Page 364 - DECO503_INTERNATIONAL_TRADE_AND_FINANCE_ENGLISH

International Trade and Finance Pavitar Parkash Singh, Lovely Professional University

Notes
Unit 31 : India’s Trade Policy : Recent Developments

CONTENTS
Objectives
Introduction
31.1 India’s Foreign Trade Policy
31.2 Export Import Policy
31.3 Foreign Trade Policy
31.4 Summary
31.5 Key-Words
31.6 Review Questions
31.7 Further Readings

Objectives

After reading this Unit students will be able to:
• Explain India’s Foreign Trade Policy.
• Know Export-Import Policy.
• Describe Foreign Trade Policy.
Introduction

Advanced countries like Germany, U.S.A., Japan and others used their trade policy to (a) restrict
their imports and provide a sheltered market for their own industries so that they could develop
rapidly, and, (b) promote their exports so that their expanding industries could secure foreign markets.
In other words, trade policy played a significant role in the development of the advanced countries.
India, however, did not have a clear trade policy before Independence, though some type of import
restriction—known as discriminating protection—was adopted since 1923 to protect a few domestic
industries against foreign competition. It was only after Independence that a trade policy as part of
the general economic policy of development was formulated by India.
Main features of India’s trade policy
On the import side, India has been in a disadvantageous position vis-a-vis advanced countries which
are capable of producing and selling almost every commodity at low prices. This meant that India
could not develop any industry without protecting it from foreign competition. Import restriction—
commonly known as protection—was thus essential to protect domestic industries and to promote
industrial development. Since Independence, the Government of India has broadly restricted foreign
competition through a judicious use of import licensing, import quotas, import duties and, in extreme
cases, even banning import of specific goods. The Mahalanobis strategy of economic development
through heavy industries, which India adopted since the Second Plan, called for (a) banning or keeping
to the minimum the import of non-essential consumer goods, (b) comprehensive control of various
items of imports, (c) liberal import of machinery, equipment and other developmental goods to support
heavy-industries based economic growth, and (d) favourable climate for the policy of import
substitution.
On the export side : To pay for its essential imports and to minimise dependence on foreign countries
expansion of exports was very essential. It was also realised that the market for many goods within
India may not be adequate to absorb that entire domestic production and hence a search for markets
else where was a necessity. The Indian Government had to play an important role to promote exports

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