Abstract:In present scenario, foreign trade considered essential for each nations of the world for their growth and development. In this globalised era all the nations of the world have realised its interdependence over other nations for one and the other resources, commodities and services because no country have self-sufficiency in terms of resources and technology in all over the globe. This paper emphasises on India’s performance in merchandise foreign trade after globalisation. At the present time, India is one of the fastest developing economy in the world with greater population growth and consumer demands. With the rise in per capita income of lower and middle income group people of India has appeared as bigger market in terms of imports of goods from different nations of the world. Along with this, increase in technology and innovation permits India to take active participation in production and competitiveness that leads to increased exports in globalising world. The present scenario of India’s merchandise foreign trade indicates trade deficits which means merchandise imports are increasing at faster rate than the merchandise exports. The study analyses the trends and performance in merchandise trade for the period of 28 years i.e. 1991-92 to 2018-19. The study also investigate the pattern of growth in India’s exports and imports throughout the study period. Further, the study also projecting the value of exports and imports from and to India for the next 6 years from 2019-20 to 2024-25.The present and the forecasted trend values of export and import state that these are going to be increase in terms of volume with upward trend but imports will grow slightly more than exports. The conclusive point is if India wants to increase itsshare in global trade then it has to increase its export potentials and reduce imports. At the same time, it has to increase its exports to other regions and capitalise the market.

Keywords: Foreign Trade, Globalisation, Merchandise Trade, Exports and Imports etc.

Introduction

Trade is the lifeline of any nation in the world which helps in economic growth and nation’s development. Trade can be well-defined as transference of goods and services from one to the other in exchange of money. But with the increase in domestic competition, it is hard to an economy to maintain its trade position with domestic trade. This circumstances leads to the concept of foreign trade. Foreign trade refers to business transactions taking place between two and more than two nations. Foreign trade is the trading of goods, services and capital over the national boundaries. This kind of trade can be conducted by an individual or government of a country. Foreign trade is vital for every nation because nonation on the globe have self-sufficiency. There is always a necessity of goods and services and capital by every nation, no matter what their natural or human resources are.

Foreign trade also plays an imperative role in India. India’smerchandise foreign trade has deep roots from early civilizations. We know about the foreign trade of ‘Harappan civilization’ with rest of the world. Along with this we also know about the ‘Silk route’ through which European civilizations were able to connect themselves with Asian countries. So, we can say that it is not a novel concept rather foreign trade co-operation has historical existence and it will further grow and develop.India’s trade relations flourished a lot with neighbouring countries like- Middle East Asia, Europe etc. But during British colonial rule, Britishers concentrated on exploiting the resources of India. The britishers focused on their own interest which created a situation, in which India could not benefited from major changes like- industrialisation, growth in trade, production etc. At the end of British colonial rule, India became one of the deprived and motionless economies in the world. As a result at the time of Independence India was completely depended on agriculture and most of the people involved in agriculture, which was scarce to feed rapidly accelerating population and contributing in growth of the economy.

India advocated an inward looking industrialization strategy with stress on import substitution in the course of planning for the Indian economy, just after the independence. Export development was neglected by the early planners as it was believed that demand for India’s traditional exporting products is inelastic and, therefore, only after a tough industrial base greater export earnings would be thinkable. As a result, India could not play a part properly with the world trading system. On the other hand, the dissatisfaction in import substitution; the debt difficulties, which caused macroeconomic instability; and the role of foreign creditors, for instance the International Monetary Fund and the World Bank, have been nominated of the fundamentalreasons of the economic reforms in India, which began in July 1991. The external sector reform such as foreign trade policy reform along with the liberalization, privatisation and globalisation (LPG) of trade has been the indispensable feature of the economic reform process of India. Anon-going process of liberalization, privatisation and globalisation (LPG) in external trade regime has been applied during the last three decades and India has incorporated progressively into the regional and the world economic system(Gupta, 2010).

India’s Merchandise Foreign Trade in Globalised Era

Major steps were taken in the early 1990s as part of the policy of liberalization and globalisation and this opened the new economy to India. This new innovative policy system completely in favour of a more open and market-oriented economy. Some major changes include scrapping the industrial licensing scheme, reducing the number of fields reserved for the public sector, changing the monopolies and restrictive trade practices act, starting the privatization scheme, reducing tariff rates and switching to market-specific exchange rates(Velayudham, 2002).In 1991 the Government of India commanded by the then Prime Minister P.V. Narasimha Rao with the former finance minister Manmohan Singh (known as father of new economic policy) decided for several reforms that are collectively termed as New Economic Policy of Liberalisation, Privatization and Globalisation (LPG) a step towards made economy more open.

Exports and imports growth picked up after new economic reforms (LPG), i.e. after 1991, and foreign trade support to GDP improved to 17.1 percent by 2000. However, import growth levels were greater than export growth rates during the era.Exports have executed well during the post-reforms period, specifically between 1992-93 and 1996-97; and between 2002-2003 and 2007-2008. As a share of GDP, exports grew from a point of 5.8% in 1990-91 on a balance ofpayments (BoP) basis to a point of 14.0% of GDP in 2006-07.Imports were put at 20.9 percent of GDP in 2006-07 as a percentage of GDP based on balance of payments (BoP). Thus, in 2006-07, the trade deficit increased to 6.9% of GDP. Anupsurge in petroleum, oil and lubricants as well as non-POL shares in imports could be credited to the more trade deficit. The steady increase in global prices and the increase in gold prices were the main contributors to this process.The trade account is defended by rising exports of services. India’s services exports in 2006-07 at $81.3 billion are improved rapidly with the country’s $127.1 billion merchandise exports. In 2006-07, the rate of growth in services exports was 32.5% matched to 21% in goods exports. India’s share of worldwideservices export is more than double of merchandise exports and India is one of the few nationswhich have enlarged their share of services exports in recent years(Pillania, 2008).

India’s merchandise exports attained a level of US$ 251.14 billion in 2010-11 recording a 40.49 percent growth contrasting to a 3.53 percent poor growth in the past year. In past few years, the export industry in India has revealedprominent strength and dynamism. Despite India's export sector's recent setback leading to worldwide slowdown, merchandise exports experienced a 20.0 percent CAGR from 2004-05 to 2010-11(Annual Report,2011-12).Over the period of April-December 2017-18, the country’s commodities exports rose by 12 percent to US$ 223.51 billion corresponding to US$ 199.46 billion over the year-ago period. Imports grew 21.76 percent to US$ 338.36 billion over the current fiscal nine-month period, leaving a trade deficit of US$ 114.85 billion (Economic Survey, 2018).

Significance of the Study

As we already discussed that Foreign trade is essential for the growth and development of any nation in the world because no nation on the globe have self-sufficiency.India advocated an inward looking industrialization strategy with stress on import substitution in the course of planning for the Indian economy, just after the independence.As a result, India could not play a part properly with the world trading system. In July 1991, the external sector reform such as foreign trade policy reform along with the liberalization, privatisation and globalisation (LPG) of trade has been the essentialattribute of the economic reform progression of India. An on-going process of liberalization, privatisation and globalisation in outward trade regime has been applied during the last three decades and India has incorporated progressively into the regional and the world economic system. Thus, study engaged in understanding the performance of India’s foreign trade i.e. merchandise exports and imports after globalisation.

Review of Literature

Hublikar & B.S.in their study “Recent Trends in India’s International Trade” studied the various aspects of India’s international trade. These aspects includes India’s merchandise and service trade performance, analyse India’s trade basket and India’s major trading partner. They found that India’s international trade in case of merchandise trade shows deficit, on the other hand in case of services shows surplus. They further stated that India can increase its global trade share by enhancing export potential and reducing imports. With this, India should try to establish trade relations and increase exports with other regions.P.& Raju,(2017) in their study “Emerging Trends in Foreign Trade of India-A Glimpse into the Post Globalisation Economy” analysed the post globalisation trend of Indian foreign trade and examines the trends of Indian exports and its projected values and  found that exports will increase during the forecasted period. Matore & Sagar,(2015) in their paper “India’s International Trade since Globalisation” examined the concept, significance and the direction of India’s trade after globalisation. They found in their study that exports and import are increasing but exports increasing at declining rate on the other hand, imports increasing at improving rate. As a result, balance of trade was and will be unfavourable during the post globalisation period. Sahu, (2017) in her paper “ A Comperative Study of Performance of India’s Trade in Pre and Post Liberalisation Period” examined the  India’s foreign trade during pre and post liberalisation period. This paper basically focused on changes in imports and exports alongwith growth of trade. She found in her study that total trade in post liberalisation has been significantaly higher than the pre liberalisation period. Thus, totaltrade of India significantly increases due to the effect of liberalisation. Agrawal,(2014) in his paper “Globalization and its Effect on India” focused on the impact of globalisation on India’s foreign trade and the economy. He found that there is an accelaration in the Indian economy after 1991. Due to the flow of globalisation, GDP of Indian economy increased that ultimately improve the global position of India. Globalisation has positively impacted the India’s foreign trade but share of India in foreign trade is very low.

Objectives

·         To study the post globalisation pattern of growth in exports and imports.

·         To analyse the trend of India’s exports and imports from 1991-92 to 2018-19.

·         To analyse the projected values of India’s exports and imports from 2019-20 to 2023-2024.

Research Methodology

This paper is descriptive cum analytical and purely based on secondary sources of data collected from various issues of online database of Reserve Bank of India, Directorate General of Commercial Intelligence and Statistics, Economic Survey, Journals and Articles and Web links, etc. Data relating to the period of 28 years from 1991-92 to 2018-19 have been used in the study for analysis. The statistical tools and methods used are percentage change, compound annual growth rate (CAGR) and trend analysis.

India’s Performance in Merchandise Foreign Trade after Globalisation

In 1991, India launched a broad-based trade liberalization, globalisation and economic deregulation program with the aim of closer integration of the Indian economy with the worldwide economy.The new trade policy since institution of NEP 1991reversed the direction followed for decades. Reducing tariff protection, relaxing and simplifying the system for import licensing, reducing control over local constraints and industrial licensing encouraged foreign trade. In order to boost domestic and export-oriented growth, the policy emphasis mainly on the liberalization of capital goods and inputs for industry(Setty, n.d.). In the post globalisation and liberalisation period trade of India changed significantly. Volume and composition of trade was prominently changed. On the other hand, the direction of India’s foreign trade was observed to be expended towards new countries and regional trading blocs. The openness of the Indian economy lead the trade towards new Asian countries and consequently, China become major trading partner of India. The most significant change regarding direction of India’s trade is fast growth of India’s trade with ASEAN group, Brazil, Mexico etc.

In order to assess the performance of India’s total trade i.e. exports and imports, it would be proper to take an overview of foreign trade performance of India. Keeping this in mind, in the table 1.1, India’s merchandise foreign trade performance during 1991-92 to 2018-19 have been presented.

An analysis of the table 1.1 reveals that India’s merchandise foreign trade registered more than 22 folds increase with ups and down in few years during the study period. It has been observed thatin 1991-92 the India’s merchandise foreign trade was US $ 37,276 million which continuously increased to US $ 76490.9 million in 1997-98. In 1998-99, it decreases slightly but from the next year it increases and showed continuous increasing pattern up to 2008-09 i.e. US $ 481633.4 million. It recorded continuous growth of more than 5 folds between the years 1999-2000 i.e. US $ 86493.1million and 2008-09 US $ 481633.4 million. Between 2010-11 and 2018-19 India’s merchandise foreign trade recorded a growth about 1.5 times with marginal fluctuations. It has been US $ 620905.3 million in 2010-11 and reached to US $ 844103.7 million in 2018-19. An analysis of the table states that India’s merchandise foreign trade increased significantly during study period. The compound annual growth rate (CAGR) of India’s merchandise foreign trade recorded 12.25 percent during the period taken under study.

Table- 1.1

 India’s Merchandise Foreign Trade Performance

                                                                                                                                                  (US $ Million)

Source: RBI Database, DGCI&S and Economic Survey, (Various Issues)

Note: Percentage growth calculated over the previous year.

India’s Merchandise Exports

An analysis of table 1.1 reveals that India’s total merchandise exports improvedmore than 18 folds with variations during the period taken under study. The interpretation exhibits that in post-globalisation at initial in 1991-92 was US $ 17865.4 million which continuously increased to US $ 35006.4 million in 1997-98. In 1998-99, it decreased slightly, but from the next year it showed increasing pattern till 2008-09 i.e. US $ 182799.5 million except 2001-02. During 2010-11 to 2018-19 total exports registered a growth about 1.5 times with the value of US $ 251136.2 million in 2010-11 and US $ 330069.6 million in 2018-19 as shown in figure 1.1(a). The compound annual growth rate (CAGR) of India’s total merchandise exports recorded 11.41 percent during the period taken under study. Exports performance can be observed graphically in figure 1.1(a).

India’s Merchandise Imports

Table 1.1 reveals the pattern of India’s total merchandise imports during 1988-89 to 2018-19. During this period total merchandise imports witnessed a growth of more than 26 folds.In post globalisation in 1991-92, it was US $ 19410.5 million which continuously increased to US $ 298833.9 million in 2008-09. In the year 2009-10, it recorded deterioration and stood at US $ 288372.9 million, but from the next year 2010-11, it again showed increasing trend with ups and downs in few years up to 2018-19. During 2010-11 to 2018-19 total imports registered a growth about 1.5 times with the value of US $ 369769.1 million in 2010-11 and US $ 514034.1 million in 2018-19 as shown in figure 1.1(a). The compound annual growth rate (CAGR) of India’s total imports recorded 12.90 percent during the period taken under study. Imports performance can be perceived graphically in figure 1.1(a).

Percentage Growth in Total Merchandise Trade

Table 1.1 represents the percentage growth in total merchandise foreign trade during 1991-92 to 2018-19. An analysis of the table reveals that growth in India’s merchandise foreign trade during post globalisation in 1992-93 at initial, it recorded 8.43 percent over previous year. Further, interpretation exhibits that the percentage growth over previous year was healthy during post globalisation period except few years. In between 1992-93 and 1999-2000, it recorded highest 24.53 percent over previous year in 1995-96 with negative growth of -1.16 percent over previous year in 1998-99 as shown in figure 1.1(a).

Figure-1.1(a)

India’s Exports and Imports and Growth of Total Trade

Source: Compiled by Author on the basis of data fromRBI Database, DGCI&S and Economic Survey, (Various Issues).