The direction of India’s foreign trade has changed since independence with the position of UK going down. The shares of the European Union and North America in our exports increased during the Seventh Plan period while those of the OPEC and East European countries declined in comparison with the Sixth Plan period as a whole. There was a distinct down trend in the share of Eastern Europe and Japan in India’s exports during the nineties. Some salient features of the changes in the direction of trade in the post-independence period may be noted here:

i)   New Trading Partners: An important feature of the new direction of trade since 1951 is the increase in the number of trading partners for India. Before independence, UK was the principal trading partner for India. This spatial or geographical diversification has helped India go for diversification of industries along with specialization in certain goods, and secure new market for her products after independence.

ii)  Larger Sources Of Imports: The increase in the number of countries from whom we buy has been necessitated by many factors peculiar to post-World War II economy First the tremendous increase in India’s developmental imports could not be met by UK alone, or even by USA. Secondly, tied aid and grants from some countries willing to help India in her planning effort made it necessary for India to import from particular countries. Thirdly, grant of aid and other assistance by international institutions like World Bank allowed India to buy from the cheapest sources (through global tenders).

iii) Larger Outlets For Exports: India has been diversifying her exports to match her imports. Now China is our greatest trading partner. USA is our greatest investor. These are rich countries with high national and per capita incomes and they provide excellent markets for India’s traditional goods (cotton and jute manufactures, specially carpet making, leather manufactures) and non-traditional items such as marine products pearls precious stones, etc. Middle-East countries offer a good market for Indian exports.

iv)  Scope For Diversion: The share of Africa and South America is only marginal. These are rich continents with very bright future. India should cultivate trade relations with these countries-they could offer huge markets for India’s exports. Likewise, the scope of India’s exports to the developing countries of the Middle-East Asia is vast and in recent years, India is increasingly cultivating these markets.

v)   More Imports from West Europe and East Asia : A comparison of respective shares of sources of India’s imports reveal that, imports from W. Europe remain high while East Asia led by China ia making huge contributions to India’s Import basket at the cost of Oceania and E. Europe.

Latest Trends

2018-19 has closed with growth in world output on a downward trajectory. The World Economic Outlook (WEO) in its April 2019 issue has projected growth in world output at 3.3 per cent in 2019, down from 3.6 per cent obtained in 2018. Heightened US-China trade tensions has been stated as one of the reasons behind the global slowdown that has spilled into other economies including India through the channel of exports. Beginning 2019 global slowdown has made advanced countries persist with their accommodative monetary policy stance. This has escalated portfolio investment into emerging market economies making their currencies stronger and imports cheaper.

The WEO accordingly advises that at the multi-lateral level, the main priority is for countries to resolve trade disagreements cooperatively, without raising distortionary barriers that would further destabilize a slowing global economy. It seems countries are well advised to do so as beginning 2019, crude oil prices have begun to harden following production cuts by oil exporting countries with the US also cutting out oil supplies from Iran, while prices of other commodities have also risen due to supply distortions. These developments increase the vulnerability of external sector of emerging market economies like India, which are dependent on crude imports for fueling their economic growth.

India’s overall exports (Merchandise and Services combined) in April-June 2019-20* are estimated to be USD 137.26 billion, exhibiting a positive growth of 3.14 per cent over the same period last year. Overall imports in April-June 2019-20 are estimated to be USD 164.50 billion, exhibiting a positive growth of 3.57 per cent over the same period last year.

COMPOSITION OF TRADE

Indian exports cover about 7,500 commodities to about 180 countries, while imports from about 140 countries account for over 6,000 commodities.

Export Items

These cover a wide range of items of agricultural and industrial sectors as also various handicrafts, handloom, cottage and craft articles. Project exports include consultancy civil construction and turnkey contracts. The composition of exports has changed gradually during the nineties. The share of ores and minerals has declined progressively. Project exports have made a significant progress in the recent years. Electronic hardware and software exports have also increased.

Import Items

Bulk of imports comprises sophisticated machines, scarce raw materials, lubricants, oil and fertilizers essential for industrial and agricultural development.