Page 295 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Unit 22: Sectoral Performance III - Foreign Trade and Balance of Payments

However, what is disquieting is that our international trade still stands at a level which is less than Notes
one per cent of the total world trade. This is precipitated inter alia due to the relative low share of
hardware in our export basket and large volume of the same in the import basket. The situation is
aggravated further by oil. There has to be a whole range of export import strategies in the field. There
should be more finished manufacturers and less of ores and grains in export, and a shrinking import
basket as far as consumables are concerned. All these hinge on the overall policy of the Government
information technology and the widening base of outsourcing but the basic character in our export
and import baskets will require drastic overhaul.
What India should aim at is nothing less than a five per cent share—as in the 1950s—by the end of the
Eleventh Five-Year Plan and not less than 10% in the decade following. Here again, the exchange
account surplus will have to continue to grow steadily from one year to another.

60
50

40
Amount in US $ (’000 Million) 20 0
30

10

–10

–20
–30
1950–1951 1955–1956 1960–1961 1965–1966 1970–1971 1975–1976 1980–1981 1985–1986 1990–1991 1995–1996 1999–2000

Import (cif) Export (fob) Trade Balance Current Account

Source : Planningcommission.nic.in

Figure 1 : Trade balance and current account.

Utopian
A tall order ! There is, however, no other way out for the economy to be on a galloping growth path
with a GDP of 10% plus in competition with our nearest neighbour China.
Use of Reserves
There is a continuing debate in recent years as to whether our expanding exchange reserve should
remain frozen or some portion of it—may be a small percentage to start with—should be used for
socioeconomic development—mainly for planned growth of infrastructure. The issue is highly
problematical. For one thing, there may be a sudden erosion in our reserves due to the effects of an
international trade cycle. For another, the practice may become habit forming. On the other hand,
like a bank balance, investment on a capital infrastructure may earn us positive growth in GDP. It,
however, will require deployment of farsighted economic sense.

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