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    India'S Trade Policy: Foreign Trade Balance of Payments Trade Policies Foreign Trade Policy (FTP)

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    Shivam Popat
    This document provides information on India's foreign trade and trade policies over time. It shows that India has transitioned from a trade deficit to a trade surplus in recent decades. The key points are: - India has seen its exports and imports grow significantly since the 1950s, with imports generally exceeding exports resulting in a trade deficit. - In the early 1990s, India faced a foreign exchange crisis and introduced reforms like devaluation, liberalization and export promotion to improve its balance of trade and balance of payments. - Since then, India's exports have grown strongly in sectors like manufactured goods, software services and gems/jewelry, helping reduce the trade deficit. Various trade policies and incentives have been

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    India'S Trade Policy: Foreign Trade Balance of Payments Trade Policies Foreign Trade Policy (FTP)

    Uploaded by

    Shivam Popat
    45 views32 pages
    This document provides information on India's foreign trade and trade policies over time. It shows that India has transitioned from a trade deficit to a trade surplus in recent decades. The key points are: - India has seen its exports and imports grow significantly since the 1950s, with imports generally exceeding exports resulting in a trade deficit. - In the early 1990s, India faced a foreign exchange crisis and introduced reforms like devaluation, liberalization and export promotion to improve its balance of trade and balance of payments. - Since then, India's exports have grown strongly in sectors like manufactured goods, software services and gems/jewelry, helping reduce the trade deficit. Various trade policies and incentives have been

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    This document provides information on India's foreign trade and trade policies over time. It shows that India has transitioned from a trade deficit to a trade surplus in recent decades. The key points are: - India has seen its exports and imports grow significantly since the 1950s, with imports generally exceeding exports resulting in a trade deficit. - In the early 1990s, India faced a foreign exchange crisis and introduced reforms like devaluation, liberalization and export promotion to improve its balance of trade and balance of payments. - Since then, India's exports have grown strongly in sectors like manufactured goods, software services and gems/jewelry, helping reduce the trade deficit. Various trade policies and incentives have been

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    45 views32 pages

    India'S Trade Policy: Foreign Trade Balance of Payments Trade Policies Foreign Trade Policy (FTP)

    Uploaded by

    Shivam Popat
    This document provides information on India's foreign trade and trade policies over time. It shows that India has transitioned from a trade deficit to a trade surplus in recent decades. The key points are: - India has seen its exports and imports grow significantly since the 1950s, with imports generally exceeding exports resulting in a trade deficit. - In the early 1990s, India faced a foreign exchange crisis and introduced reforms like devaluation, liberalization and export promotion to improve its balance of trade and balance of payments. - Since then, India's exports have grown strongly in sectors like manufactured goods, software services and gems/jewelry, helping reduce the trade deficit. Various trade policies and incentives have been

    Copyright:

    © All Rights Reserved
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    of 32

    INDIAS TRADE POLICY

    Foreign Trade
    Balance of Payments
    Trade policies
    Foreign Trade Policy (FTP)

    VOLUME OF FOREIGN TRADE


    Year

    Exports (Including Imports


    Re exports)

    Trade
    Balance

    1950-51

    606

    608

    -2

    1960-61

    642

    1122

    -480

    1970-71

    1535

    1634

    -99

    1980-81

    6711

    12549

    -5838

    1990-91

    32553

    43198

    -10645

    2000-01

    203571

    230873

    -27302

    2006-07

    571779

    840506

    -268727

    2008-09

    840755

    1374436

    -533681

    2009-10

    845543

    1363736

    -518202

    2010-11

    1142649

    1683467

    -540818

    2011-12

    1024707

    1651240

    -626533

    Year

    Exports
    Value

    Imports

    Terms of Trade

    Volume

    Unit
    Value

    Value

    Volume

    Unit

    Net
    Value

    Income

    2001-02 -1.6

    0.8

    1.0

    1.7

    5.8

    2.8

    -2.1

    -1.3

    2004-05 30.8

    11.2

    14.9

    42.7

    16.0

    18.9

    -3.5

    7.3

    2005-06 23.4

    15.1

    6.1

    33.8

    9.8

    14.0

    -6.0

    8.2

    2007-08 29.0

    7.9

    5.1

    35.5

    20.7

    1.9

    2.6

    10.7

    2009-10 -3.5

    -1.1

    1.0

    -5.0

    9.9

    -10.0

    12.3

    11.1

    2010-11 40.5

    43.2

    -5.1

    28.2

    10.1

    11.2

    -14.3

    22.7

    TERMS OF TRADE
    Terms of Trade in India increased to 113 Index Points in 2011 from 91 Index
    Points in 2010. Terms of Trade in India is reported by the Reserve Bank of
    India. Historically, from 2000 until 2011, India Terms of Trade averaged 90
    Index Points reaching an all time high of 113 Index Points in June of 2011 and a
    record low of 77 Index Points in June of 2007. In India, Terms of Trade (ToT)
    correspond to the ratio of Price of exportable goods to the Price of importable
    goods.

    Trade Deficit
    Causes of Trade Deficit In India

    Large size in
    imports of
    petroleum

    Others
    (fertilisers
    and pearls,
    precious
    stones)

    Disintegration
    of Soviet
    union

    Low world
    Demand

    Import
    restrictions in
    Foreign
    countries

    High cost

    Low quality

    Growing
    Competition

    Rising
    Imports

    Large
    increase in
    Development
    al Imports

    Modest
    growth
    of
    Exports
    Cost and
    Quality

    MEASURES TO CORRECT DEFICIT


    IN BALANCE OF TRADE
    Import
    Substitution
    and
    Restriction
    Export
    Promotion

    Licensing of Imports
    Tariff Restrictions
    Quantitative Restrictions

    Setting up Export processing Zones


    Devaluation of currency in 1991
    Income tax concessions to exporters
    Setting up EXIM Bank

    COMPOSITION OF TRADE
    Composition of exports
    S.
    No

    Commodity Group

    Year 2010-11 ( in
    %age)

    Agriculture and allied products

    9.9

    Ores and minerals ( excluding coal)

    4.0

    Manufactured Goods

    68.0

    Crude and petroleum products( Including


    coal)

    16.8

    Other and unclassified items

    1.2

    Total

    100.0

    Source : Economic Survey 2011-12

    Composition of Exports

    17%

    1% 10%
    4%

    68%

    Agriculture and allied


    products
    Ores and
    minerals(excluding coal)
    Manufactured Goods
    Crude and petroleum
    products (including coal)

    COMPOSITION OF IMPORTS
    S Commodity
    . Group
    N
    o

    Year
    201011

    Food and
    allied
    products

    2.9

    Fuel

    31.3

    Fertilisers

    1.9

    Paper Board,
    0.6
    manufacture
    and newsprint

    Composition of Imports

    Food and allied


    products

    Capital Goods

    13.1

    Others

    47.7

    Total

    100.0

    3%

    Fuel
    32%

    49%

    Fertilisers
    Paper Board

    2%
    13%

    1%

    Capital Goods
    Others

    DIRECTION OF TRADE

    ANALYSIS OF DIRECTION OF TRADE

    Constantly
    evolving
    directional
    pattern of
    trade

    Bilateral
    trade
    Surplus
    with 5
    countries

    Asia and
    Asian
    countriesimport as
    well as
    export

    UAE is
    Indias
    largest
    trading
    partner
    followed by
    China

    BALANCE OF TRADE AND BALANCE OF PAYMENT


    Balance of Trade refers to difference in the export and import of
    goods.
    Balance of Payment refers to systematic record of all economic
    transactions between the residents of a country and rest of the
    world in a year
    S. No. Balance of Trade

    Balance of Payment

    It records transactions
    relating to trade of goods
    only

    It records transactions relating


    to both goods and services.

    Balance of trade account


    does not record
    transactions of capital
    nature

    BoP account records


    transactions of capital nature
    also.

    It is a part of current
    account of the balance of
    payments.

    It is more comprehensive and


    has three accounts of which
    BoT is a part.

    CURRENT
    ACCOUNT

    Current Account to GDP in India is reported by the Ministry of Finance,


    Government of India. The Current account balance as a percent of GDP
    provides an indication on the level of international competitiveness of a
    country. Usually, countries recording a strong current account surplus have
    an economy heavily dependent on exports revenues, with high savings
    ratings but weak domestic demand. On the other hand, countries recording
    a current account deficit have strong imports, a low saving rates and high
    personal consumption rates as a percentage of disposable incomes. This
    page includes a chart with historical data for India Current Account to GDP.

    CAPITAL ACCOUNT

    TRENDS IN INDIAS BALANCE OF PAYMENTS

    STAGE I : 1951-52 TO 1975-76


    This period covers the first four five year plans.
    1. First Plan : Deficit in BoP on Current Account of Rs. 42
    Cr.
    2. Second Plan: Deficit in BoP rose to Rs. 1725 Cr.
    3. Third Plan: Deficit in BoP increased Rs. 1951 Cr.
    4. Three Annual plans wherein deficit rose to Rs. 2015 Cr.
    5. Fourth Plan: BoP favourable to the extent of Rs. 100
    Cr.

    Stage II : 1976-1977 to 1979-80 (A


    decade of comfort)

    STAGE III: 1980-81 TO 1989-90

    STAGE IV 1991-92 TO 2001-02


    1991 : Eighth plan

    2000: ninth plan

    Foreign Exchange Crisis

    Unfavourable BoP

    Devaluation, decontrol, liberalisation


    were introduced.

    Main reasons for the deficit were:

    (a)Import of Capital Goods


    (b)Increase in price of crude oil

    First four years of the plan


    recorded deficit of 69,434
    crores.
    Last year recorded surplus of
    6719 crore.

    Reasons for good performance:

    (a)Dynamic export performance


    (b)Increase in software services
    (c) Reduced non-oil import
    demands

    Stage V : 2002-03 till date


    Year

    Balance of

    Balance of

    Total Balance of

    Current A/C

    Capital A/C

    Capital A/C)

    Payments on

    Payment on

    Payments ( Current +

    1990-91

    -17,366

    +12,895

    -4,471

    2000-01

    -11,431

    +39,093

    +27,662

    2004-05

    -12,174

    +1,28,081

    +1,15,907

    2005-06

    -43,737

    +1,09,633

    +65,896

    2006-07

    -44,383

    +2,08,017

    +1,63,634

    2008-09

    -1,27,600

    +30,500

    -97,100

    2009-10

    -1,79,700

    +2,43,900

    +64,200

    2010-11

    -2,10,100

    +2,69,600

    +59,500

    2011-12

    -1,48,600

    +1,74,200

    +25,600

    Trends :Balance of Payment ( Current A/C + Capital A/C)


    200000

    150000

    100000

    50000
    Rupees in crores
    0

    -50000

    -100000

    -150000

    Balance of Payment ( Current A/C +


    Capital A/C)

    POLICY MEASURES TO MANAGE


    UNFAVOURABLE
    BALANCE OF PAYMENT

    Pre 1991 Trade Policy

    1991 CRISIS

    THE 1991 TRADE POLICY

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