the change in the pattern of import and export of differnt product
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Trends and Patterns of Merchandise Exports and Imports of India in the Post-liberalization Era
Trends and Patterns of Merchandise Exports and Imports of India in the Post-liberalization Era
14.1 Introduction
The process of trade liberalization and market-oriented economic reform that had started in early 1980s intensified in the 1990s.During the past fifteen years, the Indian economy has become substantially more integrated to the world economy. The focus of these reforms has been on liberalization, openness, transparency and globalization with a basic thrust on outward orientation and on export promotion. The philosophy behind economic reforms was that the role of government in making decisions on resource allocation should be minimize. It was prophese that this would not only lead to growth and diversification but also to the upgrading of the production structure, facilitated by imported technology and improved skills enhanced by trade. It is asserted that trade liberalization would help diversification of the structure of exports and output in favour of manufactured good. Has it happened? If it did, has it been accompanied with growth of manufacturing value added and structural change in exports and output? To what extent have the objectives of reform been achieved? This paper seeks to explain all these probes in the light of the external sector performance over the last fifteen years. The introduction part is followed by an evaluation of the main aspects of India’s foreign trade policy since reforms. The following section analyses the trends and pattern of export and imports and the direction of trade in some detail. The final session summerises the important observations from the analysis.
Indian trade policy can be widely divided in to three periods- An initial period of export pessimism or period of ‘indiscriminate’ import substitution policy (1956-1965), a later Period of gradual transformation from protectionist policies to liberal policies with some incentives to exports and with a transformation from indiscriminate import substitution to ‘efficient’ import substitution (1965-1990) and a more recent Period of liberalization in economic policy, especially after economic reforms, which replaced the erstwhile inward looking strategy with outward oriented development strategy (1991-till date).
14.2 Policy changes in the 1990s.
The impact of excessive controls and regulations on the overall performance of the economy and the grounds on which the idea of economic refoms in India is supported are well documented in number of studies. (Bhagavathi and Desai, 1970, Bhagavathi and Sreenivasan, 1975 Jha 1980, Dhar 1990, Alhuvalia, 1994 et al). The inward looking policies resulted in limited Indian participation in world markets. It resulted in a high level of protection to domestic industries with an anti agricultural bias, and paid little attention to an export led growth.The collapse of the world’s leading centrally planned economy of USSR undermined India’s faith in the inward looking policys followed till 1990. The political developments and the gulf crisis during 1990-91 in the context of fragile BoP situation culminated in a payments crisis of unprecedented dimension in the first quarter of 1991-92. The forex reserves declined to a level barely enough to finance the import requirements of mear three weeks.A high rate of inflation much above 10 percent raised serious concerns on the macro economic stability of Indian economy.the gross fiscal deficit had grown to about 10 per cent of GDP.The current account deficit increased to the tune of 3.2 percent of GDP in 1990.The debt GDP ratio which increased through 1980’s reached almost 60 percent by 1990s. Large scale withdrawal of NRI deposits in expectation of an imminent devaluation made the economy highly vulnerable to external shocks. An analysis by Willem Buiter and Urjit Patel (1992) showed that unless corrective steps were taken, India faced fiscal insolvency.All these factors helped the reform policies to be politically acceptable.The fear of being left behind China, which presented a sustained growth record since its 1978 economic reforms, also made the new economic policy domestically salable.
Trends and Patterns of Merchandise Exports and Imports of India in the Post-liberalization Era
14.1 Introduction
The process of trade liberalization and market-oriented economic reform that had started in early 1980s intensified in the 1990s.During the past fifteen years, the Indian economy has become substantially more integrated to the world economy. The focus of these reforms has been on liberalization, openness, transparency and globalization with a basic thrust on outward orientation and on export promotion. The philosophy behind economic reforms was that the role of government in making decisions on resource allocation should be minimize. It was prophese that this would not only lead to growth and diversification but also to the upgrading of the production structure, facilitated by imported technology and improved skills enhanced by trade. It is asserted that trade liberalization would help diversification of the structure of exports and output in favour of manufactured good. Has it happened? If it did, has it been accompanied with growth of manufacturing value added and structural change in exports and output? To what extent have the objectives of reform been achieved? This paper seeks to explain all these probes in the light of the external sector performance over the last fifteen years. The introduction part is followed by an evaluation of the main aspects of India’s foreign trade policy since reforms. The following section analyses the trends and pattern of export and imports and the direction of trade in some detail. The final session summerises the important observations from the analysis.
Indian trade policy can be widely divided in to three periods- An initial period of export pessimism or period of ‘indiscriminate’ import substitution policy (1956-1965), a later Period of gradual transformation from protectionist policies to liberal policies with some incentives to exports and with a transformation from indiscriminate import substitution to ‘efficient’ import substitution (1965-1990) and a more recent Period of liberalization in economic policy, especially after economic reforms, which replaced the erstwhile inward looking strategy with outward oriented development strategy (1991-till date).
14.2 Policy changes in the 1990s.
The impact of excessive controls and regulations on the overall performance of the economy and the grounds on which the idea of economic refoms in India is supported are well documented in number of studies. (Bhagavathi and Desai, 1970, Bhagavathi and Sreenivasan, 1975 Jha 1980, Dhar 1990, Alhuvalia, 1994 et al). The inward looking policies resulted in limited Indian participation in world markets. It resulted in a high level of protection to domestic industries with an anti agricultural bias, and paid little attention to an export led growth.The collapse of the world’s leading centrally planned economy of USSR undermined India’s faith in the inward looking policys followed till 1990. The political developments and the gulf crisis during 1990-91 in the context of fragile BoP situation culminated in a payments crisis of unprecedented dimension in the first quarter of 1991-92. The forex reserves declined to a level barely enough to finance the import requirements of mear three weeks.A high rate of inflation much above 10 percent raised serious concerns on the macro economic stability of Indian economy.the gross fiscal deficit had grown to about 10 per cent of GDP.The current account deficit increased to the tune of 3.2 percent of GDP in 1990.The debt GDP ratio which increased through 1980’s reached almost 60 percent by 1990s. Large scale withdrawal of NRI deposits in expectation of an imminent devaluation made the economy highly vulnerable to external shocks. An analysis by Willem Buiter and Urjit Patel (1992) showed that unless corrective steps were taken, India faced fiscal insolvency.All these factors helped the reform policies to be politically acceptable.The fear of being left behind China, which presented a sustained growth record since its 1978 economic reforms, also made the new economic policy domestically salable.
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