Dissertation Report

on

“ INDIA’S FOREIGN TRADE SINCE 1947-2015

IMPACT ON INDIAN ECONOMY GROWTH ”

Session: 2019-2021

Under Supervision of : Submitted By :

Mr. Kartikeya Singh anamika kumari

( Assisitant Professor ) PG/25/012

PGDM 4 th Semester
SMS, Varanasi
SMS, Varanasi

1
 DECLARATION

I hereby declare that this Dissertation Topic, “ INDIA’S FOREIGN TRADE

SINCE 1947-2015 IMPACT ON INDIAN ECONOMY GROWTH ” is my
original work under the guidance of Mr. Kartikeya Singh (Assisitant
Professor) towards partial fulfillment of the requirements for the PGDM
course of School of Management Sciences, Varanasi. I have utilized the
requisite concepts and applied the required methodologies to analyze the
secondary data collected to reach the conclusion present in the report.

Date: anamika kumari

Place: PG/25/012

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 ACKNOWLEDGEMENT

I consider this as the best opportunity to thank everyone, who has co-operated
with me & encouraged me to carry out this Survey Report specially topic “
INDIA’S FOREIGN TRADE SINCE 1947-2015 IMPACT ON INDIAN
ECONOMY GROWTH ” I am especially thankful to my Mentor Mr. Kartikeya
Singh ( Assisitant Professor ) who has co-operated with me & encourage me to
carry out this Survey Report.
Last I am thanks to my Course-Coordinator Mr. veeresh tripathi his necessary
support to me for his suggestion & guidance to complete to my survey Dissertation
report.
Last but not the least, I highly obliged to all those, who helped me directly or
indirectly in completion of this Dissertation report .My seniors, classmate &
friends always encourage me &helped me. I do not words acknowledge them but I
wish them all success in their career.
I feel my duty to put it into record the great affection &inspiration of my reverent
parents of their constant encouragement, financial & moral supports throughout the
study period.
Last but not least, I specially acknowledge my sincere thanks to all who love &
care for me

PREFACE

3
It is a great pleasure for me to present this Dissertation report before the readers. I
am extremely happy to present the report before my respected teacher. The project
report entitled me as “ INDIA’S FOREIGN TRADE SINCE 1947-2015
IMPACT ON INDIAN ECONOMY GROWTH” The project work was a great
challenge for me. It gave me an opportunity to collect and analyze the entire
situation.

THANK YOU anamika kumari

PG/25/012

PGDM 4th Semester

SMS, Varanasi

TABLE OF CONTENT

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No. Content Page No.
01 INTRODUCTION 6
02 INDIA’S FOREIGN TRADE PRE AND 9
POST REFORMS PERIOD
03 STRATEGY OF INDIA FOREIGN TRADE 13
04 INDIAN FOREIGN TRADE OVERVIEW 15
05 COMPONENTS OF INDIA FOREIGN 20
TRADE
06 INDIAN FOREIGN TRADE NEW ERA 26
07 SIGNIFICANCE OF DISSERTATION 29
PROJECT
08 LITERATURE OVERVIEW 30
09 OBJECTIVES OF DISSERTATION 34
PROJECT
10 RESEARCH METHODOLOGY 35
11 DATA ANALYSIS & INTERPRETATION 40
12 CONCLUSION 47
13 LIMITATIONS 48
14 BIBLIOGRAPHY 49

INTRODUCTION

Foreign trade is recognised as the most significant determinant of economic

development of a country, all over the world. For providing, regulating and
creating necessary environment for its orderly growth, several fact have been put in

5
place .The foreign trade of a country consists of inward and outward movement of
goods and services, which result into outflow and inflow of foreign exchange. The
foreign trade of India is governed by the foreign trade (Development &Regulation)
Act, 1992 and the values and orders issued there under. Payments for import and
export transactions are governed by Foreign trade Exchange Management, 1992
and the rules and order issued there under. Payments for import and export
transactions are governed by foreign Exchange Management act, 1999.Custom
Act, 1962 governs the physical movement of goods and services through various
modes of transportations. To make India a quality producer and exporter of goods
and services, apart from projecting such image , an important Act –Export( Quality
control and inspection )Act ,1963 has been vogue .

Development pace of foreign trade is dependent on the Export-Import policy

adopted by the country too.

Even the Exim policy 2002-2007 lays its stress to simplify procedures, sharply to
further reduce transactions costs. Today‘s international; trade is not only highly
competitive but also dynamic. Necessary responsive framework to make export
compete globally is essential. In order to harness these gain from trade .the
transaction cost in turn dependent on the frame work support , I involved need to
be low for trading with in the country and for international trade. International
trade is a vital part of development strategy and it can be an effective instrument of
economic growth, employment generation and poverty alleviation. Market
condition change, almost daily, requiring quick response and more importantly,
anticipation of the future requirement, it is essential that the frame work as to
remain in pace.

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A country’s position in the international scenario is evaluated by its economic
power. The economic strength of a country depends upon its various economic
components. One of the most important
economiccomponentsistheforeigntradeofthecountry.Foreigntradehasbeenplayingavi
talroleinthe economic progress and prosperity of every country. In modern days
foreign trade has assumed an immense prominence and substance for economic
development of a country because of interdependence of economies, increasing
specialization and joining regional cooperation. Foreign trade has worked as
“Engine of Growth” for developing countries like India. The foreign trade of any
nation comprises of inward and outward movement of goods and services, which
ultimately affects the inward and outward flow of foreign exchange from one
country to another.
For providing, regulating and creating necessary environment for its orderly
growth, several Acts have been put in place. The international trade of India is
directed by the Foreign Trade Development & Regulation Act, 1992 and the rules
and orders issued there under. The physical movement of goods and services
through various modes of transportation and Payments for Export and Import
transactions are governed by Custom Act, 1962 and Foreign Exchange
Management Act, 1999 respectively. (Sahu, 2017) An analysis of foreign trade
indicates the composition and the determinants of foreign trade. By composition is
meant the various commodities exported and the various commodities imported by
country. By determinants is meant the factors that influence the value of the
exports and the value of the imports. Based on these criteria, the countries could be
classified either as developed countries or as developing countries. In today’s
world, nations cannot exist on economic isolation. In other words, we can say that
any country in the world cannot claim that it is self-sufficient to possess facilities
for economical production of all goods and services that are consumed by its
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people. Some nations have rich in natural resources and agricultural products such
as fertile soil, timber, fossil fuels, tea, rice, pulses etc., while other nations have
scarcity of many of these resources. So, there is a need of international trade for the
benefit of countries.

INDIA’S FOREIGN TRADE PRE AND POST REFORMS

PERIOD

Since the time of independence in 1947, India’s foreign trade has shown a
significant positive growth. Prior to independence, India was typically a colonial
economy, based primarily on the agricultural sector. Major portion of India’s trade
was controlled by the British rulers who exploited the country’s resources by
exporting the goods to England at cheaper rates. After independence, Indian
government was facing a major problem related to economic development of the
country. At that time growth economy conditions were not very good. This was
because it did not have proper resources for the development, not only in terms of
natural resources but also in terms of financial and industrial development. At that
time India’s foreign trade was regulated through economic planning. During the
period of 1949-1970, India’s export has grown at a very slow rate. In the words of
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Harikumar (2014) “In the period of 1950 to 1951, main products dominated the
Indian export sector. These included cashew kernels, black pepper, tea, coal, mica,
manganese ore, raw and tanned hides and skins, vegetable oils, raw cotton, and raw
wool. These products comprised of 34 percent of the total exports. In the period of
1950s there was balancing with payments crunch. The export proceeds were not
enough to fulfil the emerging import demand.” In 1950s, India entered into
planned development era. Due to continuous increasing imports and stagnant
exports, policy of import substitution was started in 1960s to cut down on imports.
During this period, Indian Government had implemented the policy of export
pessimism and import substitution. During the period of 1971-1991, export
performance had improved. In the late 1960s, Government of India took significant
steps like establishment of Indian Institute of Foreign Trade (IIFT) and others such
institutions for the
promotionofforeigntrade.Theworldeconomywasalsoshowingrapidgrowthduring197
0s.Thegrowth rate of exports was 15.8 percent in 1970s, which declined to 8
percent in 1980s. The decade of 1970 also witnessed an upsurge in the imports,
resulting in a higher growth rate for imports as compared to exports. The export
was flourishing at the time of 1970s, however, showed a declining trend during the
starting of 1980s. During the second half of the 1980s, due to recovery in the world
economy, the exports of India grew at a significant rate (17.8 percent). There was
found an unquestionable improvement in the competitive position of India in terms
of trade during the period as a result of the increased export subsidies. India has a
very high rate of merchandise trade growth compared with per capita income. For
instance, compound annual growth rate of merchandise trade are rises from 9
percent to 21 percent in 1990-95, whereas per capita income has moved slowly to
about 8 per cent over 2000-05 from around 6 percentin1990-95.(Yadav,2012).

9
India adopted New Economic Reforms in 1991 for the improvement in the
economy and country’s growth. Economic Reforms comprises that the introduction
to inventive policies such as abolishing the market trade barriers, boosting
economic participation in private sector, decrease in the fiscal deficit, an increase
in exports and reducing imports, etc. for increasing the growth rate of the
economy. Thereafter, the government of India has announced many programs
related to Economic Reforms in India. Liberalization, Privatization and
Globalization (LPG) model is one of them. The concept of globalization and
liberalization was introduced in this era and it got momentum through process of
economic integration. In the post liberalization period, rate of growth of import and
export increased manifold. Many export promotion policies were started after
liberalization. Various schemes have been introduced by the government from time
to time to encourage exports, such as Export Promotion Capital goods (EPCG),
Duty Entitlement Passbook (DEPB), Software Technology Parks (STPs), Special
Import License (SIL), Agri Export Zones (AEZ), Export Oriented Units (EOUs),
Duty Free Replenishment Certificate (DFRC), Special Economic Zones (SEZs),
Electronics Hardware Technology Parks (EHTPs), and Biotechnology Parks
(BTPs).

In 1991, the major program of economic reform were introduced which emphasize
on external sector wherein the protective tariffs were decreased, changes into
foreign investment and the restrictive import licensing system was relaxed and
simplified. This policy mainly focused on liberalization of capital goods and
imports from industry for encouraging the domestic and export oriented growth.
India’s trade was

Changed significantly into the post reform periods. After the New economic
reforms ,volume of trade rose up and composition of trade was also frequently

10
changed. India’s chief exports involve machinery items, chemicals, precious and
semi-precious stones and electronic goods .On the other hand ,side major imports
were involved fertilizers, gold, petroleum and petroleum products. Through the
introduction to new economic reforms, there was also an enlargement of the
direction of India’s foreign trade with the new other countries and regional trading
blocs. Before these reforms, India’s exports were limited to OECD and OPEC
countries but after the new economic policy our country turn towards the new
Asian countries and consequently China became a major trading partner of India.
In terms of direction, traditionally EU and USA was the major trading partners of
India but from the last few years this scenario has been changed and India’s trade
is increasing with mainly East Asian countries.

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 STRATEGY OF INDIA FOREIGN TRADE

India‘s Foreign Trade Policy was recently announced in the backdrop of reduced
global trade growth forecast and lack of growth momentum in India‘s export
growth. India‘s export stood at $310 billion for the financial year 2014-15 and
missed the target by $30 billion. For the last three to four years, the merchandise
export growth has been flat. Recently , the World Trade Organization has also
revised its global trade growth forecast to 3.5 percent from its earlier forecast of 4
percent on account of continued slowdown in the global market.
Analysts and optimists are intrigued as to how the government will rise to the
challenge and turn the tide of foreign trade. Realizing the goal of doubling export
of goods and services to $900 billion by 2020 will require sustained growth in
exports at double digit rates for the next few years, a feat that will be
unprecedented, given India‘s track record of export performance.
The government is relying on strategic, systemic and structural changes to be able
to realize the ambitious goal. It aims to bring missionary zeal in support of export
growth by bringing all ministries, departments and state governments in sync, by
easing export procedures and documentation, and by ensuring better
competitiveness and branding of products and services exported from India.
There are three key elements in the government‘s export growth strategy. Firstly,
the government intends to catalyse merchandise export by diversification of market
and products, by participation in global value chain, by improving branding and
competitiveness of India‘s exports, and by reducing transaction cost through online
processing of authorizations thus improving ease of doing business. The
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government‘s approach and mainstreaming the trade policy with its economic
vision are an integral part of the emerging trade export architecture.
Secondly, the government proposes to give a boost to services export by allowing
fiscal incentives in the form of SEIS scrip, and ensuring that the agreement on
trade in services becomes an integral part of all trade agreements that India
proposes to sign or has signed in the recent past. The government expects to boost
services export from $145 billion to $300 billion. Trade in services agreement
under free trade agreements could contribute significantly in realizing this vision.
The third, and the most important, part of the strategy is to increase focus on
utilization of trade agreement routes for accelerating export of goods and services.
India has existing agreements on the trade of goods with Japan, Korea, Singapore
and ASEAN countries, but the utilization of these agreements has been very low.
As a first step, the government aims to increase awareness about the benefits and
opportunities under these trade agreements through outreach programmes and
operationalization of its Niryat Bandhu scheme.

INDIAN FOREIGN TRADE OVERVIEW

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Foreign trade in India began in the period of the latter half of the 19th century. The
period 1900-1914 saw development in India's foreign trade. The augment in the
production of crops as oilseeds, cotton, jute and tea was mainly due to a thriving
export trade. In the First World War, India's foreign trade decelerated. After post-
war period, India's exports increased because demand for raw materials was
increased in all over world and there were elimination of war time restrictions.
The imports also increased to satisfy the restricted demand. Records indicated that
India's foreign trade was rigorously affected by the great depression of 1930s
because of decrement in commodity prices, decline in consumer's purchasing
power and unfair trade policies adopted by the colonial government. During the
Second World War, India accomplished huge export surplus and accumulated
substantial amount of real balances. There was a huge pressure of restricted
demand in India during the Second World War. The import requirements were
outsized and export surpluses were lesser at the end of the war. Before
independence, India's foreign trade was associated with a colonial and agricultural
economy.
Exports consisted primarily of raw materials and plantation crops, while imports
composed of light consumer merchandise and other manufactures. The structure of
India's foreign trade reflected the organized utilization of the country by the
foreign. leaders. The raw materials were exported from India and finished products
imported from the U.K.

The production of final products was discouraged. For instance, cotton textiles,
which were India's exports, accounted for the largest share of its imports during the
British period. This resulted in the decline of Indian industries. Since last six
decades, India's foreign trade has changed in terms of composition of commodities.
The exports included array of conventional and nontraditional products while
14
imports mostly consist of capital goods, petroleum products, raw materials,
intermediates and chemicals to meet the ever increasing industrial demands. The
export trade during 1950-1960 was noticeable by two main trends.
First, among commodities which were directly based on agricultural production
such as tea, cotton textiles, jute manufactures, hides and skins, spices and tobacco
exports did not increase on the whole, and secondly, there was a significant boost
in the exports of raw manufactures such as iron ore. In the period of 1950 to 1951,
main products dominated the Indian export sector. These included cashew kernels,
black pepper, tea, coal, mica, manganese ore, raw and tanned hides and skins,
vegetable oils, raw cotton, and raw wool. These products comprised of 34 per cent
of the total exports. In the period of 1950s there were balance of payments crunch.
The export proceeds were not enough to fulfil the emerging import demand. The
turn down in agriculture production and growing pace of development activity
added pressure. The external factors such as the closure of Suez Canal created
tension on the domestic financial system. The critical problem at that moment was
that of foreign exchange scarcity. One of the most important phenomena in post
war economic history has been the the enormous expansion of world trade .

India trade grew poorly from 1950 to 1980 as compared with world. trade. 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. In 1950
India‘s share in the total world trade was1.78%which reduced to 0.6% in 1995. In
1993, India rank 33rd in top exporting countries and 32nd in top importing
countries. Natural Resources of the country are not evenly divided amongst public
and private sector business enterprises . During 2003-04 India‘s share in the global
trade was 0.8%, in 2005 it was 1.0%. The PC Alexander Committee (1978) was
the first committee to review and recommend on Import –Export Policies and
15
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. 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. Export Oriented Units were set up
under the EOU scheme introduced in early 1981. 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 were to provide financial
assistance to exporters and importers. 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.
The export import pass book scheme was introduced in 1985 as per
recommendation of Abid Hussain Committee. In 1985 Visvanathan pratap Singh
Government developed a 3 year Exim policy.
Tax Reform Committee chaired by Raja J Chelliah suggested minimizing the role
of quantitative restrictions and reducing the tariff rates substantially. Export
Processing Zones were set up to push up export In order to liberalize imports and
boost exports, the Government of India for the first time introduced the Indian
EXIM Policy on ApriI,1992.
In the light of the reform policy objectives successive governments have been
taking various trade reforms. Successive annual Union Budgets have also extended
a number of tax benefits and exemptions to the exporters. These include reduction
16
in the peak rate of customs duty to 15 per cent; significant reduction in duty rates
for critical inputs for the Information Technology sector, which is an important
export sector; grant of concessions for building infrastructure by way of 10-years
tax holiday to the developers of SEZs; Facilities and tax benefits to exporters of
goods and merchandise; reduction in the customs duty on specified equipment for
ports and airports to 10 per cent to encourage the development of world class
infrastructure facilities, etc.

A number of tax benefits have also been announced for the three integral parts of
the convergence revolution‘ the Information Technology sector, the
Telecommunication sector, and the Entertainment industry. In order to bring
stability and continuity, the Export Import Policy was made for the duration of 5
years. However, the Central government reserves the right in public interest to
make any amendments to the trade Policy in exercise of the powers conferred by
Section-5 of the Act. Such amendment shall be made by means of a Notification
published in the Gazette of India. Prior to 2004, the Foreign Trade Policy was
called EXIM Policy.
The Foreign Trade Policy, 2015-2020 (‗FTP‘) was finally announced by the
Hon‘ble Minister of Commerce and Industry, Smt. Nirmala Sitharaman on April 1,
2015. The FTP has been announced in the backdrop of several measures initiated
by the Government of India such as Make in India‘, Digital India‘ and Skills
India‘, among others.

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 COMPONENTS OF INDIA FOREIGN TRADE

In India, exports and imports are regulated by the Foreign Trade (Development and
Regulation) Act, 1992, which replaced the Imports and Exports (Control) Act,
1947, and gave the Government of India enormous powers to control it. The salient
features of the Act are as follows:-

1. It has empowered the Central Government to make provisions for

development and regulation of foreign trade by facilitating imports into, and
augmenting exports from India and for all matters connected therewith or
incidental thereto.

2. The Central Government can prohibit, restrict and regulate exports and
imports, in all or specified cases as well as subject them to exemptions.

3. It authorizes the Central Government to formulate and announce an Export

and Import (EXIM) Policy and also amend the same from time to time, by
notification in the Official Gazette.

4. It provides for the appointment of a Director General of Foreign Trade by

the Central Government for the purpose of the Act. He shall advise Central

18
 Government in formulating export and import policy and implementing the
policy.

5. Under the Act, every importer and exporter must obtain an 'Importer
Exporter Code Number' (IEC) from Director General of Foreign Trade or
from the officer so authorised.

6. The Director General or any other officer so authorised can suspend or

cancel a licence issued for export or import of goods in accordance with the
Act. But he does it after giving the licence holder a reasonable opportunity
of being heard.

7. As per the provisions of the Act , the Government of India formulates and
announces an Export and Import policy (EXIM policy) and amends it from
time to time. EXIM policy refers to the policy measures adopted by a
country with reference to its exports and imports. Such a policy become
particularly important in a country like India, where the import and export of
items plays a crucial role not just in balancing budgetary targets, but also in
the over all economic development of the country.

The principle objectives of the EXIM POLICY 2015-2020 policy are:-

1. To facilitate sustained growth in exports of the country so as to achieve larger

percentage share in the global merchandise trade.

2. To provide domestic consumers with good quality goods and services at

internationally competitive prices as well as creating a level playing field for the
domestic producers.

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3. To stimulate sustained economic growth by providing access to essential raw
materials, intermediates, components, consumables and capital goods required for
augmenting production and providing services.

4. To enhance the technological strength and efficiency of Indian agriculture,

industry and services, thereby improving their competitiveness to meet the
requirements of the global markets.

5. To generate new employment opportunities and to encourage the attainment of

internationally accepted standards of quality.

Besides this Act, there are some other laws which control the export and import of
goods. These include:-

1. Tea Act, 1953

2. Coffee Act, 1942

3. The Rubber Act, 1947

4. The Marine Products Export Development Authority Act, 1972.

5. The Enemy Property Act, 1968

6. The Export (Quality Control and Inspection) Act, 1963

7. The Tobacco Board Act, 1975

At the central level, the Ministry of Commerce and Industry is the most important
organ concerned with the promotion and regulation of the foreign trade in India.

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The Ministry has an elaborate organizational set up to look after the various
aspects of trade. Within the Ministry, the Department of Commerce is responsible
for formulating and implementing the foreign trade policy. The Department is also
entrusted with responsibilities relating to multilateral and bilateral commercial
relations, state trading, export promotion measures and development and regulation
of certain export oriented industries and commodities.

The matters relating to foreign trade are dealt with by the following divisions of
the Department:-

1. Administrative and General Division

2. Economic Division 3. Foreign Trade Territorial Division

4. Export Industries Division.

5. Supply Division 6. Finance Division

7. Trade Policy Division 8. Export Products Division

9. Export Services Division

Directorate General of Foreign Trade (DGFT):-

With its headquarters at New Delhi, is headed by the Director General. It functions
as the executive arm of the Supply Division of the Department of Commerce for
conclusion of Rate Contracts for common user items, procurement of stores,

21
inspection of stores, shipment and clearance of imported stores/cargo. It has three
Regional Offices located at Chennai, Mumbai and Kolkata.

Directorate General of Supplies and Disposal (DGS&D):-

With its headquarters at New Delhi, is headed by the Director General. It functions
as the executive arm of the Supply Division of the Department of Commerce for
conclusion of Rate Contracts for common user items, procurement of stores,
inspection of stores, shipment and clearance of imported stores/cargo. It has three
Regional Offices located at Chennai, Mumbai and Kolkata.

Directorate General of Commercial Intelligence and Statistics (DGCI&S):-

With its office located at Kolkata, is headed by the Director General. It is entrusted
with the work of collecting, compiling and publishing/ disseminating trade
statistics and various types of commercial information required by the policy
makers, researchers, importers, exporters, traders as well as overseas buyers.

Office of Development Commissioner of Special Economic Zones:-

The Special Economic Zones (SEZs) are geographically exclusive enclaves

separated from domestic tariff areas. The main objective of SEZs is to provide
certain common facilities and a duty free environment for exporters. Each Zone is
headed by a Development Commissioner and is administered as per the SEZ
scheme announced on 31st March, 2000.

Office of the Custodian of Enemy Property (CEP):-

22
CEP is located in Mumbai with a Branch office at Kolkata. The office is
functioning under the Enemy Property Act,1968. All immovable (like land,
buildings, etc.) and movable properties (like securities, shares, debentures, bank
balances, viz. fixed deposits and other amounts lying in the enemy nationals' bank
accounts, Provident fund balances etc.) all over India belonging to or held by or
managed on behalf of Pakistani nationals between the period 10.9.1965 and
26.9.1977 are vested in the Custodian of Enemy Property for India.

Pay and Accounts Office (Supply):-

The payment and accounting functions of Supply Division, including those of

DGS&D, are performed by the Chief Controller of Accounts (CCA) under the
Departmentalized Accounting System. Payment to suppliers across the country is
made through this organisation.

Pay and Accounts Office (Commerce & Textiles):-

The Pay and Accounts Office, common to both the Department of Commerce and
the Ministry of Textiles, is responsible for the payment of claims, accounting of
transactions and other related matters through the four Departmental Pay &
Accounts Offices in Delhi, two in Mumbai, two in Kolkata and one in Chennai.

INDIAN FOREIGN TRADE NEW ERA

23
IMF in its World Economic Outlook (WEO) released in April 2015 has projected
economic growth rate for 2015 and 2016 to be at 3.5%and 3.8% respectively. The
new Foreign Trade Policy will focus on ways to boost India‘s exports and reduce
dependence on imports, a government official said on Monday. India being part of
WTO cannot only think in terms its export promotion without equally supporting
import substitution. Therefore, the focus of the new policy would be to vigorously
promote both exports and imports with significantly substantial focus on exports,‖
industry body PHDCCI said, quoting Additional Director General of Foreign Trade
(DGFT) Sumeet Jerath. Mr. Jerath said the policy (FTP 2014—19), to be
announced by the new government post general elections next month, will lay
greater thrust on engaging with the rest of the world particularly in sectors such as
pharma and engineering. He said old procedures and regulations governing
exporters will be trimmed and pruned to suit the export requirements of the modern
times so that the realistic targets are made achievable. India‘s overall exports fell
short of the $325 billion target in 2013—14.

They touched $312.3 billion. Mr. Jerath said: ―It would be the attempt of the
policy makers to take India ‘s share in global trade to over 5 per cent from current
level of 2 per cent in the next five year period. He also informed the industry
chamber‘s members that the DGFT‘s second committee report on reducing
transaction cost is ready. He said, ―...(it) suggests a way forward as to how the
new government should tackle the issues relating to higher transaction cost to
enable exporters achieve the desired level of exports to both developed and
developing economies. On the pharma sector, he assured the industry that new
government will make sure that the domestic industry gets a fair deal in other
countries.

24
"The focus of the foreign trade policy is to support services and exports along with
improving the ease of doing business. The new trade policy will boost exports and
create jobs while supporting Make in India and Digital India," said commerce and
industry minister Nirmala Sitharaman while announcing the FTP on Wednesday. It
will promote defence, pharma, environment friendly products and value-added
exports." Industry welcomed the policy that has been delayed by a year.

"The new policy recognizes the global challenges faced by the export sector and
also identifies the potential sectors which could emerge as winners in the next five
years," said SC Ralhan, president of the Federation of Indian Export Organisations
(FIEO). He described the policy as "path breaking". The Confederation of Indian
Industry said in a release that, "The much-awaited Foreign Trade Policy 2015-20
seems to be a visionary policy which is in sync with government's campaigns like
Make in India, Digital India and Skills India, which indicates that India is geared
up to realize the aim of improving the ease of doing business.

" India's exports contracted 15% in February, the third successive month of
decline, because of a global slowdown and the appreciation of the rupee against a
basket of currencies. Merchandise exports account for about one-fifth of the
country's $2 trillion economy. Several promotional schemes such as focus product
and focus market schemes for goods have been consolidated into a single
Merchandise Export from India Scheme (MEIS).

Under the scheme, incentives will be given for export of specific goods to specific
markets. The Services Export from India Scheme (SEIS) will replace the Serve
from India Scheme (SFIS), giving a push to sectors such as medical tourism,
accountancy and architecture.

25
 Significance of Dissertation Project
In the late 1980s, Due to the long term reduced economic performance under
protectionist policies, India started eliminating their trade barriers for the
improvement of economic development of the country. During the time of
independence, India’s foreign trade was typically a colonial and agricultural
economy and our trade relationship were mainly limited to U.K. During the period
1950 -1990, India’s foreign trade suffered from strict administrative controls. In
1991, the Indian Government introduced the economic reforms policy of the
liberalization and globalization of Indian economy. After the establishment of
economic reforms, India’s foreign trade has started increasing. The trade policy of

26
India has undergone various changes time to time and the major changes involved
simplification of processes and techniques, elimination of quantitative restrictions
and reduction in the tariff rates. On the other side, after the liberalization and
globalization the foreign trade has been playing a very important role in increasing
the GDP level of India. The foreign trade acts as an engine of growth of India’s
trade in terms of increase in Export and Import. Thus, it is essential to understand
the trend of the foreign trade since 1991.

Literature Overview
Misra , Jenaand hil (2011), analyzed and evaluated the India’s foreign
trade position in terms of volume, composition and direction during the
post liberalization period. This study also suggest the ways and means for
improving foreign trade of India on the basis of the observation of the
study. Yadav (2012), explained the regional patterns of inflows and
outflows of trading activity which includes the changes in commodity
composition and direction .With this background this study is suggested
that globalization has directed to specialization of production and
expansion of consumption.

Finally, it can be conclude that manufacturing sector has increased its

share vis-à-vis other tradable sectors and Indian trade is gradually

27
moving away from low value-added product. Singh (2014), analyzed the
trend and composition of international trade during the post liberalization
era and also determine the effect of foreign trade on the economic growth
of India. This study shows that though the total exports and imports both
have improved but the growth rate of imports is higher in comparison to
the growth rate of exports. Major portion of exports comprises the
manufactured goods while petroleum and crude products hold the major
portion of the imported goods. It is also found that there is positive
relationship between export and economic growth while imports are
negatively related with the economic growth of India. Jadhav and Satpute
(2014), evaluated India’s direction and composition of foreign trade for
the period2003-04 to 2012-13. It may be found that there has been a
gradual increase in India’s export and imports and also there is a rise in
trade deficit.

India has good trading associations with all the topmost countries in the
world. More than 50% of India’s total export is with Asia and ASEAN
region and about 60% of India’s total imports are with the same countries
. As far as India’s composition of foreign trade is concerned it also has
undergone major changes after independence.

With the industrialization of the economy, compositions of export have

undergone changes. India now exports items such as machinery,
chemicals and marine products. Thus, we can say that India now export
the same items which we once use to import. This is a good sign for one
of the fastest emergent economies in the world. So in the present research
study effort has been made to cast light upon India’s direction and
composition of foreign trade especially after 2000. Mr. A. Harikumar

28
(2014), examined the foreign trade of India during pre and post the
liberalization period.

This study found that with the Liberalization, Privatization and

Globalization of the Indian economy and following liberal foreign trade,
there had been changes in the business environment. With the
development of science and technology there is a change in the nature of
the Indian economy. There had been increase in the trade volume in the
India’s international trade, and the exports from India also have
increased. Sachin N. Mehta (2015), examined the trend outline of India’s
Exports, Imports and Total Trade during the pre and post New Economic
Policy program with the time series data from1971to2013. Further, this
study also analyzed the impact of New Economic Policy on Exports,
Imports and Total Trade of India using paired sample‘t’ test.

It suggests that there is more increment in the growth rate of imports in

comparison to growth rate of export. The outcome of paired sample “t”
test suggests that there was positive impact of new economic policy on
India’s Exports, Imports and Total Trade. It means after the new
economic policy India’s Exports, Imports and Total Trade had increased
significantly. Matore and Sagar (2015), concluded that, the exports was
rises at a decreasing rate but the imports are rises at an increasing rate. As
a result, the balance of trade is becoming unfavorable to India during the
post globalization period.

It is a significant achievement for India that we have changed ourselves

from a mainly primary goods exporting country into a non-primary goods
i.e. manufactured goods exporting country. Kumar and Sood (2016),

29
examined the growth of foreign trade and balance of payments in pre and
post reforms period. This study also suggest to ways and means for
accelerating India’s Foreign Trade. Therefore, the fact that introduction
of economic reforms had a positive impact on India’s foreign trade,
cannot be denied. A push has been given to the exports but the increasing
rate of imports is higher in comparison to the increasing rate of exports.
As a consequence of it economic reforms have not flourished in
correcting trade imbalance. Kabita Kumari Sahu (2017), examined the
India’s foreign trade pre and post liberalization in India. This study found
that the total trade after liberalization has been significantly higher than
the total trade before liberalization and the imports were more than the
exports in all the years. Thus, the liberalization period is effective
insignificantly increasing the export of India. This study is suggested that
import restriction is necessary on non-essential items to narrow down the
trade deficit.

30
 Objectives of Dissertation Project

1. To Study the importance of foreign trade in the world of Indian market.

2. To examine the relationship between Indian foreign trade and economic

development of India.

3. To link rules, procedures and incentives for exports and imports with other
initiatives such as „Make in India‟, „Digital India‟ and „Skills India‟ to
create an „Export Promotion Mission‟ for India.

4. To create an architecture for India‘s global trade engagement with a view to

expanding its markets and better integrating with major regions, thereby
increasing the demand for India‘s products and contributing to the
government‘s flagship „Make in India‟ initiative;.

5. To examine the trade pattern of India’ Foreign Trade for a period of twenty
one years before and twenty one years after the new economic reforms
period (1991-1992).

Research Methodology

31
  Type of Research: -

Descriptive Research

 Type of Data use : -

Secondary Data

 Source of Data : -
International Journal of Management and Commerce Innovations , ISSN
2348-7585 (Online ).
The data has also been collected from sources like different issues of the
Handbook of Indian Statistics ,the Economic Survey ,and he website of
Ministry of Commerce, RBI.

 Tools for data analysis:-

In this study, tabular and graphical representation tools are used

for the analysis of data. Using t-test (Paired samples for means), the pre-reform
period and post-reform period trade performance was tested.

32
33
Table-1and Graph-1presents an analytical study of India’s Export and Import and
also shows the percentage of annual growth rate respectively. Exports and Imports
grew with varying rates during the period under study. In graph ,values of exports
and imports is showing significantly arising trend.

34
35
Table-2 and Graph-2 presents an analytical study of India’s Export and Import and
also shows the percentage of annual growth rate respectively. Exports and Imports
grew with varying rates during the period under study In graph ,values of exports
and import is showing significantly arising trend.

Data Analysis & Interpretation

36
 India’s Exports in Pre-Reforms and Post-Reforms period –
Table 1 and 2 shows that general trend of India’s Overall exports during the
period under study. It is useful to mention that various policy measures
introduced from time to time have a significant impact on the value of
exports. Indian exports have covered a long distance from the time of
independence in terms of value. In 1970-71, India’s merchandise exports
stood at low level of 2031 million US dollars which moved up toan all-time
high level of 18143 million US dollars in 1990-91 before the pre-reforms
period. After the independence, exports have grown at a very slow rate.
During 1950s the exports growth rate was 3.6 percent in dollar terms.
Various exports promotion scheme adopted in the 1970s. This has resulted
in an annual growth rate of exports in dollar terms is 6.01 % in 1971-72,
18.44 % in 1972-73, 25.84 % in 1973-74 and so on. The annual growth rate
of exports was highest at 30.07 % in 1974-75 during the pre-reforms period
under study. Thereafter, this rate was continuously decreasing with many
fluctuations and in the year 1985-86 this rate was recorded in negative
valuesi.e.-9.86%. In1990-91, the exports annual growth rate was 9.22 %.
During post reforms era, Indian exports have shown remarkable
improvement principally from the period 1992-93 to 1996-97 and from
2002-03 to 2008-09. Exports registered 1.8 times and 3.5 times rises in the
year 1992-93 to 1996-97 and 2002-03 to 2008-09 respectively. In 2009-10,
the exports was declined with the slight variation and recorded at 178751
million US dollars. After that the Indian exports have moved up and touch a
new height of 305964 million US dollar sin 2011-12. It was also a highest
India’s exports during the period under study. Lastly, in 2012-13 exports

37
value has decreased and stood at 300401 million US dollars.Table-
1and2alsoshows the Annual Growth rate of India’s exports during pre-
reforms period as well as post-reforms period. Regarding annual growth rate
of exports, it was high in 1993-94 and 1994-95 at 19.97 % and 18.40 %
respectively, but declined sharply in 1996-97 to 5.26 %, and continuously
till 1998-99 on account of the South East Asian crisis and worldwide
recession. It again recovered to 10.53 % and 20.05 % in 1999-00 and 2000-
01 respectively. However, the global economic slowdown and the events of
September 11, 2001 led to a steep fall in the growth rate of exports during
2001-02 (-0.56 %). The period since 2002-03 has recorded a steady export
growth rate up to 2008-09 (13.59 %). The export growth rate declined to
3.53 % in 2009-10 in view of the global meltdown. But in 2010-11, exports
made a huge jump and thus the growth rate of exports recorded at 40.49 %
which was also the highest annual growth rate during the post-reforms
period understudy. The growth rate values also registered in negative terms
during the post reforms period, such as -5.11 % in 1998-99, -0.56 % in
2001-02, -3.53 % in 2009-10 and -1.82 % in 2012-13. The Annual growth
rate of exports is fluctuating in both the periods because of many reasons. It
does not give the clear picture of growth of exports. Therefore, compound
annual growth rate is calculated. The CAGR % of post-reforms period is
more than the pre-reforms period. The compound annual grow the rate of
exports in the pre-reforms periodwas11.57%whereasinthepost-reforms
period it went up to 14.94 %. The table clearly shows that exports have
increased during post reforms period although the impact of economic
reforms on exports is not very significant but still it is positive. Therefore
through this analyses we can says that, India’s exports moved up with
varying rates during the period understudy.
38
  India’s Imports in Pre-Reforms and Post-Reforms Period-
Table 1 and 2 shows that trend of India’s imports during the period under study.
During 1970s, India’s total imports growth rate picked up and was even higher
than growth rate of India’s exports. This period was also characterized by a
stronger import substitution strategy and greater government control over
economic activities, a strategy which was maintained even after the occurrence of
the India-Pakistan war in 1971 and the first oil price shock. Total imports
registered a remarkable growth over 9.8 times in the year 1970-71 to 1989-90 but
between 1980-81 and 1989-90, it grew at its lowest less than 2 times. Initially,
annual growth rate of imports was registered at 13 % in 1971-72 but next year it
was declined and reached in negative values i.e. -1.15 %. Thereafter suddenly, this
rate shows the tremendous growth and recorded at 50.73 %in 1974-75 and it was
also the highest annual growth rate during the pre-reforms period under study. It
was maintained at 13.46 % in 1990-91. There has been a sharp increase in the
import during post-reforms period. This development is the result of repeated
devaluation of Indian rupee and increasing import intensity of both production and
consumption during the post-reforms period. The process of structural reforms has
further increased Indian imports. Duringtheperiod1990-91 to2009-10, total imports
shows the enormous growth nearly 12 times from 24075 million US dollars to
288373 million US dollars. Between 1990-91 and 1999-00, imports recorded a
growth of 2 times and during 2000-01 to 2009-10 imports were recorded 5.6 times.
Between 2000-01 and 2004-05 imports were registered 2.2 time growth and in the
year from 2005-06 to 2009-10, imports fallen down and attained a growth of 1.9
times. The highest total India’s imports was registered at 490737 million US
dollars in 2012-13 during the period under study. Table-1 and 2 also shows the

39
annual growth rate of India’s imports during pre and post-reforms period.
Regarding the annual growth rate of imports, it was 6.51 % in1993-94. The growth
rate was high inthe1995-96 (28%) and then it declined steeply. The growth rate of
imports was very low in 2000-01 (0.48 %). It regained in 2002-03, and has grown
steadily thereafter and touched 42.70 % in 2004-05 which was also the highest
annual growth rate during the post-reforms period understudy and then declined
upto 20.68% in 2008-09.The global slowdown during 2008 had its impact on the
economy of almost all the countries, including India. The impact was such that
during 2009-10, both exports as well as imports and this led to negative imports
growth rate of -5.05 % in 2009-10.

Lastly, this rate was recorded at 0.29 % in 2012-13. Data clearly shows that like
exports annual growth rate of imports in both the periods is also fluctuating
because of many reasons. It does not give clear picture of the growth rate of
imports. Therefore, compound annual growth rate is calculated. The CAGR % of
post-reforms period is more than the pre-reforms period. The compound annual
growth rate of imports in the pre-reforms period was 12.80 % whereas in the post-
reforms period it went up to 16.82 %. It can be said that economic reforms have
increased imports significantly. The CAGR of Imports is higher than that of
exports even in the post reforms period. It is important to mention here that the
Indian exports are not increasing at expected rate instead imports are increasing
because of liberalized trade policies.

40
The mean value in post-reform period is more than the mean value in pre-reform
period (Table-3). Hence it can be said that the export in pre-reform period was less
than the export in post-reform period. As per the result of paired t-test, the p value

41
(0.000) is less than the level in the exports after the post of significance value 0.05,
indicating that there is significant increase –reforms period.

The mean value in post-reform period is more than the mean value in pre-reform
period (Table-3). In this result, the value of t-statistic is negative. Hence it can be
said that the import in pre-reform period was less than the import in post-reform
period. However, it is more important to know whether the differences in the mean
values is significant or not. In the paired t-test results, the p value (0.000) is less
than the value of significance 0.05that indicating there is significant increase in the
imports after the post-reforms period.

42
 Conclusion
With the Liberalization, Privatization and Globalization of the Indian
economy and following liberal foreign trade, there had been changes in the
business environment. With the development of science and technology
there is a change in the nature of the Indian economy. There had been
increase in the trade volume in the India‘s international trade, and the
exports from India also have increased. This study investigates the effect of
New Economic Reforms on Exports, Imports and Total Trade for India
using time-series data from 1970-71 to 2012-13. In this regard pre crisis and
post crisis period trade performance is compared on the basis of its value.
Over the study period it has been concluded that foreign trade of India has
shown an increasing trend after the introduction of new economic reforms in
India. During the period under study, the volume of trade is increasing day
by day with the many fluctuations. The study also indicates that post reform
43
 era has certainly helped India in achieving high growth of the economy. The
result shows that in post-reforms period the exports and imports were more
than the exports and imports in pre-reforms period but it is also suggested
that the growth rate of imports was higher in comparison to the growth rate
of exports. The null hypothesis has been rejected. So, the study concludes
that the introduction of economic reforms in India had a significant positive
impact on India’s foreign trade.

Limitations

The study is based on secondary data which are collected from several websites.
The limitations of secondary data, if any, will also influence study. The major
factors have been discussed, yet there exist more issues which have not been
detailed due to time constraints as well as unavailability of data in the stipulated
time. The study is limited to twenty one years before and twenty one years after the
new economic reforms period.

44
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