q4
Services 34.0 5.9 -6.6
Travel 11.6 -13.9 -25.9
Transportation 21.0 -8.1 -7.9
Insurance 19.4 -21.5 -28.5
Miscellaneous 40.9 1.5 -2.1
Software Services 41.3 19.5 -12.5
Business services 17.4 -12.6 -15.1
Financial Services 34.2 0.8 -13.5
Source: Reserve Bank of India, (2009c)

Table 4: Geographical Diversification of India’s Imports (Per cent in total )

Region 2005-08 2007-08 2008-09
1.Advanced Economies 34.3 35.4 31.8
EU 15.6 15.3 14.3
US 6.8 8.4 6.2
Other OECD 11.9 11.8 11.5
2.OPEC 25.3 30.7 32.6
Saudi Arabia 5.7 7.7 6.7
UAE 5 5.4 7.1
3.Developing Countries 30.4 31.5 32.9
Asia 24.5 25.5 26.6
China 9.6 10.8 10.8
Hong Kong 1.5 1.1 2.2
Africa 3.7 3.7 4.3
Latin America 2.2 2.3 2
4.Others 7.9 0.8 0.5
Total 100 100 100
Source: RBI’s Report on Currency and Finance, 2008-09
Global Financial Crisis and its Impact on India’s
Trade Flows
By
* Andalib zaihra
**Dr. Zeba Sheereen
*Research Scholar, Dept. of Economics, Aligarh Muslim University,
Aligarh(andalib.zehra@gmail.com)
**Associate Professor, Dept of Economics, Aligarh Muslim University, Aligarh