INTERNATIONAL TRADE BY

INDIA(Imran Khan)

EMBA,Delhi Technological University

International Trade?

International trade is an exchange of capital, goods and services across international borders. In most countries, it represents a significant share of gross domestic product (GDP).

International trade has been present throughout the history, its economic, social and political importance has been on the rise in recent centuries.

Cont…..The 2008 global financial crisis and subsequent slowdown

in the world economy has clearly demonstrated that tremor originating in one corner of the world can quickly reach other parts among others via the trade channel.

The 2008 crisis left world trade (both goods and services) shattered with a steep fall to a negative 19.8% in 2009.

For five years before the crisis (2003–2007) world trade value grew at a robust 16.6% (compound annual growth rate—CAGR) and for five years after the crisis (2009-2013) it grew at a subdued 9.9%.

India’s exports (goods and services) which also had robust growth of 30.1% in the five pre-crisis years (2003-2007) decelerated to 16.0% in the five post-crisis years (2009-2013).

Importance

Without international trade, nations would be limited to the goods and services produced within their own borders.

International trade is the backbone of modern commercial world, as producers in various nations try to profit from an expanded market, rather than be limited to selling within their own borders. There are many reasons that trade across national borders occurs, including lower production costs in one region versus another, specialized industries, lack or surplus of natural resources and consumer tastes.

RisksBuyer insolvency (purchaser cannot pay);Non-acceptance (buyer rejects goods as different from the agreed

upon specifications);Credit risk (allowing the buyer to take possession of goods prior

to payment)Regulatory risk (e.g., a change in rules that prevents the

transaction)Intervention (governmental action to prevent a transaction being

completed)Political risk (change in leadership interfering with transactions

or prices)War and other uncontrollable events.

In addition, international trade also faces the risk of unfavorable exchange rate movements

Trade In IndiaTrade and commerce have been the backbone of the Indian economy right from ancient times.

Textiles and spices were the first products to be exported by India.

The Indian trade scenario evolved gradually after the country’s independence in 1947. From the 1950s to the late 1980s, the country followed socialist policies, resulting in protectionism and heavy regulations on foreign companies conducting trade with India.

MERCHANDISE TRADE

• India’s ranking in the top merchandise exporters and importers in the world has also improved from 31st in 2000 to 19th in 2013 in exports and from 26th to 12th for imports in the same years, as per the World Trade Organization (WTO).

• Also an improvement in India’s total merchandise trade to GDP ratio from 21.8% in 2000-01 to 44.1% in 2013-14.

SERVICES TRADE• In commercial services trade, India was the sixth largest

exporter with 3.4% share of world exports and seventh largest importer with 3.0% share of world imports in 2012.

• The 2008 global financial crisis gave a big jolt to India’s service exports. In the five years prior to 2008 (i.e. 2003-04 to 2007-08) service export growth (CAGR) at 35.4% was faster and way above the merchandise export growth at 25.8%.

• In the five years post crisis (2008-09 to 2012-13), service export growth at 8.3% was below the 12.8% merchandise export growth.

• In 2012-13, service exports at US$ 145.7 billion showed a lower growth of 2.4% compared to the 14.2% in the preceding year. They improved slightly in 2013-14 with a 4% growth the same as merchandise export growth

India’s Trade: Imports

India’s major imports comprise of crude oil, machinery, military products, fertilizers, chemicals, gems, antiques and artworks. Imported goods are divided into the following categories:

Freely importable items: For these items, no import license is required. They can be freely imported by an individual or a firm.

Canalized items: These items can only be imported by public sector firms. For example petroleum products fall under this category.

Prohibited items: Items such as unprocessed ivory, animal rennet and tallow fat cannot be exported to India.

India’s Import Performance

India’s Trade: Exports

Indian exports comprise mainly of engineering and textile products, precious stones, petroleum products, jewelry, sugar, steel chemicals, zinc and leather products. Most of the exported goods are exempt from export duties.

India also exports services to several countries, primarily to the US. In fact, India is among the world’s largest exporters of services related to information and communication technology (ICT). It is also the key destination for business process outsourcing (BPO).

India’s Export Performance

EXIM BANK

Set up by an act (Export-Import Bank of India) of parliament in September 1981

Wholly owned by Government of India Commenced operations in march, 1982 Established “for providing financial assistance to exporters

and importers and for functioning as the principal financial institution for coordinating the working of institutions engaged in financing export and import of goods and services with a view to promoting the country’s international trade…”

A. EXPORTS (Receipts)Exports during July, 2014 were valued at US $ 13344

Million (Rs. 80142.20 Crore).

B. IMPORTS (Payments)Imports during July, 2014 were valued at US $ 6822

Million (Rs. 40971.98 Crore).

C. TRADE BALANCEThe trade balance in Services (i.e. net exports of Services) for July, 2014 was estimated at US $ 6522 Million.

INDIA’S FOREIGN TRADE (SERVICES)

(As per the RBI Press Release dated 15th September, 2014)

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