Foreign Trade (1)

India, with the 2nd largest population, is the most favorable export destination of the world. Today all the major economies are interested in expanding their relationships with India and trade is playing a stabilizing role. One of the main reason for this policy shift is India’s huge market of 1.2 billion people. Today if each of us gives rupee 1, we will be able to collect 1.2 billion rupees and that’s a huge amount to be used for any purpose. This fact is very well recognized by the western as well as Asian economies and they are framing their policies accordingly. Least barriers to foreign trade, favorable fiscal and monetary policies, floating exchange rate system, government commitment towards trade expansion are some the factors responsible for India’s growing clot in the world economy. Today India’s forex accounts for 277 billion USD and its 6th largest in the world.


The dramatic increase in trade deficit in the recent years is a matter of concern today. Trade deficit has already crossed 80 billion USD. This is not of major concern if import consists of machinery or raw material but of great worry if import consists of finished goods. More import of finished goods indicates weak status of Indian industry and this is the scenario India is experiencing from the last few years. Is growing trade deficit indicates the failure of economic liberalization in India? The answer is no, although the trade deficit is increasing which also indicates the increase in current account deficit but our capital account transactions are much on positive side and offsetting current account deficits and we are able to maintain favorable BOP and increasing foreign exchange reserves .

India and china


Today economic factors plays a very important role in India’s engagement with china. The dramatic increase in bilateral trade in recent years has provided a much needed stabilizing agent which doesn’t exist earlier. The bilateral trade has crossed 52 billion USD in 2008 despite the economic slowdown, it was 38 billion USD in 2007. President Pratibha Devisingh Patil said during its recent visit to china that India plans to achieve 60 billion dollars in bilateral trade with China in 2010.

But a growing trade doesn’t signifies a political warmth as in the case of china and japan. According to critics the growth in bilateral trade is in highly unsustainable pattern. In 2008, more than 50% of Indian exports to china comprised of one item ie iron ore. If other primary commodities are added 85% of India’s export to china are raw material for the rising industrial might of china. In return India imports Chinese processed goods to the extent that it has become import dependent on china specially on steel tubes and pipes. More over the trade gap is also galloping with each passing year.

Indian Economy Through Different Phases

The economy of India is the eleventh largest economy in the world by nominal GDP and the fourth largest by purchasing power parity (PPP). In the 1990s, following economic reform from the socialist-inspired economy of post-independence India, the country began to experience rapid economic growth, as markets opened for international competition and investment. In the 21st century, India is an emerging economic power with vast human and natural resources, and a huge knowledge base. Economists predict that by 2020 India will be among the leading economies of the world.


India was under social democratic-based policies from 1947 to 1991. The economy was characterised by extensive regulation, protectionism, public ownership, pervasive corruption and slow growth Since 1991, continuing economic liberalisation has moved the economy towards a market-based system. A revival of economic reforms and better economic policy in 2000s accelerated India's economic growth rate. In recent years, Indian cities have continued to liberalize business regulations. By 2008, India had established itself as the world's second-fastest growing major economy just behind china. However, the year 2009 saw a significant slowdown in India's official GDP growth rate to 6.1% as well as the return of a large projected fiscal deficit of 6.8% of GDP which would be among the highest in the world. This huge growth in fiscal deficit is mainly because of market slowdown and huge investment in social sector. Despite the crisis GOI is fully adhere to its social commitments and is very much confident about returning to its FRBM targets in a year or more.


India's large service industry accounts for 62.5% of the country's GDP while the industrial and agricultural sector contribute 20% and 17.5% respectively. Agriculture is the predominant occupation in India, accounting for about 52% of employment. The service sector makes up a further 34%, and industrial sector around 14%. The labor force totals half a billion workers.
India's per capita income (nominal) is $1,030, ranked 139th in the world, while its per capita (PPP) of US$2,940 is ranked 128th . India currently accounts for 1.5% of World trade as of 2007 according to the WTO. According to the World Trade Statistics of the WTO in 2009, India's total merchandise trade (counting exports and imports) was valued at $385 billion in 2008.

Indian economy an overview

Indian economy Rank 11th in terms of nominal GDP and 4th in terms of PPP(purchasing power parity)

Currency 1 Indan Rupee (INR) (₨) = 100 Paise



Fiscal year 1 April — 31 March

Trade organizations WTO, SAFTA, G-20 and others

Statistics
GDP $1.236 trillion (2009) (nominalrank; 11th) $3.526 trillion (2009)[1] (PPP rank; 4th)

GDP growth 7.4% (2009/2010)

GDP per capita $1,030 (2009) (nominal rank; 139th) $2,940 (2009)[1] (PPP rank; 128th)

GDP by sector agriculture (17.5%), industry (20%), services (62.5%) (2009 est.)

Inflation (CPI) 10.16% (May. 2010)

Food inflation (16.87%) (Apr. 2010)

Population 1024 million (2001)

below poverty line 27%

Labour force 467 million

Labour force
by occupation agriculture (52%), industry (18%), services (30%)

Main industries telecommunications, textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, information technology

External
Exports $155 billion f.o.b (2009)

Export goods software, petroleum products, textile goods, gems and jewelry, engineering goods, chemicals, leather manufactures

Main export partners US 12.3%, UAE 9.4%, China 9.3% (2008)

Imports $232.3 billion f.o.b (2009)

Import goods crude oil, machinery, gems, fertilizer, chemicals

Main import partners China 11.1%, Saudi Arabia 7.5%, US 6.6%, UAE 5.1%, Iran 4.2%, Singapore 4.2%, Germany 4.2% (2008)

FDI stock $156.30 billion (31 December 2009)

Gross external debt $232.5 billion (31 December 2009)

Foreign reserves $287.37 billion (end-Dec 2009)