Background of India’s Foreign Trade

1. India entered into planned development era in 1950’s and at that time Import Substitution was a major element of India’s trade and industrial policy.
2. In 1950 India’s share in the total world trade was 1.78% which reduced to 0.6% in 1995. During 2003-04 India’s share in the global trade was 0.8%, in 2005 it was 1.0%. (China has 4.1%)
3. India’s rank is 30th in world’s largest exporter nations and 23rd in world’s largest importers in the world’s merchandise trade. In Trade Policy 2004-09 a target was set to achieve 1.5% share in Global trade till 2009.
4. The PC Alexander Committee (1978) was the first committee to review and recommend on Import –Export Policies and Procedures. This committee recommended the simplification of the Import Licensing procedure and provided a framework involving a shift in the emphasis from “control to development”. In 1980 Tandon Committee gave recommendations on export strategies in eightees.
5. In the Export Import policy of 1978-79, for the first time in India’s History decentralization of some licensing functions took place and the powers of regional licensing authorities was enhanced.
6. Export Processing Zones were set up to push up exports. They are now SEZ
7. Export Oriented Units were set up under the EOU scheme introduced in early 1981.
8. The export and Import Bank of India (website) was set up in 1982 to take over the operations of international finance wing of the IDBI. Other major objectives was to provide financial assistance to exporters and importers.
9. In the Trade Policy of 1985-88 some measures were taken based upon the recommendation of Abid Husain Committee 1984. This committee envisaged “Growth Led Exports, rather than Export Led Growth”. The recommendation of this committee stressed upon the need for harmonizing the foreign trade policies with other domestic policies. This committee recommended announcement of foreign trade policies for longer terms.
10. The export import pass book scheme was introduced in 1985 as per recommendation of Abid Hussain Committee. In 1985 Vishvanath pratap Singh Government developed a 3 year exim policy.
11. Tax Reform Committee chaired by Raja J Chelliah suggested minimizing the role of quantitative restrictions and reducing the tariff rates substantially.
12. Until 1990’s, India’s Trade Policy was mostly influenced by the “Swadeshi” (self sufficiency) feelings and the “licence raj” system of restrictions on production and imports. A first generation of reforms (1991- 1996) – aimed at, inter alia, liberalizing trade – led to a reduction of import tariffs, elimination of quantitative restrictions, exchange rate reforms and deregulation of industry resulting in yearly growth rates of around 7% (compared with 3% before the reforms).

In July 1991 Rupee was devaluated and change over to a market based exchange rate regime measures were aimed at enhancing the price competitive of exports of our country.
13. Export Import Policy of 1992-97 was a five year policy announced on March 31, 1992 and aimed at eliminating licensing and quantitative restrictions substantially.
14. Export Import Policy of 1997-2002 consolidated the gains made by restructuring the scheme to achieve further liberalization and transparency. Export Promotion of Capital Goods (EPCG) was launched.
15. EXIM policy 2002-2007 withdrew most of the earlier export restrictions and provided several incentives for the newly created SEZ. Quantitative restrictions on exports were withdrawn except from few items related to national security.
16. The new UPA government at the center changed the name and introduced Foreign Trade Policy 2004-09, which was announced on August 31, 2004.
17. Annual Foreign Trade Policy (2005-06) was announced on April 8, 2005.
18. Annual Foreign Trade policy (2006-07) was announced on April 07, 2006.
19. Annual Foreign Trade Policy (2007-08) was announced on April 19, 2007.
20. Annual Foreign Trade Policy (2008-09) was announced on April 11, 2008.
21. Interim Foreign Trade Policy was announced by Commerce Minister on February 26, 2009.
22. India’s exports cover around 7500 commodities to 190 countries and India imports 6000 commodities from 140 countries around the world.
23. Balance of Trade: India’s balance of trade has remained unfavorable throughout the planning period, except 1972-73 and 1976-77. In 1972-73 India showed favorable balance of trade worth Rs. 104 crore and in 1976-77 we showed a favorable balance of trade of Rs. 68 crore.

data on India’s Balance of Trade
24. Since independence, India’s balance of payments on its current account has been negative. Since liberalization in the 1990s (precipitated by a balance of payment crisis), India’s exports have been consistently rising, covering 80.3% of its imports in 2002–03, up from 66.2% in 1990–91. Although India is still a net importer, since 1996–97, its overall balance of payments (i.e., including the capital account balance), has been positive, largely on account of increased foreign direct investment and deposits from non-resident Indians; until this time, the overall balance was only occasionally positive on account of external assistance and commercial borrowings. As a result, India’s foreign currency reserves stood at $285 billion in 2008.

25. India’s largest foreign trade partner is US. India’s trade relations with US have not been very favorable because of imposition of American trade laws like Super-301. China is India’s second largest partner in foreign trade.
26. US was India’s top export destination country (14.9% of India Exports in 2006-07, 15.25% in 2007-08). Second was UAE in 2007-08 (9.76%).
27. Indian Imported maximum from China in (9.39% in 2006-07), however in 1997-98 largest chunk of imports came from United States 8.95% .
28. Gold Import Policy was announced in 1992 which gave permission to NRI and Indian Tourists to bring Gold up to 10 kgs. On January 5, 1999 the ceiling of 5 kgs was raised to 10 kgs. Initially an import duty @Rs. 400 per 10 grams was applied which was further reduced to Rs. 250 per 10 gms from 2001-02. It was further reduced to Rs. 100 per 10 gms in 2003-04.
29. The Govt. of India has removed quantitative restrictions on imports of 714 products from 1st April 2000 and further removed the restrictions on 715 items from April 1, 2001.
30. From January 8, 1993 FERA conditions were liberalized and later on FEMA came into act on the 1st day of June, 2000.


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