Explain about recent trade practices in India.
Foreign Trade is the important factor in economic development in any nation. Foreign trade
in India comprises of all imports and exports to and from India. The Ministry of Commerce
and Industry at the level of Central Government has responsibility to manage such operations.
The domestic production reveals on exports and imports of the country. The production
consecutively depends on endowment of factor availability. This leads to relative advantage
of the financial system. Currently, International trade is a crucial part of development strategy
and it can be an effective mechanism of financial growth, job opportunities and poverty
reduction in an economy. According to Traditional Pattern of development, resources are
transferred form the agricultural to the manufacturing sector and then into services.
Historical review: Foreign trade in India began in the period of the latter half of the 19th
century. The period 1900-1914 saw development in India's foreign trade. The augment in the
production of crops as oilseeds, cotton, jute and tea was mainly due to a thriving export trade.
In the First World War, India's foreign trade decelerated. After post-war period, India's
exports increased because demand for raw materials was increased in all over world and there
were elimination of war time restrictions. The imports also increased to satisfy the restricted
demand. Records indicated that India's foreign trade was rigorously affected by the great
depression of 1930s because of decrement in commodity prices, decline in consumer's
purchasing power and unfair trade policies adopted by the colonial government. During the
Second World War, India accomplished huge export surplus and accumulated substantial
amount of real balances. There was a huge pressure of restricted demand in India during the
Second World War. The import requirements were outsized and export surpluses were lesser
at the end of the war. Before independence, India's foreign trade was associated with a
colonial and agricultural economy. Exports consisted primarily of raw materials and
plantation crops, while imports composed of light consumer merchandise and other
manufactures. The structure of India's foreign trade reflected the organized utilization of the
country by the foreign leaders. The raw materials were exported from India and finished
products imported from the U.K. The production of final products were discouraged. For
instance, cotton textiles, which were India's exports, accounted for the largest share of its
imports during the British period. This resulted in the decline of Indian industries. Since last
six decades, India's foreign trade has changed in terms of composition of commodities. The
exports included array of conventional and non-traditional products while imports mostly
consist of capital goods, petroleum products, raw materials, intermediates and chemicals to
meet the ever increasing industrial demands. The export trade during 1950-1960 was
noticeable by two main trends. First, among commodities which were directly based on
agricultural production such as tea, cotton textiles, jute manufactures, hides and skins, spices
and tobacco exports did not increase on the whole, and secondly, there was a significant
boost in the exports of raw manufactures such as iron ore. In the period of 1950 to 1951, main
products dominated the Indian export sector. These included cashew kernels, black pepper,
tea, coal, mica, manganese ore, raw and tanned hides and skins, vegetable oils, raw cotton,
and raw wool. These products comprised of 34 per cent of the total exports. In the period of
1950s there were balance of payments crunch. The export proceeds were not enough to fulfil
the emerging import demand. The turn down in agriculture production and growing pace of
development activity added pressure. The external factors such as the closure of Suez Canal
created tension on the domestic financial system. The critical problem at that moment was
that of foreign exchange scarcity. The Second Five Year Plan with its emphasis on the
development of industry, mining and transport had a large foreign exchange factor. This
tension on the balance of payments required the stiffening of import strategy at a later stage.
