India has always attracted the attention of foreigners as a country rich in natural wealth. In the ancient times the country was famous for its spices, rich textiles and precious items like stones and ivory. Foundations of India’s textile trade with other countries started as early as the 2nd century BC. Some records have shown that during the 13th century, Indian silk was bartered for spices from the west. India was plundered by the mughals, Portuguese and British for its wealth.
Exports till 1990s
Exports declined when the East India Company took control of India’s foreign trade. The country had to start afresh after independence (attained in 1947), trying to gain its lost position in the world. The British imported capital goods from their own country to manufacture consumer goods in India, as labour was cheap here.
When India became independent, the primary goal of the country was to become attain self-sufficiency and do away with the need to import by implementing import-substitution policies. Fresh from the freedom struggle, the burningspirit of ‘swadeshi’ also encouraged the inward oriented economic policies which did not gave much importance to exports. It took some time to realize that exports earnings are an important contributor to economic development. Even when the importance of export earnings was realized (during the 3rd Five Year Plan, 1960-61), it was only to fund the rapidly rising cost of imports, leading to BOP huge BOP deficit. India was then a predominantly agriculture based economy, and its export items too constituted mainly agricultural items.
Primary products like agriculture and allied products and minerals are inelastic in demand and hence not much profitable. Their wasn’t any serious attempt to encourage exports. It was largely a residual approach, i.e., selling whatever is in excess.
Conscious, focused attention to increase and diversify export goods and markets was severely lacking. Exports were badly lagging behind due to several factors like obsolete technology(low productivity & producing poor quality goods), poor infrastructure facilities, dependence on government subsidies (benefits of which were rarely passed to the customers), cumbersome procedures of license, customs clearance, corruption etc. Domestic inflation also made Indian goods less competitive in the world market.
Change in the export scenario
Share of India’s exports in the world has increased from 0.4% in 1980, 0.7 in 2000 and 1.1% in 2009. India’s share in world exports started rising after the liberalization and globalization of the economy were initiated in the 1990s. The more encouraging fact about Indian exports is the positive change in its composition. From a primary product exporting country, India now is more a manufactured goods exporting country and is also fast gaining the tag of service exporter.
Composition of Merchandise Exports
Agriculture products constituted 45% of India’s export basket during the sixties. The manufacturing sector has now overtaken and it now constitutes around 70% of the country’s export basket. Here is a list of (approximate) percentage share of major exports in India’s export basket in the year 2009-10 -
- Agriculture & allied products – 9 %
- Ores and minerals – 4%
- Manufactured goods – 69 %
- Crude & Petroleum Products – 14 %
- Other (unclassified items) – 4%
- Agriculture and allied products- The main items are tea, coffee, cereals, tobacco, spices, cashew nuts, oil meals, fruits, vegetables, pulses, marine products, raw cotton, jute, rice, flowers, meat and poultry, alcoholic beverages etc.While the share of India’s tea in world exports has fallen, that of rice and spices has increased. India is the third largest rice producer after Thailand and Vietnam.
- Ores and minerals- Mica and iron ore are the major export items
- Manufactured goods- These include textile fabrics and manufactures (readymade garments, cotton yarn, fabrics and made ups), coir yarn and manufactures, jute and leather manufactures, handicrafts, gems and jewellery, chemicals & allied products (agrochemicals, pharmaceuticals etc.), machinery, transport and metal manufactures. 10.5 % of world’s export of silk is from India. Textiles accounted for 4% share in world exports while that of gems and jewellery was 13 %, leather goods accounted for 3%, medicinal & pharmaceutical products 1% and industrial machinery and parts was 0.7%, in the year 2007.
- Service exports – While India ranked 27th in world merchandise exports, it ranked 9th in commercial service exports in the year 2008. The services that India exports are- Transportation, travel, other commercial services, communication, construction, insurance, financial, computer and information, other business services and personal, cultural and recreation services. Among these, India’s share in world export of computer and information services is around 18 %.
The biggest trade partners of India are UAE, China and USA. UK, Hong Kong, Germany, Japan, Saudi Arabia, Singapore, Malaysia, Brazil are also important trade partners. Region-wise, over half of India’s exports (55%) were to Asia (including ASEAN) in 2009-10.
India’s export sector which was once limping on the crutches of government subsidies, have now started to grow and spread wings on its own. The removal of innumerable bans, licenses and paper works have given the long required boost to export entrepreneurs. The composition of export basket has changed in the right direction, comprising 51% of dynamic goods (mainly manufactured items), whose demand is rising. Service exports are another shining light.Primary goods exports and petroleum products exports buckled under the pressure of recent global recession.
The manufactured goods exports helped the country to keep sailing through world recession. Exports are also spreading to newer potential markets. India is certainly moving in the right direction, but a lot has still to be attained. It is still quite behind China. In 1990 the share of China and India in world exports was 1.8% and 0.5% respectively. By 2008, China jumped to 8.9% and has managed to reach just 1.1%. Some problems, like infrastructure, still exist in the country which has to be taken care of.
Inflation needs to be checked as it makes exports costly. The country needs to increase productivity and quality of export products. We need innovations and aggressive marketing to establish ourselves firmly in the world market.
(Reference: Economic Survey of India 2009-10)