Growth and trade – volume, composition and direction of exports and imports
The composition of commodities in India’s international trade has been undergoing a change over the years. The share of agriculture and allied products has declined, whereas, shares of petroleum and crude products and other commodities have increased. The shares of ore minerals and manufactured goods have largely remained constant over the years from 2009-10 to 2010-11 2018-19.
The decline in traditional items is largely due to the tough international competition. Amongst the agricultural products, there is a decline in the export of traditional items, such as coffee, cashew, etc., though an increase has been registered in floricultural products, fresh fruits, marine products and sugar, etc.
Manufacturing sector alone accounted for 73.6 per cent of India’s total value of export in 2016-17. Engineering goods have shown a significant growth in the export. China and other East Asian countries are our major competitors. Gems and jewellery contributes a larger share of India’s foreign trade.
Changing Patterns of the Composition of India’s Import
India faced serious food shortage during 1950s and 1960s. The major item of import at that time was foodgrain, capital goods, machinery and equipment. The balance of payment was adverse as imports were more than export in spite of all the efforts of import substitution. After 1970s, foodgrain import was discontinued due to the success of Green revolution but the energy crisis of 1973 pushed the prices of petroleum, and import budget was also pushed up. Foodgrain import was replaced by fertilisers and petroleum. Machine and equipment, special steel, edible oil and chemicals largely make the import basket.
Direction of Exports
India’s largest export partner has been Asia. Exports to Asia have grown by more than 23.0% (CAGR), from USD 22.2 billion in 2009 to USD 150.4 billion in 2019. The next largest export destination is Europe (USD 58.8 billion in 2019), followed by America (USD 53.4 billion).
Although, nominally speaking, trade with Europe and America has risen over the 10 year period under consideration their share in overall exports has declined. Share of exports to Europe declined from 25.7% in 2013 to 19.6% in 2019, while that of America came down from 24.6% in 2013 to 17.8% in 2019. Coupled with increased trade integration with Asia, this shift of export direction away from America and Europe may be attributed to the moderation in economic activity in these countries, which has caused import demand from these countries (i.e. exports from India and others) to contract.
Direction of Imports
A major part of India’s imports are sourced from Asia itself (57.7% of overall imports which are due to the POL bill. Imports from Asia stood at USD 283.0 billion in 2019, registering growth of 26.0% over FY03 (CAGR, 2009-2019). In fact, there appears to be substantial difference in the value of imports from Asia and the next largest import partner of the country. After Asia, the next largest import sources is Europe (USD 91.7 billion), followed by America (USD 58.2 billion).
Recent trends
Exports inMay 2019 were USD29.99billion, as compared to USD28.86billion in May 2018, exhibiting a positive growth of 3.93per cent. In Rupee terms, exports were Rs. 2,09,280.62 crore in May 2019, as compared to Rs. 1,94,928.45crore in May 2018, registering a positive growth of 7.36per cent.
Cumulative value of exports for the period April-May 2019-20 was USD56.07billion (Rs.3,90,301.96 crore) as against USD54.77billion (Rs.3,64,981.41 crore) during the period April-May 2018-19, registering a positive growth of 2.37per cent in Dollar terms (6.94per cent in Rupee terms).
Imports in May 2019 were USD45.35billion (Rs. 3,16,448.93 crore), which was 4.31per cent higher in Dollar terms and 7.76per cent higher in Rupee terms over imports of USD43.48billion (Rs.2,93,660.48 crore) in May 2018. Cumulative value of imports for the period April-May 2019-20 was USD86.75billion (Rs.6,03,881.86 crore), as against USD83.11billion (Rs.5,53,745.15 crore) during the period April-May 2018-19, registering a positive growth of 4.39per cent in Dollar terms (9.05per cent in Rupee terms).
Composition of India’s export
The top items of agriculture exports include :
- Fish Products,
- Rice,
- Oil Cakes
- Fruits and Vegetables
The overall export performance of ores and minerals is not satisfactory. In percentage terms, the export performance of ores and mineral has increased from 4.4% in 1990-91 to 5.8 % in 2018-19.
Foreign trade policy of India
In the mid-term review of Foreign Trade Policy (FTP) 2015–20, the Ministry of Commerce and Industry enhanced the scope of Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS), increased MEIS incentive raised for ready-made garments and made-ups by 2% and raised SEIS incentive by 2% and increased the validity of Duty Credit Scrips from 18 months to 24 months.
In April 2020, the Government extended FTP for one more year, up to March 31, 2021. In August 2019, the Ministry of Commerce planned to introduce new FTP aimed at providing incentives and guidelines for increasing export in the next five financial years, starting FY20.