Page 297 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

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

• India has had from ancient times a flourishing world trade, particularly with the Mediterranean, Notes
the Far East and the Levant. Geographically, India was ideally located for this purpose ‘in the
centre of the world.’
• During the British regime, the international trade policy of India had a clear and perceptible
orientation. This was to promote exports of raw materials from mining and agronomy to the
mills and manufactories in Great Britain, and the import of their finished products like cotton
textiles (nearly half of total exports) and engineering goods in to the vast Indian colony.
• This shows a galloping rise during the last four decades, as indicated in Table 22.3. The rise has
not only been galloping from year to year and from decade to decade, there has also been wide
and perceptible changes in the components of imports—with a high percentage being accounted
for by oil and technical hardware (in many cases with technical expertise).
• The rise has been astronomical—from ` 1,535 crore in 1970–71 (base year) to ` 1,30,100 crore in
1997–98 and ` 2,93,367 crore in 2003-04. What is of greater importance is the relative rise in the
export of technology, hardware, manufactured commodities and knowledge—spearheaded by
IT.
• From the beginning of the twentieth century (` 263 crore in 1904–05) to independence (` 652
crore in 1946-47), the value of India’s foreign trade registered a clear rise, but this certainly
paled into insignificance when compared to the post independence thrusts.
• It is however worth noticing that while exports and imports have grown, the growth in imports
has been out of all proportion to exports.
• As agronomy and industry picked up, imports of fertilizers, POL and metals also peaked. With
a relative rise in purchasing power, imports of edible oils, paper, sugar and cement grew as
well. Import of foodgrains had ceased altogether.
• The Foreign Trade Policy of 2004 (discussed later) enunciated by the Government of India
retains the emphasis on the growth in both quantity and components of exports—so that the
same remains ahead of the increasing volume of imports.
• India’s exports and imports have been guided, if at all, under different relevant acts and covenants
and rules and regulations. It was for the first time in 1988 that an Export-Import Policy—that
too for three years—was promulgated.
• For India to become a major player in world trade, a comprehensive view is necessary. While
increase in exports is of vital importance, we have also to facilitate those imports which are
required to stimulate our economy.
• We have had decades of atrophied balance of payments in our exchange accounts, interlaced
with years or periods of revival. That is all a story now.
• There has been strong growth in merchandise exports. This has been a propellant behind many
international trade account indices.
• Our foreign trade is now buoyant and the exchange account is robust. The days of disequilibrium
in the exchange counter have gone by.
• 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.
• 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.
• 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.

LOVELY PROFESSIONAL UNIVERSITY 291