Tuesday, May 26, 2009

Short Notes: Foreign Trade Policy of India

a) Foreign Trade Policy of India

India’s foreign trade can be traced back to the age of the Indus Valley civilization. But the growth of foreign trade gained momentum during the British rule. During that period, India was a supplier of foodstuffs and raw materials to England and an importer of manufactured goods. However, organized attempts to promote foreign trade were made only after Independence, particularly with the onset of economic planning. Indian economic planning is nearing five decades’ of completion. During this period, the value, composition and direction of India’s foreign trade have undergone significant changes.
India’s foreign trade has come a long way since 1950-51. The values of both exports and imports have increased several times over the period (table). The value of exports rose from Rs. 606 crore in 1950-51 to Rs. 608 crore to Rs. 1,21647 crore. With the exception of 1971-72 and 1976-77, the value of India’s imports has always been higher than that of India’s foreign trade is the fluctuation growth rates of exports and imports. The growth rate for exports ranged from as low as – 19.3 percent in 1952-53 – 21.1 percent in 1952-53 to 58.3 percent in 1973-74.

Imports: - During 1950s the value of trade increased only marginally. The value of exports, remained the same, more or less. But the value of imports, with certain fluctuations, increased by about 60 percent during the decade. The significant rise in imports was largely due to the increase in the quantum of imports of food grains, raw materials, capital equipments and machinery. The emphasis on heavy industries during the second Five Year Plan necessitated the imports of machinery and capital equipments, which contributed to the increase in the value of imports.

Exports: - Exports were more or less stagnant at around Rs. 600 crore during the fifties. The introduction of some export promotion measures led to the rise of exports in the sixties significant rise was seen in the exports of gems and jewellery, readymade garments and engineering goods. After the devolution of 1966,exports of iron ore, leather and leather manufactures, chemical and allied products, etc. received a further boost. During 1960/61-1969/70, exports grew, on an average, by 10.2 percent.

The high growth rate of India’s exports in the 70s were mainly due to:

· The increase in the unit value index of exports
· The increase in the quantum index of exports
· New markets for India‘s exports in oil producing countries with the boom in oil prices
· Increase in the price competitiveness of Indian exports as a result of a rise in the world prices of all commodities
· Boom in the value of agro-based exports such as oil cakes, marine products, and sugar; and
· Increase in project exports to the Middle East countries.

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