A MINOR PROJECT REPORT

“A STUDY ON INDIAN EXPORT”

Under The Supervision Submitted By

Miss Prasoon Gupta Anjali Kanaujiya
Roll No. 2111772010028
B.Com VIth Sem

The Department of Commerce,

Techno institute of Higher Studies, Lucknow
University of Lucknow
 CERTIFICATE OF COLLEGE
Certified that this is a bonafide report of the project work undertaken by ANJALI

KANAUJIYA Roll No.: 2111772010028 of B.Com Semester VIth, in partial

fulfillment of the requirements for the award of the Bachelor‘s Degree in Commerce

of University of Lucknow under my supervision and guidance

Miss Prasoon Gupta Dr. Suresh Chand Shukla

Assistant Professor Principal Name

 DECLARATION

I hereby declare that the minor report entitled of “A STUDY ON INDIAN EXPORT” is

submitted to University of Lucknow it is a record of an original work done by me under the

guidance of Miss Prasoon Gupta (Faculty Guide) and this internship report is submitted in

the partial fulfillment of Bachelor of Commerce.

ANJALI KANAUJIYA

Roll No. 2111772010028

B.Com VIth Sem

 ACKNOWLEGEMENT

No project report ever reflects the efforts of a single individual. The report owes its existence to the

constant support and guidance of a number of people. I am thankful to all of them.

I would like to thank my faculty guide Miss Prasoon Gupta for giving her valuable time and guided

me to the completion of the Minor project report.

I am also grateful to all my friends, family members and my faculty members who have contributed

towards the completion of the project. I am thankful for their support and encouragement.

ANJALI KANAUJIYA

Roll No. 2111772010028

B.Com VIth Sem

4
 Abstract
Nations are concerned about improving the quality of life of their countrymen, which mainly comes
from overall, i.e. macroeconomic, development in a highly competitive and globalized world. The
major program of economic reform was introduce in 1991 with emphasize on external sector
wherein the protective tariffs were reduced and the restrictive import licensing regime was relaxed
and simplified. The objective of this paper is to study the Cross sectional comparison of import and
exports from the period 2003-2004 to2016-2017 and Economic growth of the country. This paper is
purely based on the secondary sources of the data collected form books, Journals, Thesis and
articles, web links. The analysis includes the study of Export and import of the government of
India, responses of the trade and investment policies of the Government of India. The study reveals
that it has been more of globalization in India and less of globalization of India. It can be somehow
concluded that, the exports are increasing with growing government focus on various policies
related to it but the imports are also increasing undoubtedly. Surely, there is a greater scope for
more increase in the foreign trade with better policies and reforms which lead to growth in GDP.

5
 TABLE OF CONTENTS
1. Introduction ...................................................................................................................... 1-5
1.1 Overview ..................................................................................................................... 1-4
1.2 Hypothesis and Objective ............................................................................................. 5
2. Literature Review .......................................................................................................... 6-28
2.1 Trends ......................................................................................................................... 6
2.2 Observations ...............................................................................................................13
3. Research Methodology .................................................................................................. 29-33
3.1 Keynesian Model of Income Determination ............................................................. 30
3.2 Description of Variables ............................................................................................ 31
4. Regression Results ....................................................................................................... 34-36
5. Conclusion ...................................................................................................................... 37-52
5.1 Policy Implications .................................................................................................... 40
References ......................................................................................................................... 53-54

6
1. Introduction
1.1 Overview
Since the early 1960s, both policy makers and academics have shown great interest in exploring
the possible relationship between international trade and economic growth. The reason is obvious.
Nations are concerned about improving the quality of life of their countrymen, which mainly comes
from overall, i.e. macroeconomic, development in a highly competitive and globalized world. So, ‖‖ ―

an appropriate trade policy has become very necessary and significant. Today no country in the
world is self-sufficient i.e. it does not possess facilities for economical production of all the goods
and services that are consumed by its people. Therefore, Foreign Trade is a vital sector of a
country's national economy, and contributes substantially to the economic welfare of the people and
the development of resources. There are many different approaches to achieve this goal, though not
‖ ―

a single foolproof. One possibility is to find new export markets for goods and services, as exports,
along with the imports of new technologies, is an important engine of development. This strategy,
however, raises the question: should a country promote exports and/or imports to speed up
economic development and growth, or should it primarily focus on economic growth to generate
international trade? There has been a considerable debate on the same in the literature. It is widely
‖

believed that exports are crucial in providing the impetus for economic growth in developing
countries in terms of production, new technology, and greater resource utilization and so on. Some
note that imports have positive influence on economic growth. Imports of capital goods are
especially important for developing countries which depend on foreign capital for their economic
development programs. Imports and exports are, thus, complementary, and need to be pursued
vigorously by all countries at various stages of development.
 INDIA
India‘s foreign trade was largely determined by the strategic needs of the British colonial powers
prior to its independence in 1947 .Like other colonies, India too was a supplier of raw materials and
agricultural commodities to Britain and other industrial countries and it used to import the
manufactured goods from Britain. But, since then, India‘s Trade performance has been increasing
which can be measured from various perspectives – imports, exports, trade balance, total trade, etc.
and its growth over the years.
 At the level of Central Government, it is administered by the Ministry of Commerce and
Industry.

1
  Government of India accesses financial assistance in the form of loans/ credits/ grants from
various multilateral agencies. The World Bank and the Asian Development Bank are
leading multilateral institutions for availing external assistance by India.
 IMF provides assistance like macro-economic growth, alleviation of poverty and economic
stability, policy advice & financing, forum for cooperation in monetary system, promotion
of exchange rate stability and international payment system.
 India is both a donor and a recipient of Global Environment Facility (GEF).
So, the paper revolves around the Trade Performance of India over the years and the impact of it on
the GDP of the Country.

India is one of the largest economies in the world and is known for its diverse export potential.
The Indian export sector has played a crucial role in the country's economic growth and
development. In recent years, India has emerged as a major player in the global export market,
with its exports accounting for a significant portion of its GDP. This paper aims to analyze the
various factors that contribute to the success of Indian exports and their impact on the country's
economy.

Overview of Indian Export Sector

India's export sector is a major contributor to its economic growth, accounting for around 20%

of the country's GDP. The sector has witnessed significant growth in the last few decades, with

its exports increasing from US$ 18 billion in 1990-91 to US$ 537 billion in 2018-19. India's

export basket is diverse, comprising of various goods and services such as petroleum products,

gems and jewelry, engineering goods, chemicals, textiles, agricultural products, and IT

services.

Factors driving Indian Export Growth

1. Government Initiatives: The Indian government has taken several initiatives to boost the

country's export sector. One of the most significant initiatives is the Foreign Trade Policy,
2
which provides various incentives and schemes for exporters. The government has also

introduced the 'Make in India' campaign to promote manufacturing and exports.

2. Cost Competitiveness: India's cost competitiveness is a major driver of its export growth.

The country's labor costs are relatively lower than other major economies, making it an

attractive destination for foreign investors. This has also helped in the growth of the

manufacturing sector, which is a major contributor to India's exports.

3. Skilled Workforce: India has a large pool of skilled and educated workforce, which has

been a key factor behind the growth of its export industry. The country's IT services sector,

which is one of the major export sectors, is highly dependent on its skilled workforce.

4. Diversification of Exports: India has been successful in diversifying its export basket,

reducing its dependence on a few traditional sectors. This has helped in mitigating the risks

associated with fluctuations in global demand for specific products or services.

5. Access to Global Markets: India has signed several trade agreements and has a favorable

trade policy with many countries, which has helped in increasing its access to global

markets. The country's geographical location also makes it a strategic export hub, with easy

access to major markets such as Europe, the Middle East, and Southeast Asia.

Impact of Indian Exports on the Economy

The growth of the Indian export sector has had a significant impact on the country's

economy. It has contributed to the growth of the manufacturing sector, providing

employment opportunities and boosting the country's GDP. The sector has also helped in

improving the balance of trade, with exports exceeding imports in recent years. This has led

to a reduction in the current account deficit and has also helped in strengthening the Indian

rupee.

Indian exports have also played a crucial role in the country's foreign exchange reserves,
3
which stood at US$ 579 billion as of June 2021. These reserves provide stability to the

Indian currency and help in managing external shocks.

Challenges faced by Indian Exporters

Despite the growth and success of the Indian export sector, there are several challenges that

exporters face. Some of the major challenges include:

1. Infrastructure: India's infrastructure, including ports, roads, and railways, is inadequate to

support the growing export demand. This leads to delays in shipments and increases the

cost of exports.

2. Logistics: The logistics cost in India is higher than that of other major economies,

making Indian exports less competitive in the global market.

3. Non-Tariff Barriers: Indian exporters also face non-tariff barriers such as technical

regulations, standards, and sanitary and phytosanitary measures in the importing countries,

making it difficult to access certain markets.

4. Exchange Rate Volatility: The high volatility of the Indian rupee can have a significant

impact on the competitiveness of Indian exports. A strong rupee makes exports more

expensive, while a weak rupee reduces the profit margins for exporters.

4
Hypothesis and Objective

India has a rich history of international trade and is gradually working to reap the benefits in the

best possible manner. Its impact on the economy has captured the minds of researchers and

economists since ages.

Our aim of the paper is to study the cross sectional comparison of exports, imports, and GDP (all

measured at current prices) in India spanning from 2003-2004 to 2016-2017, and to know:

 The direction of India‘s trade.

 Testing the impact of international trade on GDP of our country.

 And its impact on the Government‘s Actions and policies i.e. policy implications.

Since our findings have economic policy implications on the Indian trade policy, this paper is

expected to make a useful contribution to the empirical literature.

5
6. Literature Review
Various studies have been carried out to study the Impact of Foreign Trade on the GDP of
the country and on the Foreign Trade of India . Reviewing the relevant literature,
 India's Foreign Economic Policies by Jerome B. Cohen concludes that during the
fiscal year 1953-1954, expansionary pressures in India stemming from a budget deficit
and a balance-of-payments surplus were offset by expanding production and the anti-
inflationary policy of the Reserve Bank. Rising urban unemployment had a
deflationary impact, Exports increased and Imports fell off significantly. In the fiscal
year I954-I955, exports remained stable, but imports expanded, the money supply
expanded slightly, but prices fell. It was clear that a general rise in production and
incomes in India would require a larger aggregate volume of imports. The
International Monetary Fund Mission to India noted: The Five Year Plan is so essential
to the well-being of the people of India that it should be possible to find an agreed
basis for additional foreign aid to India. If the external resources are not forthcoming,
more severe import controls will be needed to hold the foreign exchange deficit within
available exchange resources. This will compel India to curtail imports of consumers'
and developmental goods, thus creating internal inflationary pressures and retarding
economic development. Unless its foreign economic policies are managed effectively,
India's economic development may be retarded to the point where it falls behind a
rising population. Thus domestic factors which affect its external economic relations,
as well as the foreign economic policies which it pursues, are vital to India's economic
growth and stability.

The above study very well concluded that proper Year Plans are needed along with
increase in the domestic productivity to improve the competitiveness of the Trade of
India. Effective Trade Policies and the Five Year Plans in the later periods worked very
well to help improve the Position of our country in the Trade Market. This helps us to
study the reasons for the change required in the views of the Government to make the
country more liberalize, privatize and globalize.

 Impact of Exports and Imports on Growth Rate of India: An Empirical Enquiry

by Dr. Sushil Kumar Rai and Ms. Purvashree Jhala provided the dependence of
growth rate on the exports and imports during the entire reform period. The period

6
 after 1991 has been marked by a substantial transformation in trade policy and the
policy of trade is tilted towards export promotion and import substitution/restriction to
achieve higher growth rate. A causal relationship among these variables vis-à-vis
growth rate, exports and imports was established and the results revealed that there is a
positive relationship between growth rate and exports. The Exports and the Imports
have contributed significantly in the determination of the growth. It was also observed
by the paper that Imports have greater impact than Exports. Finally, it was concluded
that mere Export promotion and Import substitution policy were not enough for
achieving GDP Growth, but, a policy containing a proper combination of Export and
Import would help better.

The study helps us to know that merely Export Promotion and Import Substitution were not
enough to increase the GDP of the country. A proper combination of Export, Imports and
Trade Policies were needed to overcome from the Economic Crisis of 1991. And so, various
changes were seen in the upcoming Trade Policies which focused more on increasing the
Exports of the country. Also, it was studies that there existed a positive relationship between
Growth Rates and Exports which provides us with the base of the existing relationship
between the variables and to study the trend thereafter.

 Analysis of Trade Before and After the WTO: A Case Study of India by Dr.
Shamsher Singh provided the trade of India before and after the World Trade
Organization. To analyze the impact of WTO on foreign trade of India the study was
divided into two parts ten years before and ten years after the WTO. It was concluded
that trade of the India has not been increased up to the expectations that results in to
low gaining of benefits from world trade. The trade volume of India was increasing
after the WTO implementation, and the rate of increase in imports of India was greater
than rate of increase in exports. The imports remained more than exports for whole of
the years during pre and post the WTO, except 1991 and 1993. The relatively slower
growth rate of exports as compared to imports has contributed more towards the
slower growth rate of trade. For India, both the growth rate of exports and imports has
risen after the WTO. Thus, WTO has been playing a very important role in India's
foreign trade.

7
The above study claims that India‘s performance has not been up to the mark before WTO
came into agreement with India. The targets achieved by the India were not up to the mark. A
helping hand was needed to increase the Trade of the country and reach the desired results.
Interestingly, the Trade Volume substantially increased but the worry was that the increase in
Imports was more than the increase in Exports. Thus, significant role of WTO can be studied
and we can see how the GDP grew and the Policies which were implemented to increase the
overall performance of the country.

 India’s international trade since globalization by Amol Dattatraya Matore and

Sunanda Sagar provided the meaning of globalization in terms of the genesis, the
evolution, and the characteristics of globalization with respect of India. The analysis
included the study of Export and Import of the government of India, responses of the
trade and investment policies of the Government of India. The study revealed that
globalization with reference of India has been rather shallow in its characteristics. So,
it can be concluded that, the exports were increasing at a decreasing rate but the
imports were increasing at an increasing rate. As a result, the balance of trade was
becoming unfavorable to India during the post globalization period. The composition
of India's foreign trade has undergone substantial changes, particularly, after the
liberalization and globalization. Major Exports include manufacturing goods such as
Engineering Goods, Petroleum Products, Chemicals and allied Products, Gems and
Jewelries, Textiles, Electronic Goods, etc. It is a remarkable achievement that India
has transformed itself from a predominantly primary goods exporting country into a non-
primary goods (manufactured goods) exporting country.

This paper makes us study the transformation of Indian Trade post Globalization like the
increase in the Exports of various goods. This paper leaves us to a thought that measures t o
increase the Exports of the country were given a thought and the initiatives were taken by the
Government to increase the same. This builds our mind to look for the Trade Initiatives and
Policies which will fall in favor of the Indian Trade thereby increasing the competitiveness by
efficiently mobilizing the resources and study the initiatives which are already taken by the
Government.

 India’s Foreign Trade Since 1947-2015: Impact on Indian Economy Growth by Obaid-
Ur-Rehman provided that with the Liberalization, Privatization and
8
 Globalization of the Indian economy and following liberal foreign trade, there had
been changes in the business environment. There had been increase in the trade
volume in the India‗s international trade, and the Exports from India also have
increased. The total value of India‘s merchandise export increased from 1950-1951 to
in 2014-2015. After Liberalization of 1991, India trade growth has picked up place. In
the last decade and at present, the composition of trade is dominated by manufactured
goods and services. The share of exports of Indian service sector in global exports is
more than double of that of Indian exports. Under the central Governments‘ campaign
―MAKE IN INDIA ―new projects will be coming upon the future in our economy.

This paper provides us the with the Trade conditions in the recent years which makes us
believe that Exports have increased but the ratio of increase in services is more than the
manufactured goods. Also, GDP growth has been concluded which shows the changes over
the years. The paper helps us study the Trade changes over the years and builds up the
thoughts on programs / initiatives like MAKE IN INDIA which will help us perform better in
the International Market. More of such initiatives are needed to increase the competition.

6.1 TRENDS:

1. TIME PERIOD RANGING FROM 1990 to 2003

India was a latecomer to economic reforms, embarking on the process in earnest only in 1991, in
the wake of an exceptionally severe balance of payments crisis. The need for a policy shift had
become evident much earlier, as many countries in East Asia achieved high growth and poverty
reduction through policies which emphasized greater export orientation and encouragement of the
private sector. India took some steps in this direction in the 1980s, but it was not until 1991 that the
government signaled a systemic shift to a more open economy with greater reliance upon market
forces, a larger role for the private sector including foreign investment, and a restructuring of the
role of government.

What made India take certain economic reforms to shift to an open economy was:

9
“THE 1991 FINANCIAL CRISIS”

Macroeconomic crisis can be defined as ―the one which generally takes the form of accelerating
inflation and unsustainable fiscal and current account deficits.‖ The deterioration in India‘s balance
of payments situation which started from the Seventh Plan onwards ultimately reached to a critical
position in the year 1990 – 91. Its origin can be traced from the inefficient management of the
Indian Economy in the 1980s wherein the balance of payments was under severe pressure (due to
unsustainable borrowing and high expenditure) and significant loss of foreign exchange reserves
was being experienced. A number of reasons that contributed to the crisis namely,

 Iraq- Kuwait War led to rise in the Crude oil prices. As a result, the oil import bill
increased by about 60 percent in 1990-91. This accounted for rise in trade deficit from an
average of $ 356 million per month in June-August 1990 to $ 677 million per month in the
following 6 months.
 Slow Growth of Important Trading Partners: The deterioration of the current account
was also induced by slow growth in economies of important trading partners. Export
markets were weak in the period leading up to India‘s crisis, as the world growth declined
steadily from 4.5 percent in 1988 to 2.25 percent in 1991.
 Political Uncertainty and Instability: The period from November 1989 to May 1991 was
marked with political uncertainty and instability in India. The three coalition governments
led to delay in tackling the ongoing balance of payment crisis, and also led to a loss of
investor confidence.
 Loss of Investors’ Confidence: The widening current account deficits and reserve losses
contributed to low investor confidence. Due to the loss of investors‘ confidence, commercial
bank financing became hard to obtain, and outflows began to take place on short-term
external debt, as creditors became reluctant to roll over maturing loans.
 Fiscal Indiscipline: Throughout the eighties, all the important indicators of fiscal
imbalances were on the rise. These were the conventional budgetary deficit, the revenue
deficit, the monetized deficit and gross fiscal deficit.
 Increase in Non-oil Imports: The trends in imports and exports show that imports rose
much faster than exports during the eighties. Imports increased by 2.3 percent of GDP,
while exports increased by only 0.3 percent of GDP. As a consequence, trade deficit
increased from an average of 1.2 percent of GDP in the seventies, to 3.2 percent of GDP in
eighties.

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 (₹ in crores)
Period Oil Imports Non- Oil Imports Total Imports
26041.61 54491.03 80532.64
1981-82 to 1985-86
(32.00) (68.00) (100.00)
28299.75 120796.18 149095.93
1986-87 to 1990-91
(19.00) (81.00) (100.00)

Table 1: The Oil and Non- Oil Imports

Source: Reserve Bank of India – Handbook of Statistics on Indian Economy 2005-06

 Rise in External Debt: In the second half of the 1980s, the current account deficit was
showing a rising trend and was becoming unsustainable. The current account deficit was
mainly financed with costly sources of external finance such as external commercial
borrowings, NRI deposits, etc. The current account deficit increased from ₹11,350 crore in
1989-90 to ₹17,350 crore in 1990-91.
Thus, the balance of payments situation came to the verge of collapse in 1991, mainly because
the current account deficits were mainly financed by borrowing from abroad. The economic
situation of India was critical; the Government was close to default. Government of India's
immediate response was to secure an emergency loan of USD 2.2 billion from the International
Monetary Fund by pledging 67 tons of India's gold reserves as collateral. The Reserve Bank of
India had to airlift 47 tons of gold to the Bank of England and 20 tons of gold to the Union
Bank of Switzerland to raise USD 600 million. These moves helped tide over the balance of
payment crisis temporarily and kick-started P V Narasimha Rao‘s economic reform process.
In the light of the above discussion, we may now examine the macroeconomic strategy for
dealing with India's Economic Crisis to lift the Indian economy out of the crisis in order to
achieve an effective macroeconomic turnaround:

o The profitability of exports should be systematically improved, so that selling in the

domestic market does not necessarily remain more profitable than selling in the
international market. This would require improved access to critical, imported raw materials
and streamlining of various export incentives. The past experience shows that relatively
faster growth of exports has been experienced by those industries which had ready access to
imported inputs at international prices.
o Export incentives should be linked to a much greater extent with net exports rather than
gross exports, i.e., exports less import content of exports. This would ensure relatively faster

11
 growth of value added exports and also simultaneously encourage internationally
competitive import substitution.
o There is a need to pursue the policy of depreciation of the real effective exchange rate. It
is necessary to follow it at a rate higher than the average differential between the domestic
and the international inflation rates. Such effective depreciation of Indian Rupee in real
terms would lead to a significant improvement in the competitiveness of India's exports and
at the same time also improve the viability of several import substitution projects which in
turn could result in a reduction in import intensity in Indian manufacturing.
o There is a need to focus on the turnaround of loss making public enterprises. In the case of
financially viable public enterprises, there is a need to facilitate their growth through Export
oriented modernization and expansion programs. Moreover, it is necessary that more and
more public enterprises are asked to finance the bulk of their current import requirements
through direct export earnings.
o There is a need to decrease the ratio of government expenditure to GDP by ensuring that
the percentage change in government consumption expenditure is significantly less than the
expected percentage change in GDP (measured at current prices).
o Significant emphasis needs to be placed on stepping up and stream lining the tax collection
effort in the areas of both direct as well as indirect taxes. It is evident; therefore, that better
tax administration can contribute significantly in achieving the required reduction in the
budget deficit.

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6.2 OBSERVATIONS
India remained a protected economy for quite a long time that had been described as an ‗import
substituting country par excellence‘ (Rodrik 1996). Prior to the 1990s, import regime was
dominated by quantitative restrictions on imports and a highly protectionist import tariff structure.
The World Bank included India in the list of ‗strongly inward-oriented‘ countries, meaning that the
overall incentive structure strongly favored production for the domestic market (Dutta and

Ahmed, 2004). So, in order to improve the situation, the crisis was converted into an
opportunity to introduce some fundamental changes in the content and approach to economic
policy. The response to the crisis was to put in place a set of policies aimed at stabilization and
structural reform. The policy measures undertaken aimed at making domestic industry cost-
efficient by enhancing efficiency in resource use under international competition, which was
expected to derive a better export performance in the long-run. The major trade policy changes in
the post-1991 period included simplification of procedures, removal of quantitative restrictions, and
substantial reduction in the tariff rates as also their dispersion as recommended by the Tax Reforms
Committee, 1992 (Chairman: Raja J. Chelliah). Furthermore, the reach of the export incentives
was broadened, extending the benefits of various export-promotion schemes to a large number of
non-traditional and non-manufactured exports. Following the announcements in the Export Import
(EXIM) policies, various changes were effected such as the removal of quantitative restrictions,
strengthening the export production base, removal of procedural bottlenecks, technological up
gradation, and improvement of product quality. Various steps were also taken to promote exports
through multilateral and bilateral initiatives, including identification of thrust areas and focus
regions. The policy stance also marked a move away from the provision of direct export subsidy to
indirect promotional measures. Under the policy of liberalization interest rate of the banking
system were determined by all commercial Banks. Investment limit of the small scale industries
had been raised to ₹1 crore. Indian industries were free to buy machines and raw materials from
foreign countries to do their holistic development. Industries were free to diversify their production
capacities and reduce the cost of production. According to Monopolies and Restrictive Trade
Practices (MRTP) Act 1969, all those companies having assets worth ₹100 crore or more were
called MRTP firms and were subjected to several restrictions. Previously private sector had to
obtain license from Government for starting a new venture. In this policy private sector had been
freed from licensing and other restrictions. But, licensing is necessary for liquor, cigarette, defense
equipment, industrial explosives, drugs and hazardous chemical industries. Sale of shares,
disinvestment in PSU‘s, minimization of Public Sector, forcing trade policy for longer duration, and

13
 increase in equity limit of Foreign Investment was made. A scheme for setting up Special
Economic Zones (SEZs) in the country to promote exports was initiated. The SEZs are to provide
an internationally competitive and hassle-free environment for exports and are expected to give a
boost to the country‘s exports. The amended Export-Import policy, 2002-07, announced on 31
March, 2003, specifically emphasized service exports as an engine of growth.

o Through reform, India overcame its worst economic crisis in the remarkably short period
of two years. Macroeconomic stabilization policies including devaluation of rupee and other
structural reforms, the BOP crisis was over by the end of March 1994 and foreign exchange
reserves rose to USD 15.7 billion. Inflows of both FDI and FII into India have increased.
India also increasingly integrated its economy with the global economy. The ratio of total
exports of goods and services to GDP in India approximately doubled from 7.3 percent in
1990 to 14 percent in 2000. This rise was less dramatic on the import side but was
significant, from 9.9 percent in 1990 to 16.6 percent in 2000. Within 10 years, the ratio of
total goods and services trade to GDP rose from 17.2 percent to 30.6 percent. (₹ in crores)

Exports Imports
Trade
Year Exports %change Imports %change Total Trade (% to (% to
Balance
GDP) GDP)
1990-91 32,553.0 17.70 43,198.0 22.28 75,751.0 (10,645.0) 5.72 7.39
1991-92 44,041.0 35.29 47,851.0 10.77 91,892.0 (3,810.0) 6.73 7.31
1992-93 53,688.0 21.90 63,375.0 32.44 117,063.0 (9,687.0) 7.13 8.42
1993-94 69,751.0 29.92 73,101.0 15.35 142,852.0 (3,350.0) 8.06 8.45
1994-95 82,674.0 18.53 89,971.0 23.08 172,645.0 (7,297.0) 8.14 8.86
1995-96 106,353.0 28.64 122,678.0 36.35 229,031.0 (16,325.0) 8.92 10.29
1996-97 118,817.0 11.72 138,920.0 13.24 257,737.0 (20,103.0) 8.62 10.08
1997-98 130,100.0 9.50 154,176.0 10.98 284,276.0 (24,076.0) 8.52 10.10
1998-99 139,752.0 7.42 178,332.0 15.67 318,084.0 (38,580.0) 7.98 10.18
1999-00 159,561.0 14.17 215,236.0 20.69 374,797.0 (55,675.0) 8.15 11.04
2000-01 203,571.0 27.58 230,873.0 7.27 434,444.0 (27,302.0) 9.58 10.86
2001-02 209,018.0 2.68 245,200.0 6.21 454,218.0 (36,182.0) 9.17 10.76
2002-03 255,137.0 22.06 297,206.0 21.21 552,343.0 (42,069.0) 10.39 12.11
2003-04 293,367.0 14.98 359,108.0 20.83 652,475.0 (65,741.0) 10.65 13.04
2004-05 375,340.0 27.94 501,065.0 39.53 876,405.0 (125,725.0) 11.92 15.91
2005-06 456,418.0 21.60 660,409.0 31.80 1,116,827.0 (203,991.0) 12.73 18.41
2006-07 571,779.0 25.28 840,506.0 27.27 1,412,285.0 (268,727.0) 13.85 20.30
Table 2: Trends in India's Foreign Trade

Sources: 1) Reserve Bank of India (2009), Handbook of Statistics on Indian Economy 2008-09, Mumbai

14
 2) RBI (2010), Reserve Bank of India Bulletin, vol.64 No.8, August 2010
3) Economic Survey 2009-10, Government of India, New Delhi.

Exports
350,000.0
300,000.0
IN CRORES

250,000.0
200,000.0
150,000.0
Exports
100,000.0
50,000.0
-
1 2 3 4 5 6 7 8 9 10 11 12 13 14
YEARS

Graph1: Exports of India from 1990-91 to 2003-04

o The exports of India seem to have a positive trend over the years ranging from 1990-2003.
A positive trend line shows that exports were increasing after the implementation of Foreign
Trade Policy and the steps taken by the Government to improve its situation after the
Economics Crisis of 1990.

Imports
400,000.0
350,000.0
300,000.0
IN CRORES

250,000.0
200,000.0
150,000.0 Imports
100,000.0
50,000.0
-
1 2 3 4 5 6 7 8 9 10 11 12 13 14
YEARS

Graph2: Imports of India from 1990-91 to 2003-04

15
o Imports of India also show a positive trend line indicating that Imports of goods and
services were increasing substantially over the period 1990-2003.

Trade Balance
-
1 2 3 4 5 6 7 8 9 1011121314
(10,000.0)
(20,000.0)
IN CRORES

(30,000.0)
(40,000.0) Trade Balance
(50,000.0)
(60,000.0)
(70,000.0)
YEARS

Graph 3: Trade Balance of India from 1990-91 to 2003-04

o The above graph shows the Trade Balance of India for the time period ranging from 1990-
2003. It can be seen from the line-trend graph that Trade Balance of the country for the
initial few years was substantially low but it has been increasing since then. The year 1999
shows the increase in Trade Balance figure from -₹38,580crores to -₹55,675crores and in
the year 2000, there was a cut in the Trade Balance figure to -₹27,302crores. But, thereafter
it has been increasing.

o Also, reforms led to increased competition in the sectors like banking, leading to more
customer choice and increased efficiency. It has also led to increased investment and
growth of private players in these sectors. There was a fall in inflation rates as reforms
pushed up production of goods and services resulting in either prices falling or remaining
constant. There was a significant Improvement in GDP, from 1950 to 2000.

16
 (In Percentage)
Year Growth Rate Year Growth Rate
1990–91 5.6 1997–98 4.8
1991–92 1.3 1998–99 6.5
1992–93 5.1 1999–00 6.1
1993–94 5.9 2000–01 (P) 4.4
1994–95 7.3 2001–02 (Q) 5.6
1995–96 7.3 2002–03 (Q) 4.4
1996–97 7.8
Table 4: Growth Rate of India from 1990-91 to 2002-03

Source: Author‘s calculations based on Table 1.2 of Economic Survey, 2002–03.

(Annual Growth Rates of GDP, 1990–03)

Growth Rate
9
8 7.3 7.3 7.8
In Percentage

5.9 6.5 6.1

7 5.6 5.1 5.6
6 4.8 4.4 4.4
5
4
3 1.3
2
1
0 Growth Rate
1990–91
1991–92
1992–93
1993–94
1994–95
1995–96
1996–97
1997–98
1998–99
1999–00

2001–02 (Q)
2002–03 (Q)
2000–01 (P)

Years

Graph 4: Growth Rates of India for the Year spanning from 1990-91 to 2002-03

17
 2. TIME PERIOD RANGING from 2003 to 2017

A. INDIA’s FOREIGN TRADE

Trade performance of a country can be measured from various perspectives – imports, exports,
Trade Balance, total trade, etc. and its growth over the years. The impact of trade reforms is
evident from the changing structure of India‘s Foreign Trade in terms of diversity of market and
products, and also in the form of higher degree of trade openness (resulting from higher export
growth and the associated increase in the capacity to import).

(₹ in crores)
Year Export Import Trade Balance
2003-04 293,367 359,108 (65,741)
2004-05 375,340 501,065 (125,725)
2005-06 456,418 660,409 (203,991)
2006-07 571,779 881,515 (309,736)
2007-08 655,864 1,012,312 (356,448)
2008-09 840,755 1,374,436 (533,680)
2009-10 845,534 1,363,736 (518,202)
2010-11 1,136,964 1,683,467 (546,503)
2011-12 1,465,959 2,345,463 (879,504)
2012-13 1,634,318 2,669,162 (1,034,844)
2013-14 1,905,011 2,715,434 (810,423)
2014-15 1,896,348 2,737,087 (840,739)
2015-16 1,273,323 1,915,849 (642,526)
2016-17 1,644,589 2,290,979 (646,389)

Table 5: India’s Exports and Imports for the period 2003-04 to 2016-17
The Table above gives India‘s Exports and Imports from 2003-2004 to 2018-2019. As may be
seen from the Table that for the year 2004-05, there were increase in both Exports and Imports
figures with imports crossing ₹5 lakhs crores and with annual growth of almost 40%, a double rate
of growth compared to previous year; exports also performed well at ₹3.75 lakhs crores with 28%
growth in 2004-05 in comparison to 15% growth in 2003-04. However, the impact was noticed
more in balance of trade figures as it crossed one lakh crores (₹125725 crores) and grew with 91%
in 2004-05 compared to 56% of 2003-04. From this point, the country could not recover and the
balance of trade figures were ever increasing since then except for 2009-10 when the growth was
negative due to global slowdown impact. The impact was such that during 2009-10, both exports

18
and imports, there were decrease in the rate of growths; for exports it was merely 0.6%, whereas for
imports, it was negative growth for the first time with – 0.8% in 2009-10. The resulting impact was
that the balance of trade also showed negative growth with 2.9%. However, in 2010-11 and 2011-
12, the growths of balance of trade increased along with the exports and imports. In 2010-11, the
exports growth was 35% but import growth was less at 23%, resulting in only 4% growth in
balance of trade. However, in 2011-12, the import grew significantly at 39% and exports grew less
at 28%, resulting in whipping growth in balance of trade at 63%. Ultimately, there is a trend in
settling down during 2012-13, as export and import growth were 11% and 14% and the balance of
trade growth was 18%. However, in value terms, the balance of trade crossed the million mark and
stood at ₹1.03 million crores in 2012-13. In year 2013-2014, export and import growth were 16.6%
and 1.7% and the balance of trade account decreased to ₹810,423. For the year 2014-2015, there
were decrease in the rate of growths; for exports it was -0.45%, whereas for imports it was -0.80%.
The resulting impact was that the balance of trade growth was 3.74%. In the year 2015-2016, there
was a significant decrease in both the exports and imports value which is seen by their respective
negative growth rates i.e. -32.85% and -30%. The trade balance growth turned to -23.58%. We can
see that for the period 2016-2017, there is an increase in exports by 29.16% whereas the growth rate
for imports is 19.58%. The trade balance rested at ₹646,389 for the year.

B. COMPOSITION OF TRADE
The composition of India's foreign trade has undergone substantial changes, particularly, after
the liberalization and globalization. Our major exports now includes manufacturing goods such
as Engineering Goods, Petroleum Products, Chemicals and allied Products, Gems and
Jewelries, Textiles, Electronic Goods, etc. which constitute over 80 per cent of our export
basket. On the other hand, major import items constitute capital goods and intermediates, which
not only support the manufacturing sector but also supplies raw-materials for the export
oriented units.
 COMPOSITION OF EXPORTS
Based on the categorization of exports by the Government of India, we have the following
analysis of the composition of exports and changes therein. Table 1.2 represents the top
Export commodities of India‘s Foreign Trade for the period spanning from 2003-04 to
2016-17 (namely, iron and steel, plastic, metals, coffee, spices, cotton, etc.). Our exports
have been significantly decreasing and increasing during our study period. For the period
2003-04, the export percentage of the selected commodities was 80.13% which decreased to

19
 79.9% in the year 2006-07. ₹457253.76 crores export total was seen during this period. The
percentage increased to 81.33% in the next year but the percentage couldn‘t be maintained a
fall was seen during the year 2008-09. The exports again shot up in the subsequent years
and it reached 80.72% in the year 2012-13. A significant decrease has been seen thereof i.e.
the export percentage has been declining from 80.49% in 2013-14 to 78.26% in the year
2015-16 and it finally increased to 79.05% in the year 2016-17.

(₹ in crores)
HSCode Commodity 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Natural Or Cultured
Pearls,Precious Or
Semiprecious
71 49,451.06 64,864.10 70,208.73 72,784.16 79,763.09 128,826.92 138,148.30
Stones,Pre.Metals,Clad With
Pre.Metal And Artcls
Thereof;Imit.Jewlry;Coin.
Mineral Fuels, Mineral Oils
And Products Of Their
27 17,159.81 32,082.87 52,537.60 85,541.99 116,877.97 127,324.15 136,853.57
Distillation; Bituminous
Substances; Mineral Waxes.
Articles Of Apparel And
62 Clothing Accessories, Not 16,273.06 17,670.10 24,064.86 23,908.55 21,821.24 27,125.56 29,055.48
Knitted Or Crocheted.
29 Organic Chemicals 12,974.59 16,267.41 21,504.02 25,949.43 28,869.67 34,057.90 35,241.28
Articles Of Apparel And
61 Clothing Accessories, 12,414.90 11,867.70 14,128.23 16,371.72 17,206.45 23,264.13 21,776.62
Knitted Or Corcheted.
72 Iron And Steel 11,906.82 18,953.65 16,883.57 25,337.11 26,397.87 33,643.15 21,306.32
Nuclear Reactors, Boilers,
84 Machinery And Mechanical 11,517.15 14,858.83 18,539.76 23,038.74 27,353.92 36,496.84 34,099.57
Appliances; Parts Thereof.
52 Cotton. 11,330.50 10,167.47 13,212.22 17,755.51 20,714.30 14,224.31 21,622.96
Electrical Machinery And
Equipment And Parts
Thereof; Sound Recorders
85 And Reproducers, Television 8,726.41 9,308.39 12,252.92 18,591.80 21,519.19 43,723.32 34,325.10
Image And Sound Recorders
And Reproducers,And
Parts.
Vehicles Other Than Railway
Or Tramway Rolling Stock,
87 8,013.49 11,074.06 14,580.52 17,040.57 18,035.61 27,497.13 29,147.50
And Parts And Accessories
Thereof.
Other Made Up Textile
Articles; Sets; Worn Clothing
63 7,467.71 8,869.65 10,540.14 10,414.43 9,574.42 10,822.31 11,662.82
And Worn Textile Articles;
Rags
30 Pharmaceutical Products 7,444.53 9,263.42 10,821.24 14,380.27 16,711.65 23,379.34 24,566.27
73 Articles Of Iron Or Steel 7,030.41 10,379.76 12,461.38 15,384.16 20,967.94 26,495.95 19,363.54
10 Cereals. 6,956.68 9,022.57 7,232.61 7,670.51 14,757.89 15,086.44 14,228.15
Plastic And Articles
39 6,136.93 9,459.00 9,565.35 12,405.48 11,218.81 11,501.90 13,011.54
Thereof.
26 Ores, Slag And Ash. 6,006.84 16,799.24 19,713.27 22,059.51 28,089.47 24,814.98 31,302.45
Fish And Crustaceans,
3 Molluscs And Other Aquatic 5,680.95 5,904.06 6,292.04 7,077.73 5,983.59 5,958.23 8,581.93
Invertabrates.
Articles Of Leather,Saddlery
And Harness;Travel Goods,
42 Handbags And Similar 4,594.53 4,831.25 5,368.12 5,502.20 5,704.81 7,296.99 6,811.62
Cont.Articles Of Animal
Gut(Othr Thn Silk-

20
 Wrm)Gut.
54 Man-Made Filaments. 3,994.80 4,466.69 4,060.16 4,650.14 5,451.06 7,060.41 9,541.41
Footwear, Gaiters And The
64 Like; Parts Of Such 3,527.76 4,092.24 4,627.64 5,596.97 5,996.21 7,056.83 7,152.52
Articles.
Residues And Waste From
23 The Food Industries; 3,400.33 3,229.94 4,971.37 5,620.82 8,313.32 10,591.74 8,191.68
Prepared Animal Foder.
Carpets And Other Textile
57 3,373.68 3,715.30 4,963.67 5,464.65 5,068.46 4,873.29 4,987.03
Floor Coverings.
55 Man-Made Staple Fibres. 3,312.49 3,565.62 3,643.13 4,746.12 5,528.96 5,663.72 6,719.23
Coffee, Tea, Mate And
9 3,291.57 3,724.31 4,007.24 5,398.87 6,160.67 7,680.16 7,638.17
Spices.
Tanning Or Dyeing Extracts;
Tannins And Their Deri.
Dyes, Pigments And Other
32 3,111.60 3,111.26 3,749.71 4,562.32 5,327.43 5,899.49 6,555.92
Colouring Matter; Paints And
Ver; Putty And Other
Mastics; Inks.

Table6.1: Total Exports of India (2003-04 to 2009-10)

Source: commerce.gov.in
(₹ in crores)
HS
Code Commodity 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Natural Or Cultured
Pearls,Precious Or
Semiprecious
71 198,885.64 226,290.94 238,458.53 252,175.41 253,939.99 259,177.80 93,397.47
Stones,Pre.Metals,Clad
With Pre.Metal And Artcls
Thereof;Imit.Jewlry;Coin.
Mineral Fuels, Mineral
Oils And Products Of
27 Their Distillation; 194,487.68 274,387.04 337,567.33 392,383.12 351,110.80 203,885.14 216,413.32
Bituminous Substances;
Mineral Waxes.
Articles Of Apparel And
62 Clothing Accessories, Not 30,364.66 38,100.08 40,290.66 50,445.57 56,220.87 61,029.45 61,762.53
Knitted Or Crocheted.
29 Organic Chemicals 41,051.75 56,179.25 65,874.42 72,860.47 73,068.90 75,325.18 78,716.78
Articles Of Apparel And
61 Clothing Accessories, 22,555.58 27,638.48 30,238.18 40,338.56 46,804.11 50,153.37 55,439.85
Knitted Or Corcheted.
72 Iron And Steel 32,532.28 39,759.16 44,041.60 56,048.28 53,075.14 35,830.23 58,534.61
Nuclear Reactors, Boilers,
Machinery And
84 41,377.51 52,050.75 62,846.71 73,169.92 84,432.58 86,731.40 94,803.80
Mechanical Appliances;
Parts Thereof.
52 Cotton. 31,430.48 43,601.75 48,514.30 60,486.59 47,244.70 47,983.44 44,570.51
Electrical Machinery And
Equipment And Parts
Thereof; Sound Recorders
85 And Reproducers, 46,167.42 55,376.63 59,144.07 62,428.21 53,153.91 52,411.61 55,247.64
Television Image And
Sound Recorders And
Reproducers,And Parts.
Vehicles Other Than
Railway Or Tramway
87 42,415.87 52,556.82 66,399.18 78,569.75 88,525.46 94,039.53 100,714.21
Rolling Stock, And Parts
And Accessories
Other Made Up Textile
63 Articles; Sets; Worn 14,128.67 18,930.43 21,987.49 27,040.18 28,405.96 30,015.54 31,668.85
Clothing And Worn

21
 Textile Articles; Rags

30 Pharmaceutical Products 30,383.20 40,816.86 54,773.67 67,403.71 70,815.10 84,481.21 86,944.33

73 Articles Of Iron Or Steel 29,962.97 33,987.75 40,477.62 41,256.51 46,445.06 40,251.64 39,791.55
10 Cereals. 15,235.11 30,624.91 52,567.81 63,542.85 58,282.22 40,966.26 40,624.56
Plastic And Articles
39 18,150.36 25,311.61 28,020.54 34,153.81 31,022.09 34,338.56 35,642.19
Thereof.
26 Ores, Slag And Ash. 23,874.33 26,217.31 12,915.36 13,345.13 5,992.29 4,523.83 12,495.93
Fish And Crustaceans,
3 Molluscs And Other 10,548.94 15,836.90 18,071.28 29,451.17 32,084.38 29,378.92 37,001.16
Aquatic Invertabrates.
Articles Of
Leather,Saddlery And
Harness;Travel Goods,
42 Handbags And Similar 7,193.54 9,718.12 11,399.25 14,301.41 15,501.18 15,618.29 15,778.87
Cont.Articles Of Animal
Gut(Othr Thn Silk-
Wrm)Gut.
54 Man-Made Filaments. 10,468.87 12,466.41 12,112.37 15,574.81 14,621.09 13,459.62 13,378.72
Footwear, Gaiters And The
64 Like; Parts Of Such 8,012.94 9,963.90 11,246.05 15,473.83 18,012.38 17,932.23 18,619.87
Articles.
Residues And Waste From
23 The Food Industries; 11,441.72 12,308.69 17,592.36 18,597.36 10,006.15 5,236.62 7,432.59
Prepared Animal Foder.
Carpets And Other Textile
57 6,360.22 5,926.29 7,748.80 9,557.25 11,120.31 11,298.10 11,928.96
Floor Coverings.
55 Man-Made Staple Fibres. 8,255.85 10,598.99 10,564.94 12,620.84 13,334.21 13,624.62 14,428.62
Coffee, Tea, Mate And
9 9,928.33 14,663.38 14,927.25 16,635.31 17,563.10 19,326.56 21,681.11
Spices.
Tanning Or Dyeing
Extracts; Tannins And
Their Deri. Dyes, Pigments
32 And Other Colouring 7,719.62 9,336.34 11,371.81 15,454.90 17,205.86 16,165.14 17,250.34
Matter; Paints And Ver;
Putty And Other Mastics;
Inks.

Table6.2: Total Exports of India (2010-11 to 2016-17)

Source: commerce.gov.in

 COMPOSITION OF IMPORTS
Based on the categorization of imports by the Government of India, we have the following
analysis of the composition of imports and changes therein. Table 1.3 represents the top Import
commodities of India‘s Foreign Trade for the period spanning from 2003-04 to 2016-17 (namely,
iron and steel, plastic, mineral oils, cotton, etc.). From the period 2003 to 2011, the imports of the
selected commodities have increased and the change revolves around a percentage of 90% to 91%.
Also, the import percentage of these commodities reached 93.14% in the year 2008-09 which the
highest so far, but in the year 2009-10, it again declined and reached 91.70%. A significant
decrease has been seen thereof i.e. the import percentage has been declining from 90.80% to
88.77% in the year 2016-17. The import figure of the top 25 commodities reached ₹2,287,891.06
crores in the year 2016-2017.

22
 (₹ in crores)
HS
Code Commodity 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Mineral Fuels, Mineral Oils And
Products Of Their Distillation;
27 104,311.08 156,445.45 222,740.24 279,907.27 347,205.46 466,747.35 455,178.83
Bituminous Substances; Mineral
Waxes.
Natural Or Cultured
Pearls,Precious Or Semiprecious
71 Stones,Pre.Metals,Clad With 65,044.51 93,387.35 91,604.14 102,249.88 106,451.99 197,015.03 218,248.46
Pre.Metal And Artcls
Thereof;Imit.Jewlry;Coin.
Nuclear Reactors, Boilers,
83 Machinery And Mechanical 31,857.46 43,366.98 61,606.78 84,228.25 101,808.67 121,154.24 113,682.82
Appliances; Parts Thereof.
Electrical Machinery And
Equipment And Parts Thereof;
Sound Recorders And
84 30,165.68 40,193.31 52,680.40 65,924.91 80,812.49 115,062.18 104,765.83
Reproducers, Television Image
And Sound Recorders And
Reproducers,And Parts.
29 Organic Chemicals 14,363.01 18,784.89 22,775.24 27,329.75 32,642.33 38,852.82 44,505.49
Animal Or Vegetable Fats And
Oils And Their Cleavage
15 11,868.59 11,372.75 10,151.70 10,261.37 11,129.67 16,089.11 26,697.31
Products; Pre. Edible Fats;
Animal Or Vegetable Waxex.
72 Iron And Steel 8,155.31 15,077.42 24,113.34 27,741.87 36,592.16 46,917.25 41,746.54
Optical, Photographic
Cinematographic Measuring,
89 Checking Precision, Medical Or 7,143.03 9,053.55 11,759.35 14,083.13 17,015.09 22,242.38 20,834.66
Surgical Inst. And Apparatus
Parts And Accessories Thereof;
Ships, Boats And Floating
88 6,363.29 7,954.74 12,004.04 12,175.25 17,389.30 21,233.60 15,152.45
Structures.
Inorganic Chemicals; Organic Or
Inorganic Compounds Of
28 Precious Metals, Of Rare-Earth 5,916.26 8,130.10 10,445.86 11,473.27 11,392.82 21,492.12 16,269.72
Metals, Or Radi. Elem. Or Of
Isotopes.
39 Plastic And Articles Thereof. 5,685.28 7,491.70 11,318.34 13,386.78 16,557.76 20,385.44 6,128.93
Aircraft, Spacecraft, And Parts
87 5,371.49 7,153.93 22,045.60 23,818.99 53,569.97 24,625.39 23,520.87
Thereof.
Miscellaneous Chemical
38 3,362.05 4,045.33 5,024.69 6,390.18 7,357.38 10,688.00 11,579.25
Products.
Wood And Articles Of Wood;
44 3,325.38 4,077.11 4,230.53 4,845.44 5,686.56 6,263.61 7,688.19
Wood Charcoal.
Paper And Paperboard; Articles
48 Of Paper Pulp, Of Paper Or Of 2,961.85 3,188.16 4,056.51 5,301.00 5,506.97 7,921.78 6,904.86
Paperboard.
73 Articles Of Iron Or Steel 2,951.19 3,983.79 5,789.12 11,448.46 13,265.66 16,807.73 13,229.13
Edible Vegetables And Certain
7 Roots And Tubers. 2,622.17 2,018.73 2,823.04 4,578.60 5,674.88 6,556.19 10,653.98
Vehicles Other Than Railway Or
86 Tramway Rolling Stock, And 2,594.51 3,794.41 4,523.34 6,154.94 9,401.43 13,695.21 14,643.34
Parts And Accessories Thereof.
26 Ores, Slag And Ash. 2,327.39 4,562.23 6,837.87 25,974.73 18,705.82 21,412.44 21,580.52
31 Fertilisers. 2,313.94 4,320.68 7,423.84 12,118.55 18,454.10 54,837.43 28,479.76
40 Rubber And Articles Thereof. 2,247.58 3,045.03 3,281.24 5,050.46 5,979.61 7,396.74 8,634.28
52 Cotton. 2,222.91 2,015.28 1,939.57 2,104.64 2,195.75 2,900.15 2,360.91
Edible Fruit And Nuts; Peel Or
8 2,174.93 2,911.65 3,484.68 3,736.64 3,576.21 5,048.66 5,922.90
Citrus Fruit Or Melons.

23
 Pulp Of Wood Or Of Other
Fibrous Cellulosic Material;
47 1,880.04 2,199.46 2,537.15 2,892.67 3,132.12 3,706.30 4,177.84
Waste And Scrap Of Paper Or
Paperboard.
Salt; Sulphur; Earths And Stone;
25 Plastering Materials, Lime And 1,849.78 2,905.41 3,372.98 3,887.29 5,662.75 11,141.42 7,961.17
Cement.

Table7.1: Total Imports of India (2003-04 to 2009-10)

Source: commerce.gov.in

(₹ in crores)
HS
Commodity 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Code
Mineral Fuels, Mineral Oils
And Products Of Their
27 527,787.71 827,965.68 986,085.57 1,098,311.62 953,438.80 632,021.89 691,279.77
Distillation; Bituminous
Substances; Mineral Waxes.
Natural Or Cultured
Pearls,Precious Or
Semiprecious
71 350,396.43 434,598.46 455,856.02 345,029.56 381,514.70 369,480.50 360,262.29
Stones,Pre.Metals,Clad With
Pre.Metal And Artcls
Thereof;Imit.Jewlry;Coin.
Nuclear Reactors, Boilers,
83 Machinery And Mechanical 132,161.94 180,001.65 191,736.06 185,270.12 194,162.77 215,429.02 215,314.59
Appliances; Parts Thereof.
Electrical Machinery And
Equipment And Parts Thereof;
Sound Recorders And
84 123,859.25 157,337.53 162,266.98 176,460.98 202,763.99 235,586.83 258,696.29
Reproducers, Television Image
And Sound Recorders And
Reproducers,And Parts.
29 Organic Chemicals 57,549.80 69,144.21 85,439.09 103,156.90 108,319.83 101,986.09 103,797.91
Animal Or Vegetable Fats And
Oils And Their Cleavage
15 30,056.18 46,568.05 61,630.10 57,152.82 65,184.54 68,927.14 73,406.92
Products; Pre. Edible Fats;
Animal Or Vegetable Waxex.
72 Iron And Steel 50,133.22 65,749.40 74,125.28 54,908.18 75,516.31 73,557.89 55,277.57

Optical, Photographic
Cinematographic Measuring,
Checking Precision, Medical
89 24,109.12 31,907.54 37,181.27 40,636.00 43,109.10 47,581.26 49,624.12
Or Surgical Inst. And
Apparatus Parts And
Accessories Thereof;
Ships, Boats And Floating
88 16,016.08 21,573.88 39,285.19 40,895.89 30,662.58 29,716.58 38,058.02
Structures.
Inorganic Chemicals; Organic
Or Inorganic Compounds Of
28 Precious Metals, Of Rare-Earth 17,236.10 27,791.60 28,770.37 29,063.08 31,413.15 33,169.58 31,724.45
Metals, Or Radi. Elem. Or Of
Isotopes.
39 Plastic And Articles Thereof. 34,477.10 40,577.91 52,283.05 61,071.80 71,397.78 74,566.28 77,577.56
Aircraft, Spacecraft, And Parts
87 15,675.63 19,811.10 25,691.41 26,033.74 28,792.91 32,577.67 56,445.31
Thereof.
Miscellaneous Chemical
38 13,934.90 17,854.59 20,649.70 23,107.37 25,493.54 27,207.39 30,566.93
Products.
Wood And Articles Of Wood;
44 7,763.10 12,271.77 14,743.22 16,033.26 16,021.06 15,502.34 13,403.33
Wood Charcoal.

24
 Paper And Paperboard;
48 Articles Of Paper Pulp, Of 9,209.01 11,892.26 12,406.18 14,517.82 15,801.87 16,204.57 18,162.94
Paper Or Of Paperboard.
73 Articles Of Iron Or Steel 16,465.41 21,826.91 22,308.21 21,798.37 24,355.14 24,519.78 23,260.62
Edible Vegetables And Certain
7 7,582.27 9,488.97 13,408.34 12,928.15 17,358.82 26,409.29 28,813.12
Roots And Tubers.
Vehicles Other Than Railway
Or Tramway Rolling Stock,
86 19,029.77 24,735.06 26,847.76 27,080.44 29,722.46 32,642.18 31,653.15
And Parts And Accessories
Thereof.
26 Ores, Slag And Ash. 24,927.10 32,062.33 39,803.04 39,386.46 45,040.07 35,296.60 28,693.89
31 Fertilisers. 28,321.74 44,996.03 40,412.45 32,639.45 39,106.15 45,973.11 28,754.19
40 Rubber And Articles Thereof. 13,309.65 18,470.16 19,785.69 20,778.65 19,863.74 19,064.68 19,500.49
52 Cotton. 1,895.18 2,430.88 4,280.24 4,312.04 4,511.43 3,907.65 7,581.65
Edible Fruit And Nuts; Peel Or
8 6,291.89 10,051.34 11,744.38 12,480.93 16,287.75 19,883.99 20,359.53
Citrus Fruit Or Melons.
Pulp Of Wood Or Of Other
Fibrous Cellulosic Material;
47 5,207.85 6,524.46 6,990.52 8,378.75 10,323.08 10,698.85 11,087.62
Waste And Scrap Of Paper Or
Paperboard.
Salt; Sulphur; Earths And
25 Stone; Plastering Materials, 8,388.82 16,468.01 16,493.23 14,315.67 16,608.62 16,846.74 14,588.81
Lime And Cement.
Table7.2: Total Imports of India (2010-11 to 2016-17)
Source: commerce.gov.in

C. DIRECTION OF INDIA’S FOREIGN TRADE

Over the years, India's trade with various countries has gone up substantially as can be seen in
the following table. Apart from that, India is now a major player in global trading system and
all the major sectors of Indian economy are linked to world outside either directly or indirectly
through international trade.
(₹ in crores)

S.No. Country 2003-04 2007-08 2011-12 2013-14 2015-16 2016-17

1 Australia 2,684.91 4,630.13 11,990.22 13,958.49 21,331.63 19,886.34
2 UK 13,892.31 26,967.48 41,140.23 59,219.16 57,771.40 57,386.98
3 USA 52,798.54 83,388.07 166,455.42 236,589.80 263,859.28 283,806.53
4 China PRP 13,579.06 43,597.42 87,470.82 90,561.09 58,932.74 68,417.53
5 Japan 7,854.45 15,515.59 30,511.34 41,253.45 30,433.54 25,852.37
6 Mexico 1,215.07 2,382.05 6,578.45 13,571.28 18,793.55 23,291.37
7 Canada 3,507.00 5,094.01 9,923.74 12,344.04 13,206.80 13,469.78
8 Bangladesh PR 7,998.98 11,743.21 18,386.69 37,411.26 39,527.25 45,126.82
9 Sri Lanka DSR 6,061.91 11,374.29 20,951.46 27,643.67 34,651.84 26,291.12
10 Singapore 9,763.93 29,662.23 80,363.00 74,966.20 50,531.32 64,144.04

Table 8.1: India’s Foreign Trade (Exports) with selected 10 countries

Source: commerce.gov.in

25
 Exports from selected 10 countries
₹
300,000.00
C 250,000.00
R 200,000.00
O 150,000.00 2003-2004
100,000.00
R 50,000.00 2007-2008
E -
2011-2012
S
2013-2014
2015-2016
2016-2017

Country

Graph 5.1: India’s Foreign Trade (Exports) with selected 10 countries

(₹ in crores)

S.No. Country 2003-04 2007-08 2011-12 2013-14 2015-16 2016-17

1 Australia 12,173.59 31,552.08 74,619.62 58,957.59 58,180.67 74,864.43

2 Bangladesh PR 356.71 1,034.68 2,796.36 2,903.33 4,767.07 4,721.63
3 Canada 3,335.57 7,940.18 14,112.66 19,029.83 27,792.77 27,726.11
4 China PRP 18,625.14 109,116.07 265,465.62 309,234.96 404,043.38 411,124.50
5 Japan 12,258.39 25,457.80 57,671.03 57,211.69 64,493.15 65,424.97
6 Mexico 339.55 4,765.43 12,413.51 22,353.02 14,905.12 19,775.91
7 Singapore 9,582.60 32,682.18 39,708.48 41,063.47 47,734.89 47,540.89
8 Sri Lanka DSR 894.85 2,540.92 3,036.60 4,064.45 4,853.58 4,039.80
9 UK 14,862.26 19,941.52 34,093.94 36,043.02 33,936.31 24,583.53
10 USA 23,135.83 84,625.42 112,362.90 135,613.46 142,678.20 149,897.94

Table 8.2: India’s Foreign Trade (Imports) with selected 10 countries

Source: Commerce.gov.in

26
 Imports from selected 10 countries
450,000.00
400,000.00
₹
350,000.00
C
300,000.00
R
250,000.00 2003-2004
O 200,000.00
R 150,000.00 2007-2008
E 100,000.00 2011-2012
S 50,000.00
- 2013-2014
2015-2016
2016-2017

Country

Graph 5.2: India’s Foreign Trade (Imports) with selected 10 countries

D. Economic Growth in India

The growth experience of India since independence in 1947, has been relatively unique amongst
developing countries. It achieved neither the ‗miracle‘ growth rates (exceeding 6 percent and going
as high as 10 percent annually) of neighboring East and Southeast
Asian nor prolonged periods of stagnation and/or decline as experienced by some African and Latin
American countries. Instead growth has been relatively stables, and in consequence Indian GDP has
increased significantly during the period 1950-2005. From 1950 to 1980 India adopted a classic
import substitution approach to development, with a socialist dimension, and over this period grew
at the so-called ―Hindu‖ rate of 3.5% per annum. From 1980 onwards, however, the Indian state has
shifted more towards the East Asian models of development and has achieved a higher growth rate
of over 5% per annum. A glance at the table 1.5 clarifies that economic growth in India has
continued to high since 2000. The growth has been particularly high in industry, with agriculture
experiencing lower rates of growth. The table indicates the real GDP growth at constant prices for
the period 2003-04 to 2016-17. There was a significant increase in GDP growth from 7.9% on
2003-04 to 9.8% in 2007-08. A drastic fall was seen in the year 2008-09 with the GDP value of
3.9%. In 2010-11, a 10.3% of GDP was seen but a decline in this percentage was seen thereof. A
6.6% value was reached in the year 2013-2014 which was a question of major concern. Steps were
taken to bring back the Real GDP Growth rates to the target. Eventually, GDP increased and
reached 7.6% in the year 2015-16. The rate has been same for the period 2016-17.

27
 (% change)
Years GDP (Constant Prices) Years GDP (Constant Prices)
2003-04 7.9 2010-11 10.3
2004-05 7.8 2011-12 6.6
2005-06 9.3 2012-13 5.6
2006-07 9.3 2013-14 6.6
2007-08 9.8 2014-15 7.2
2008-09 3.9 2015-16 7.6
2009-10 8.5 2016-17 7.6
Table 9: Real GDP Growth for the Period 2003 to 2017
Source: https://knoema.com/atlas/India/Real-GDP-growth

GDP (Constant Prices)

12
10
% change

8
6
4
2 GDP (Constant Prices,
0 Percentage Change)
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17

Years

Graph 6: Real GDP Growth for the Period 2003 to 2017

28
3. Research Methodology

Our analysis is proceeded in the following manner:

1. Analysis of the Existing Literature on foreign trade policies of India
2. Fetching the dataset from live sources of portals and govt. reports
3. Implementation and execution of the dataset on statistical tools
4. Generation of assorted reports and graphs for analysis and drawing the conclusion

The study is based on the econometric analysis through regression, t test/R² to see the effect of the
Explanatory variables i.e. Value of Imports and Exports, Consumption, Investment and
Government Expenditure on the dependent variables i.e. Gross Domestic Product (GDP) for the
snapping period 2003-2004 to 2016-2017.

A multivariable regression equation has been constructed in the log form. Database is purely based
on the secondary sources of the data collected form books, Journals, Thesis and articles, web links.
The database collected provides us with the figures from the year 2003 to 2016.

With the help of the Keynesian model, the following regression model can be used to study the
impact of Net Exports on the GDP of our country:-

Ln GDPt= Ln Ct + Ln It + Ln Gt +Ln Xt +Ln Mt + Ut

Where

 Ln= Log
 C= Consumption
 I= Investment
 G= Government Expenditure
 X= Exports
 M= Imports

29
3.1 Keynesian Model Of Income Determination

The Keynesian model of income determination in the macroeconomic analysis is:

AD= C + I + G + NX

Wherein,

1. AD = Aggregate Demand i.e. the total amount of goods demanded in an economy.

2. I = Investment
3. C = Consumption
4. G = Government Expenditure
5. NX = Net Exports i.e. Exports minus Imports

It analyses the feedback effects between spending ad output.

Assumptions of the Keynesian Theory are-

 The prices of the goods and the factors of production do not change or are given.
 The firms are willing to sell any amount of the output at the given price level.
 The above two imply that the short run aggregate supple curve will be flat and hence
changes in aggregate demand will determine the economy‘s level of output.

The equilibrium level of output exists where the quantity of output produced equals the quantity
of output demanded i.e. AD=Y

Hence, the equation becomes-

Y= AD = C + I + G + NX

The above equation denotes the income- expenditure identity stating that income (Y) equals total
expenditure (C + I + G + NX).

Where,

 Y= National income/ GDP

 C= Private Final Consumption Expenditure
 I= Investment Expenditure
 G= Government Final Consumption Expenditure
 X= Exports of Goods and Services

30
  M= Imports of Goods and Services

3.2 REGRESSION EQUATION

In our paper, we have run the following regression equation (Expenditure approach) to test the
results:-

LN GDP = LN PFCE + LN CF + LN GFCE + LN X + LN M + Ut

Where,

LN PFCE, LN CF, LN GFCE, LN X, LN M are the explanatory variables of the regression model
and LN GDP is the dependent variable.

o LN= Log
o LN PFCE= Private Final Consumption Expenditure
o LN CF= Capital Formation
o LN GFCE= Government Final Consumption Expenditure
o LN X= Exports of Goods and Services
o LN M= Imports of Goods and Services

LN GDP= a + b1 (LN PFCE) + b2 (LN CF) + b3 (LN GFCE) + b4 (LN X) + b5 (LN M)

Here,

 a= Intercept coefficient
 b1= Coefficient of LN PFCE
 b2= Coefficient of LN CF
 b3= Coefficient of LN GFCE
 b4= Coefficient of LN X
 b5= Coefficient of LN M

It will be a cross sectional analysis for the given time period. Excel was used to run regressions and
find the desired results. We have included the complete Keynesian model to avoid any
discrepancies while running the regression equations.

The OLS ESTIMATORS are used to find the estimation of the results. There are several methods
of obtaining the Sample Regression Function as an estimator of the true Population Regression
Function, in Regression Analysis the method that is used most frequently is the least squares (LS),
more popularly known as the , method of ordinary least squares (OLS). The method of ordinary

31
least squares is attributed to Carl Friedrich Gauss, a German mathematician. Under the following
assumptions, the method of least squares has some very attractive statistical properties that have
made it one of the most powerful and popular methods of regression analysis.

The Population Regression Function in three variables is-

Yt = B1 + B2X2t + B3X3t + Ut

Where,

 Y= the dependent variable

 X2 and X3 are the explanatory variables
 U= the stochastic disturbance term
 t= the tth observation

To find the OLS, we write the Sample Regression Function corresponding to the Population
Regression Function.

Yt = b1 + b2X2t + b3t + et

Where,

 e is the residual term

 b‘s are the estimators of the population coefficients, the B‘s.
 b1 = the estimator of B1
 b2 = the estimator of B2
 b3 = the estimator of B3

The three OLS estimators:

The implications of OLS estimators of the multiple regression model are-

1. The Sample Regression Function obtained by the OLS passes through the sample mean
values of X and Y.

32
 2. The mean value of the residuals is always zero which provides a check on the arithmetical
accuracy of the calculations.
3. The sum of product of the residuals ei and the values of explanatory variables is zero i.e.
they are uncorrelated.
4. The sum of the product of the residuals ei and the estimated Y is zero.

The properties of OLS estimators of the multiple regression model are-

1. OLS estimators are the linear estimators i.e. they are linear functions of the random variable
Y.
2. OLS estimators are unbiased estimators.
3. The OLS estimator of the error variance is unbiased.
4. OLS estimators are efficient.

33
4. REGRESSION RESULTS:

The following results are based on the data set collected from 14 years i.e. 2003-04 to 2015-16.
(₹ in crores)
Year GDP PFCE CF GFCE X M
2003-04 3,004,190 1,823,227 772,608 340,962 447,450 512,250
2004-05 3,242,209 1,917,508 1,011,178 354,518 569,051 625,945
2005-06 3,543,244 2,083,309 1,183,303 386,007 717,424 829,926
2006-07 3,871,489 2,259,892 1,364,821 400,579 863,459 1,008,198
2007-08 4,250,947 2,471,397 1,606,175 438,919 914,628 1,110,963
2008-09 4,416,350 2,649,610 1,566,233 484,459 1,048,140 1,363,302
2009-10 4,790,847 2,845,303 1,737,527 551,702 999,030 1,334,180
2010-11 5,282,386 3,092,373 1,976,745 583,544 1,195,003 1,542,428
2011-12 5,633,050 3,378,506 2,103,756 623,574 1,381,129 1,867,249
2011-12* 8,736,039 4,910,447 3,204,473 968,375 2,143,931 2,715,554
2012-13* 9,226,879 5,170,252 3,342,627 973,498 2,288,581 2,878,384
2013-14* 9,839,434 5,520,068 3,412,575 977,521 2,466,632 2,643,368
2014-2015 @ 10,552,151 5,864,283 3,603,258 1,102,607 2,508,402 2,664,390
2015-2016 (AE) 11,350,962 6,310,565 3,793,324 1,138,558 2,349,643 2,496,119
Table 10.1: Regression Results
Source: Central Statistics Office.
Notes:
* Second revised estimates; @ First revised estimates; AE: Advance Estimates
PFCE : Private Final Consumption Expenditure
GFCE : Government Final Consumption Expenditure
CF : Capital Formation
X : Export of Goods and Services
M : Import of Goods and Services (₹ in crores)
Year LN GDP LN PFCE LN CF LN GFCE LN X LN M
2003-04 14.9155 14.4161 13.5575 12.7395 13.0113 13.1466
2004-05 14.9918 14.4665 13.8266 12.7785 13.2517 13.3470
2005-06 15.0806 14.5495 13.9838 12.8636 13.4834 13.6291
2006-07 15.1691 14.6308 14.1265 12.9007 13.6687 13.8237
2007-08 15.2627 14.7203 14.2894 12.9921 13.7263 13.9207
2008-09 15.3008 14.7899 14.2642 13.0908 13.8625 14.1254
2009-10 15.3822 14.8612 14.3680 13.2208 13.8145 14.1038
2010-11 15.4799 14.9444 14.4970 13.2769 13.9937 14.2489
2011-12 15.5442 15.0329 14.5592 13.3432 14.1384 14.4400
2011-12* 15.9830 15.4069 14.9801 13.7834 14.5782 14.8145
2012-13* 16.0376 15.4584 15.0223 13.7887 14.6434 14.8727
2013-14* 16.1019 15.5239 15.0430 13.7928 14.7184 14.7876
2014-2015 @ 16.1718 15.5844 15.0973 13.9132 14.7352 14.7955
2015-2016 (AE) 16.2448 15.6577 15.1488 13.9453 14.6698 14.7302
Table 10.2: Regression Results

34
 Regression Statistics
Multiple R 0.999854054
R Square 0.999708128
Adjusted R Square 0.999525709
Standard Error 0.010208608
Observations 14
Table10.3: Regression Results (Summary Output)

ANOVA
df SS MS F Significance F
Regression 5 2.855646947 0.571129389 5480.263948 6.55E-14
Residual 8 0.000833725 0.000104216
Total 13 2.856480672
Table10.4: Regression Results

Coefficient Standard Lower Upper Lower Upper

t Stat P-value
s Error 95% 95% 95.0% 95.0%
-
0.49056972 1.3031684 0.2287711 1.3586507 1.35865073
Intercept 0.376443822 0.3775112 -0.3775113
6 9 68 4 5
8
LN 4.8398166 0.0012884 0.3718152 1.0485877
0.7102015 0.146741406 0.37181521 1.04858779
PFCE 5 3 11 9
-
2.1631145 0.0624854 0.2762910 0.27629106
LN CF 0.13372865 0.06182227 0.0088337 -0.0088338
1 17 6 2
6
LN 0.19206889 1.6680865 0.1338537 0.4575896
0.115143241 -0.0734519 -0.0734519 0.45758968
GFCE 1 4 3 8
0.21715291 2.6372610 0.02983990.0272758 0.4070300 0.40703002
LN X 0.082340317 0.0272758
3 8 18 02 2 4
- - -
- 0.0026992
LN M 0.22095966 0.05166482 0.3400989 0.1018203 -0.340099 -0.10182038
4.2767916 14
5 5 8
Table10.5: Regression Results

Observation Predicted LN GDP Residuals

1 14.90936675 0.006133252
2 14.99656121 -0.004761214
3 15.08085675 -0.000256753
4 15.16204465 0.007055347
5 15.2560221 0.006677899
6 15.30538515 -0.004585147
7 15.38922189 -0.007021892
8 15.48318927 -0.003289272
9 15.55629083 -0.012090829
10 15.97549576 0.007504239
11 16.02003097 0.01756903
12 16.10519497 -0.00329497
13 16.18045131 -0.008651308
14 16.24578838 -0.000988381
Table10.6: Regression Results (Residual Output)

35
After running the equation, the following regression equation is seen-

LN GDP= 0.4905 + 0.7102 (LN PFCE) + 0.1337 (LN CF) + 0.1920 (LN GFCE) + 0.2171 (LN X) –
0.2209 (LN M)

Here,

 a= 0.4905
 b1= 0.7102
 b2= 0.1337
 b3= 0.1920
 b4= 0.2171
 b5= -0.2209

36
5. Conclusion
The Econometric Table-1 is the Model Summary of the variables. The R2 value is .999854,
which represents the multiple correlation coefficients. It indicates a high degree of correlation. The
R2 value indicates how much of the dependent variable, "GDP of India" can be explained by the
independent variable, " of explanatory variables i.e. Private Final Consumption Expenditure (in
crores), investment (in crores), Government Final Consumption Expenditure (in crores), Imports of
Goods and Services (in crores), Export of Goods and Services (in crores)". In this case, 99.9% can
be explained, which is very good fit. The closer to 1, the better the regression line (read on) fits the
data. Around 99.98 % of GDP is explained by the explanatory variables used in the regression
model.
The Econometric table-2 tells us about the overall significance (F Test) of the regression model.
(F=5480.263948) is statistically significant, which means that the model is statistically significant.
Also, it can be seen that Exports and Imports have significant impact on GDP but surely Imports
have a more significant impact as compared to exports.

The Econometric table-3 shows the estimated results of model of India for the data-sets of the
period of study which focus on the five predictors, whether they are statistically significant and, if
so, the direction of the relationship. The total consumption i.e. Private Final Consumption
Expenditure (LN PFCE) (t=4.8398) is significant (p=0.0012), and has positive impact on the GDP
of India. Next, the effect of investment in GDP i.e. Gross fixed capital formation + change in stocks
(LN CF) (t=2.1631, p=.062) is significant and its coefficient is positive indicating that investment is
positively affecting the GDP of India. India‘s Government Final Consumption Expenditure is also
significant t-value (LN GFCE) (1.6680, p=.1138) and so is p, the coefficient is positive which
would indicate that the positive effect on GDP. Finally, the Exports and Imports (LN X and LN M
respectively) (t=2.637, p=.0298 and t=-4.2767, p=.00269 respectively) have statistically significant
values for the data set and indicate that exports have a positive effect on the GDP of the country
while the coefficient of imports is negative which implies that it has a negative effect on the GDP
of India.

The Econometric table-3 also allows us to discuss about the individual coefficients.

o The intercept term i.e. 0.4905 tells us that if all the explanatory variables turn out to be 0
then LN GDP is equals to the intercept term, which has no intrinsic/economic meaning.

37
 o The coefficient of LN PFCE i.e. 0.7102 says that a percentage increase in Private Final
Consumption Expenditure would increase the GDP of the country by 71%.
o The coefficient of LN CF i.e. 0.1337 says that a percentage increase in Capital Formation
would increase the GDP of the country by 13.37%.
o The coefficient of LN GFCE i.e. 0.1920 says that a percentage increase in Government
Final Consumption Expenditure would increase the GDP of the country by 19.20%.
o The coefficient of LN X i.e. 0.2171 says that a percentage increase in Export of Goods and
Services would increase the GDP of the country by 21.71%.
o The coefficient of LN M i.e. -0.2209 says that a percentage increase in Imports of Goods
and Services would decrease the GDP of the country by 22.09%.

Exports
2,500,000

2,000,000
(IN CRORES)

1,500,000

1,000,000
Export
500,000

0
1 2 3 4 5 6 7 8 9 10 11 12 13
YEARS

Graph 7.1: Total Exports of Goods and Services

The above graph shows the Exports of Goods and Services for the period ranging from 2003-04 to
2015-16. The line-trend graph shows an increasing trend till the period 2014-2015 but the kink
clearly tells that the exports significantly declined in the year 2015-16. But overall, an increasing
trend for the exports can be seen.

38
 Imports
3,000,000
2,500,000

(IN CRORES)
2,000,000
1,500,000
1,000,000 Import
500,000
0
1 2 3 4 5 6 7 8 9 10 11 12 13
YEARS

Graph 7.2: Total Imports of Goods and Services

The above graph shows the Imports of Goods and Services for the period ranging from 2003-04 to
2015-16. The line-trend graph shows the increasing trend for the Imports till the year 2014-15 but,
in 2015-16, a fall in the Imports of Goods and Services was seen which may be due to the Foreign
Trade Policy 2015-20.

Trade Balance
0
1 2 3 4 5 6 7 8 9 10 11 12 13
-200,000
(IN CRORES)

-400,000

-600,000
Trade Balance
-800,000

-1,000,000

-1,200,000
YEARS

Graph 7.3: Trade Balance of India

The above graph shows the Trade Balance of India for the period ranging from 2003-04 to 2015-16.
The line trend graph shows that there is a change in the trend of International Trade before and after
the 2008 financial crisis. The kink at 2009 and at 2010 is all because of the crisis which happened.
The crisis had the three major impacts on the Indian Economy i.e. the quantum of liquidity
available during the first half of 2008-09 was about a third lower than during the first half, with
slackening external demand, export growth was expected to be slow and Foreign institutional
39
Investors had withdrawn from Indian Stock markets leading to a sharp falls in key indices. So
thereafter, India recovered and made efforts to get the Trade Balance figure improved.

5.1 POLICY IMPLICATIONS:

The Highlights of the India’s Foreign Trade Policy 2004-2009

The new United Progressive Alliance (UPA) Government at the Centre changed the name of
EXIM policy and called it Foreign Trade Policy (FTP). Consequently, on August 31, 2004, the
Commerce and Industry Minister, Mr. Kamal Nath, announced the five year (2004-09) FTP. The
policy took and integrated view of the overall development of India‘s Foreign Trade. The policy
aimed at doubling the India‘s percentage share of global merchandise trade to 1.5 percent by 2009
from 0.7 percent in 2003, besides serving as an effective tool to generate employment, especially in
semi-urban and rural areas. Exporters of all goods and services, including those from Domestic
Tariff Area (DTA), were exempted from service tax. Also exporters with minimum turnover of ₹
5crore and a sound track record were exempted from furnishing bank guarantees in any of the
export schemes, so as to reduce their high transaction cost and tax burden. The key strategies
undertaken included creating an atmosphere of trust and transparency, simplifying procedure and
bringing down the transaction costs, adopting the fundamental principle that duties and levies
should not be exported, identifying and nurturing different special focus areas to facilitate
development of India as a global hub for manufacturing, trading and services.

Several special focus initiatives were taken-

1. Sectors with significant export prospects coupled with potential for employment generation
in semi-urban and rural areas have been identified as thrust sectors and specific sectoral
strategies have been prepared.
2. Special focus initiatives have been prepared for Agriculture, Handicrafts, Handlooms, Gems
and Jewellery and Leather and Footwear sectors.
3. The threshold limit of designated Towns of Export Excellence is reduced from ₹1000crore
to ₹250crore in these thrust sectors.

Also, the export promotion schemes included-

 Target Plus – Exporters who have achieved a quantum growth in exports would be entitled
to duty free credit based on incremental exports substantially higher than the genera; actual
export target fixed.

40
  Vishesh Krishi Upai Yojana- It aimed to boost exports of fruits, vegetables, flowers, minor
forest produce and their value added products.
 Additional flexibility for fulfillment of export obligation under Export Promotion Capital
Goods Scheme (EPCG), scheme in order to reduce difficulties of exporters of goods and
services, technological upgradation, the requirement of installation certificate from Central
Excise has been done away with.
 Import of fuel under Duty Free Replenishment Certificate (DFRC) entitlements were
allowed to be transferred to marketing agencies authorized by the Ministry of Petroleum and
Natural Gas.
 The Duty Entitlement Pass Book in short DEPB scheme would be continued until replaced
by a new scheme to be drawn up in consultation with exporters.

A new rationalized scheme of categorization of status holders as Star Export Houses has been
introduced. They shall be eligible for fast-track clearance procedures, exemption from furnishing of
Bank Guarantee, eligibility for consideration, etc. Moreover, Export Oriented Units (EOUs), were
exempted from Service Tax in proportion to their exported goods and services, retain 100% of
export earnings, income tax benefits on plants and machinery shall be extended to Domestic Tariff
Area units which convert to EOUs. A new scheme to establish Free Trade and Warehousing Zone
(FTWZs) was introduced to create trade-related infrastructure to facilitate the import and export of
goods and services with freedom to carry out trade transactions in free currency. This aimed at
making India into a global trading-hub. Import of second-hand capital goods was permitted without
any age restrictions. An exclusive Services Export Promotion Council was set up in order to map
opportunities for key services in key matters and develop strategic market access programs,
financial assistance would be provided to deserving exporters for meeting the costs of legal
expenses connected with trade related matters.

OBSERVATIONS ON FOREIGN TRADE POLICY 2004-09

 The foreign trade policy announced by the Government in 2004 delivered on its promise.
 Agriculture and industry has shown remarkable resilience and dynamism in contributing to
a healthy growth in exports.
 In the last five years our exports witnessed robust growth to reach a level of 23.73%of
India's GDP in 2008-09 from 16.61% of GDP 2004-05.
 Our share of global merchandise trade was 0.83% in 2003; it rose to 1.45% in 2008 as per
WTO estimates.
 Our share of global commercial services export was 1.4% in 2003; it rose to 2.8% in 2008.

41
  With the increase in export, imports also reflected the same trend in the same period.
 It increased from 18.27% of GDP in 2004-05 to 2008-09% of GDP in 2008-09.
 Total consumption of the economy increased from 55.99% in 2004-05 to 59.99% in 2008-
09 and the total investment of the economy went down by 5.93% of GDP.
 On the employment front, studies have suggested that nearly 14 million jobs were created
directly or indirectly as a result of augmented exports in the last five years.

The Highlights of the India’s Foreign Trade Policy 2009-2014

The UPA Government assumed office at a challenging time when the entire world was facing an
unprecedented economic slow-down. The year 2009 was witnessing one of the most severe global
recessions in the post-war period. Countries across the world were affected in varying degrees and
all major economic indicators of industrial production, trade, capital flows, unemployment, per
capita investment and consumption had taken a hit. The WTO estimated project a grim forecast that
global trade was likely to decline by 9% in volume terms and the IMF estimated project a decline of
over 11%. Though India had not been affected to the same extent as other economies of the world,
yet India‘s exports suffered a decline in the last 10 months due to a contraction in demand in the
traditional markets of India‘s exports.

The policy for 2009-14 was to arrest and reverse the declining trend of exports and to provide
additional support especially to those sectors which were hit badly by recession in the developed
world.
 Short term policy objective of achieving an annual export growth of 15% with an annual
export target of US$ 200 billion by March 2011 was set up. It was targeted that in the
remaining three years of this Foreign Trade Policy i.e. upto 2014, the country should be able
to come back on the high export growth path of around 25% per annum. By 2014, it was
expected to double India‘s exports of goods and services.
 The long term policy objective for the Government was to double India‘s share in global
trade by 2020.
o In order to meet these objectives, the Government followed a mix of policy
measures including fiscal incentives, institutional changes, procedural
rationalization, enhanced market access across the world and diversification of
export markets.

42
 o Improvement in infrastructure related to exports; bringing down transaction costs,
and providing full refund of all indirect taxes and levies.
o Endeavour was made to see that the Goods and Services Tax rebated all indirect
taxes and levies on exports.
o A Special thrust was provided to employment intensive sectors which have
witnessed job losses in the wake of this recession, especially in the fields of textile,
leather, handicrafts, etc.
o Continuation of DEPB Scheme upto December 2010 and income tax benefits under
Section 10(A) for IT industry and under Section 10(B) for 100% export oriented
units for one additional year till 31st March 2011.
o Enhanced insurance coverage and exposure for exports through ECGC Schemes
were ensured till 31st March 2010.
o Also, continuation of the interest subvention scheme for this purpose was decided.
o Stipulation of a minimum 15% value addition on imported inputs under advance
authorization scheme was encouraged.

Furthermore, It was important to take an initiative to diversify India‘s export markets and offset
the inherent disadvantage for the exporters in emerging markets of Africa, Latin America, Oceania
and CIS countries such as credit risks, higher trade costs, etc, through appropriate policy
instruments. Rationalization of incentive schemes including the enhancement of incentive rates
which were based on the perceived long term competitive advantage of India in a particular product
group and market was decided to diversify products and markets. New emerging markets were
given a special focus to enable competitive exports. Additional resources were made available
under the Market Development Assistance Scheme and Market Access Initiative Scheme. Incentive
schemes were being rationalized to identify leading products which would catalyze the next phase
of export growth. A Comprehensive Economic Partnership Agreement with South Korea which
gave enhanced market access to Indian exports was signed. A Trade in Goods Agreement with
ASEAN which came in force from January 01, 2010 was signed. The Mercosur Preferential Trade
Agreement was also concluded. The Government would seek to promote Brand India through six or
more ‗Made in India‘ shows to be organized across the world every year. An important element of
the Foreign Trade Policy was to help exporters for technological upgradation by promoting imports
of capital goods for certain sectors under EPCG at zero percent duty. Under the present Foreign
Trade Policy, Government recognized exporters based on their export performance. They were
permitted to import capital goods duty free of specified product groups. ‗Towns of Export

43
Excellence‘ and units located therein were to be granted additional focused support and incentives.
The policy was committed to support the growth of project exports. A high level coordination
committee was being established in the Department of Commerce to facilitate the export of
manufactured goods / project exports creating synergies in the line of credit extended through
EXIM Bank for new and emerging markets. Production and export of ‗green products‘ were
encouraged through measures such as phased manufacturing program for green vehicles, zero duty
EPCG scheme and incentives for exports. To enable support to Indian industry and exporters,
especially the MSMEs, in availing their rights through trade remedy instruments under the WTO
framework, a Directorate of Trade Remedy Measures was proposed to set up. In order to reduce the
transaction cost and institutional bottlenecks, the e-trade project was to be implemented in a time
bound manner to bring all stake holders on a common platform.

OBSERVATIONS ON FOREIGN TRADE POLICY 2009-14

 The foreign trade policy announced by the Government in 2014 delivered on its promise.
 Agriculture, forestry and fishing, mining and quarrying showed an increase of 2.4% from
2009 to 2014-15 as per the economic survey 2014-15.
 It decreases from 27.84% of GDP in 2008-09 to 26.86% of GDP in 2013-14.
 Total consumption of the economy decreased from 59.39% in 2008-09 to 56.10% in 2013-
14.
 Total investment of the economy went down by 8.42% of GDP.

The Highlights of the India’s Foreign Trade Policy 2015-2020

The Foreign Trade Policy 2015-20 was unveiled by Ministry of Commerce and Industry Mrs.
Nirmala Sitharaman, at Vigyan Bhawan. The new five year Foreign Trade Policy, 2015-20
provides a framework for increasing exports of goods and services as well as generation of
employment and increasing value addition in the country, in keeping with the ―Make in India‖
vision of Prime Minister. The focus of the new policy is to support both the manufacturing and
services sectors, with a special emphasis on improving the ‗ease of doing business’.

Main objectives of the policy are-

 To facilitate sustained growth in exports of the country so as to achieve larger percent share
in the global merchandise trade.

44
  To provide domestic consumers with good quality goods and services at internationally
competitive prices as well as creating a level playing field for the domestic producers.

 To stimulate sustained economic growth by providing access to essential raw materials,

intermediates, components, consumables and capital goods required for augmenting
production and providing services.
 To enhance the technological strength and efficiency of Indian agriculture, industry and
services, thereby improving their competitiveness to meet the requirements of the global
markets.
 To generate new employment opportunities and to encourage the attainment of
internationally accepted standards of quality.

The initiatives taken in the Foreign Trade Policy 2015-20 are -

o ―Merchandise Exports from India Scheme (MEIS)‖ for export of specified goods to
specified markets and ―Services Exports from India Scheme (SEIS)‖ for increasing
exports of notified services, in place of a plethora of schemes earlier, with different
conditions for eligibility and usage.
o Measures have been adopted to nudge procurement of capital goods from indigenous
manufacturers under the EPCG scheme by reducing specific export obligation to 75% of
the normal export obligation.
o Measures have been taken to give a boost to exports of defense and hi-tech items.
o At the same time e-Commerce exports of handloom products, books/periodicals, leather
footwear, toys and customized fashion garments through courier or foreign post office
would also be able to get benefit of MEIS (for values upto 25,000 INR).
o ‗Niryat Bandhu Scheme‘ has been galvanized and repositioned to achieve the objectives
of ‗Skill India‘.
o Outreach activities will be organized in a structured way at these clusters with the help of
EPCs and other willing ―Industry Partners‖ and ―Knowledge Partners‖.

Trade facilitation and enhancing the ease of doing business are the other major focus areas in this
new FTP. One of the major objective of new Foreign Trade Policy 2015-20 is to move towards
paperless working in 24x7 environment. Recently, the government has reduced the number of
mandatory documents required for exports and imports to three, which is comparable with
international benchmarks. Attention has also been paid to simplify various ‗Aayat Niryat‘ Forms,

45
bringing in clarity in different provisions, removing ambiguities and enhancing electronic
governance. Manufacturers, who are also status holders, will now be enabled to self-certify their
manufactured goods in phases, as originating from India with a view to qualifying for preferential
treatment under various forms of bilateral and regional trade agreements. A number of steps have
been taken for encouraging manufacturing and exports under 100% EOU/EHTP/STPI/BTP
Schemes. The steps include a fast track clearance facility for these units, permitting them to share
infrastructure facilities, permitting inter unit transfer of goods and services, permitting them to set
up warehouses near the port of export and to use duty free equipment for training purposes.

Discussing about the Merchandise Trade and Services for the period 2014 -2015, we get to
know that-
(₹ in crores)

S.No. Particulars 2014-15 2015-16 % Growth

1 Exports (including re-exports) 154718.6 138400.44 -10.55
2 Imports 215593.93 207380.63 -3.81
3 Trade Balance -60875.33 -68980.19 13.31

Table 11.1: Exports and Imports (Goods) (Provisional – April)

 Exports during April, 2015 were valued at ₹138400.44 crores which was 10.55% lower than
the level of ₹154718.60 crores during April, 2014.
 Imports during April, 2015 were valued at ₹207380.63 crores which was 3.81% lower than
the level of imports valued at ₹215593.93 crores in April, 2014.
 The Trade Deficit for April 2015 was estimated at ₹68980.19 crores which was higher than
the deficit of ₹60875.33 crores during April 2014.

(₹ in crores)
Particulars Amount
Exports (Receipts) 87735.72
Imports (Payments) 49123.01
Trade Balance 38612.71

Table 11.2: Exports and Imports (Services) (Provisional – March 2014-15)

 Exports during March, 2015 were valued at ₹87735.72 Crores.

 Imports during March, 2015 were valued at ₹49123.01 Crores.
 The Trade Balance in Services (i.e. net export of Services) for March, 2015 was estimated
at ₹38612.71 Crores.

46
 Discussing about the Merchandise Trade and Services for the period 2015 -2016, we get to
know that- (₹ in crores)
2014-15 2015-16 % Growth
S.No. Particulars April - April – April -
March March March
March March March
1 Exports (including re-exports) 150082.8 1896348.4 152264.96 1708841.43 1.45 -9.89
2 Imports 221251.65 2737086.58 186250.88 2481367.22 -15.82 -9.34
3 Trade Balance -71168.85 -840738.18 -33985.92 -772525.79 -52.24 -8.11
Table 12.1: Exports and Imports (Goods) (Provisional)

 Exports during March, 2016 were valued at ₹152264.96 crores which was 1.45% higher than
the level of ₹150082.80 crores during March, 2015. Cumulative value of Exports for the
period April-March 2015-16 which was ₹1708841.43 crores as against ₹1896348.40 crores
registering a negative growth of 9.89% over the same period last year.
 The trend of falling Exports is in tandem with other major world economies. The growth in
Exports have fallen for USA (10.81%), European Union (7.40%), China (11.37%) and Japan
(12.85%) for January 2016 over the corresponding period previous year as per WTO statistics.
 Imports during March, 2016 were valued at ₹186250.88 crores which was 15.82% lower
over the level of Imports valued at ₹221251.65 crores in March, 2015. Cumulative value of
Imports for the period April-March 2015-16 was ₹2481367.22 crores as against ₹2737086.58
crores registering a negative growth of 9.34% over the same period last year.

(₹ in crores)
Particulars Amount
Exports (Receipts) 84130.26
Imports (Payments) 49056.08
Trade Balance 35074.18
Table 12.2: Exports and Imports (Services) (Provisional – February 2015-16)

 Exports during February, 2016 were valued at ₹84130.26 crores. During February, 2016,
on month-on-month basis, growth in services Export remained negative (with a growth of
1.94%) as compared to negative growth (10.44%) during January 2016.
 Imports during February, 2016 were valued at ₹49056.08 crores.
 The Trade Deficit (Merchandise) for April-March, 2015-16 was estimated at ₹772525.79
crores which was lower than the deficit of ₹840738.18 crores during April-March, 2014-15.
 The Trade Balance in Services (i.e. net export of Services) for February, 2016 was estimated
at₹35074.18 crores.

47
 Furthermore,
o India's growth at 7.6% in 2015-16 is fastest in five years.
o The farm sector also rebounded to the growth zone, as against a contraction in the
previous year, although the rate of expansion was low at 1.2% in 2015-16.
o The growth on manufacturing and farm sectors during the fourth quarter accelerated to
9.3% and 2.3%, respectively.
o GDP of the mining and quarrying segment grew by 8.6% in the last quarter of 2015 -16
whereas electricity, gas, water supply and other utility services recorded a growth rate
to 9.3%.
o The construction sector grew at 4.5%, trade, hotels, transport and communication at
9.9%.
o The manufacturing sector accelerated to 9.3%, up from 5.5% in the previous fiscal year.
o Farm sector grew at 1.2% in 2015-16 as against contraction in the previous fiscal year.

Discussing about the Merchandise Trade and Services for the period 2016 -2017, we get to
know that-
(₹ in crores)
2015-16 2016-17 % Growth
S.No. Particulars April - April - April -
January January January
January January January
Exports (including re-
142568.31 1420572.68 150559.98 1484473.55 5.61 4.5
1 exports)
2 Imports 194134.02 2120158.57 217557.32 2065656.42 12.07 -2.57
3 Trade Balance -51565.71 -699585.89 -66997.34 -581182.87 29.93 -16.92
Table 13.1: Exports and Imports (Goods) (Provisional)

 In consonance with the revival exhibited by Exports in the last four months, during
January,2017 exports continue to show a positive growth of 5.61% valued at ₹150559.98
crores as compared to ₹142568.31 crores during January,2016. Cumulative value of
Exports for the period April-January 2016-17 was ₹1484473.55 crores as against
₹1420572.68 crores registering a positive growth of 4.50% over the same period last year.
 The growth in Exports is positive for USA (2.63%), EU (5.47%) and Japan (13.43%) but
China has exhibited negative growth of (-1.51%) for November 2016 over the
corresponding period of previous year as per latest WTO statistics.
 Imports during January 2017 were valued at ₹217557.32 crores which was 12.07% higher
over the level of Imports valued at ₹194134.02 crores in January, 2016. Cumulative value of

48
 Imports for the period April-January 2016-17 was ₹2065656.42 crores as against
₹2120158.57 crores registering a negative growth of 2.57% over the same period last year.
 The Trade Deficit for April-January, 2016-17 was estimated at ₹581182.87 crores which
was 19.82% lower than the deficit of ₹699585.89 crores during April-January, 2015-16.

Particulars (₹ iA
nmcroournets)
Exports (Receipts) 93729.71
Imports (Payments) 56316.59
Trade Balance 37413.12
Table 13.2: Exports and Imports (Services) (Provisional – December 2016-17)

 Exports during December 2016 were valued at ₹93729.71 Crore registering a positive
growth of 3.49% in dollar terms as compared to positive growth of 1.72% during November
2016.
 Imports during December 2016 were valued at ₹56316.59 Crore registering a negative
growth of 0.35% in dollar terms as compared to positive growth of 8.37% during November
2016.
 The Trade Balance in Services (i.e. net export of Services) for December, 2016 was
estimated at ₹37413.12 crores.

Also for the period 2016-2017, we can see that-

 The growth rate of GDP at constant market prices for the year 2016-17 is placed at 7.1
per cent, as against 7.6 per cent in 2015-16. Government final consumption expenditure is
the major driver of GDP growth in the current year.
 Fixed investment (gross fixed capital formation) to GDP ratio (at current prices) is
estimated to be 26.6 per cent in 2016-17, vis-à-vis 29.3 per cent in 2015-16.
 For 2017-18, it is expected that the growth would return to normal as the new currency
notes in required quantities come back into circulation and as follow-up actions to
demonetisation are taken. On balance, there is a likelihood that Indian economy may
recover back to 6 ¾ per cent to 7 ½ per cent in 2017-18.
 Robust inflows of foreign direct investment and net positive inflow of foreign portfolio
investment were sufficient to finance CAD leading to an accretion in foreign exchange
reserves in H1 of 2016-17.

49
 During 2016-17 so far, the rupee has performed better than most of the other emerging
market economies.
 At end-September 2016, India‘s external debt stock stood at US$ 484.3 billion, recording
a decline of US$ 0.8 billion over the level at end-March 2016.
 Most of the key external debt indicators showed an improvement in September 2016 vis-à-
vis March 2016. The share of short-term debt in total external debt declined to 16.8 per
cent at end-September 2016 and foreign exchange reserves provided a cover of 76.8 per
cent to the total external debt stock.
 Agriculture sector is estimated to grow at 4.1 per cent in 2016-17 as opposed to 1.2 per
cent in 2015-16.
 Growth rate of the industrial sector is estimated to moderate to 5.2 per cent in 2016-17
from 7.4 per cent in 2015-16.During April-November 2016-17, a modest growth of 0.4 per
cent has been observed in the Index of Industrial Production (IIP).
 The eight core infrastructure supportive industries, viz. coal, crude oil, natural gas,
refinery products, fertilizers, steel, cement and electricity registered a cumulative growth
of 4.9 per cent during April-November 2016-17 as compared to 2.5 per cent during April-
November 2015-16. The production of refinery products, fertilizers, steel, electricity and
cement increased substantially, while the production of crude oil, natural gas fell during April-
November 2016-17. Coal production attained lower growth during the same period.
 Service sector is estimated to grow at 8.9 per cent in 2016-17, almost the same as in 2015-
16.
 Demonetisation has had short-term costs but holds the potential for long-term benefits. Follow-
up actions to minimize the costs and maximize the benefits include: fast, demand- driven,
remonetisation, further tax reforms, including bringing land and real estate into the GST,
reducing tax rates and stamp duties; and acting to allay anxieties about over-zealous tax
administration. These actions would allow growth to return to trend in 2017-18, possibly
making it the fastest-growing major economy in the world, following a temporary dip in
2016-17.
 The Government enacted a package of measures to assist the clothing sector that by virtue
of being export-oriented, labour-intensive could provide a boost to employment,
especially female employment.
 The major short term macro-economic challenge is to re-establish private investment and
exports as the major drivers of growth and reduce reliance on Government and private
consumption.
50
 India seems to be a demographic sweet spot with its working age population projected to
grow by a third over the next three decades providing it a potential the growth boost from
the demographic divided which is likely to peak within next five years.
Seeing the above regression results, the following can be the way forward:-
 Foreign Trade has a significant Impact on the GDP of the country.
 The Government of India should mobilize resources in such a manner that our products
are competitive in the international market.
 The Government should also subsidize Small Scale Industries which would help
increase the Exports of the country.
 Initiatives like MAKE IN INDIA are a step ahead towards increasing the Export
Market of the country as changes in customs and excise duty rates on certain inputs will
reduce costs and improve competitiveness of domestic industry in sectors Like Information
Technology Hardware, Capital Goods, Defence Production, Textiles, Mineral Fuels &
Mineral Oils, Chemicals & Petrochemicals, Paper, Paperboard & Newsprint, Maintenance
Repair and Overhauling [MRO] of Aircrafts and Ship Repair.
 Transform India to have a significant impact on economy and lives of people.
 Government to focus on –
 Ensuring macro-economic stability and prudent fiscal management.
 Boosting on domestic demand
 Continuing with the pace of economic reforms and policy initiatives to change the
lives of our people for the better.
Now critically analyzing the strategies taken by the government:-
 The government has launched various programmes for increasing agricultural
production and productivity—these include Pradhan Mantri Krishi Sinchayee
Yojana, Soil Health Cards, Fasal Bima Yojana, etc—for encouraging small
entrepreneurs and innovators through easy bank finance (MUDRA Yojana, Start-Up
India). Looking at the thrust areas of economic growth, it seems that the government
is not only seeking to diversify sources of growth, but also to democratise growth by
unlocking the potential of people from all sections of the society.
 Under its motto of ―minimum government, maximum governance,‖ the government
is increasing the use of digital technology to enable citizens avail of basic public
services, as also create a conducive environment for businesses and entrepreneurs to
thrive.

51
 The government‘s strong push to building infrastructure projects—not only to new
projects but also to kick-start the stalled projects of the previous governments—is well-
meaning insofar as it addresses market failure in the provision of public goods.

52
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