Changing Trade Patterns in India

A Presentation for International Trade & Finance

A Balasubramanian ( FI 903 ) A Bhavani ( FI 905 ) S Srinivas Reddy ( FI 926 ) Suneesh S ( FI 928 )

Changing Trade Patterns in India

Introduction

India was a relative newcomer to the process of expansion of trade, since its opening up to world trade only began after the crisis in 1991. 1980S Reduction in the of a number of restrictions on monopolies that were contained in the Monopolies and Restrictive Trade Practices Act (MRTP). Expansion of the Open General Licensing (OGL), decline of canalized imports) and several incentives to export were introduced. 1990s Lowering of the barriers to trade and to the enhancement of international integration . Tariff and non-tariff barriers were reduced for most intermediate and capital goods. Banking, telecommunications, and infrastructure opened to the private sector and to foreign. Direct investment (FDI). Export Oriented Units (EOUs), Export Processing Zones (EPZs), Special Economic Zones (SEZs), Software Technology Parks (STPs), and Electronics Hardware Technology Parks (EHTPs) were established.

Changing pattern of direction of trade flows

In the beginning of the 1990s the main trading partner for India was Europe, which

attracted in excess of 30 per cent of exports. By the beginning of the new millennium the main area of destination for Indian exports was Asia .

Exports Asia 40% Europe- Declined by 24% North America- Increased by 7% Former Soviet union Reduced from 18% to 1.5 % Imports Asia Increased Europe Declined North America - Declined. So from the above we can infer that Asia seems to be our biggest trading partners.

Indias export Share Region wise

Indias Import Share Region wise

Changing pattern of structure of trade in goods

Another important changes that was notable was how the share of agriculturebased products has declined,mainly to the advantage of manufacturing products Exports Agricultural raw materials Declined from 2.8% to 1.1% All food items- Declined by 25.2% to 12.2%. Manufactured goods - Increased by 58.2% to 75.0%. Imports Agricultural raw materials Declined from 3.0 to 2.9% All food items - Declined from 8.4% to 5.7% Manufactured goods - Declined from 56.7% to 52.6%. o

Indias Structure Exports & Imports - sectorwise

Indias Latest export Pie - sectorwise

Growth of service industry in India

Its often said that when economy moves forward nearly 70% of the economy will be dependent on the manufacturing and service industry. Out of this service industry represents the major chunk.
The most dynamic components of the service sectors are IT and IT-enabled business

services (ITES), whose exports were projected to grow at a rate of about 3233 per cent. Service sector growth critical for facilitating the technology transfers. Share of services on GDP increased from 36.6 per cent in 1980 to 48.8 per cent in 2000. Share of trade in services out of total exports and imports (%)

India Vs China

Indias share of worlds export is only 0.8% while it is 6% for China. Chinese economy is very labor intensive and hence manufacturing sector

contributes to its GDP while in India the service sector contributes towards its GDP.
FDI accounted for 50% of the exports in China while only 10% accounted

for exports in India.

FDI IN INDIA

The major sectors that have been benefited from Foreign Direct Investment are as follows:
Financial sector (banking and non-banking). Insurance Telecommunication Hospitality and tourism Pharmaceuticals Software and Information Technology

FDI IN INDIA

India Still Low in terms of FDI as % of GDP

FDI In India Is growing at phenomenal rate

FDI IN INDIA

Indias Balance Of Payments

Conclusion

Indias foreign trade has grown remarkably, both in terms of value and quantity, since the beginning of economic planning. The policy of industrial and trade liberalization introduced in 1991 has given a new turn to the growth of both imports and exports. However, imports have always exceeded exports which means that India has become a perennially trade deficit country. Indias imports mainly comprise capital goods like machinery and equipment's, raw materials and intermediates like P.O.L., iron and steel, non-ferrous metals, precious stones, etc. Thus, Indias imports are crucial in nature for the functioning of the economy. Indias export composition has transformed with the faster growth of manufactured goods and the relative decline of agricultural and allied products. But, manufactured exports are largely confined to light manufactures. Indias imports as well as exports have also undergone diversification in terms of destination.

Conclusion

As a result of all these, the share of foreign trade in Indias Gross National Product (GNP) has been increasing steadily. But it is still lower than that of East Asian and Latin American countries. The share of foreign trade in GNP in India accounted for 17 percent in 1992 whereas it was 54 percent in South Korea, 36 percent in China and 23 percent in Mexico. Indias trade balance is always negative because of volume of imports are greater than exports,so the govt. India has to go a long way in: 1. attaining economic self-sufficiency in the form of paying for imports through exports 2. improving the competitiveness of its goods in terms of price and quality to increasingly penetrate the world market 3. diversification of exports, specially in terms of heavy manufactures 4. realising foreign trade as a major sector of the economy in terms of GNP.

Thank You