Foreign Trade of India | Lucent for GK - UPSC PDF Download

Understanding India's Foreign Trade

India's foreign trade encompasses two fundamental aspects: exports and imports. Exports refer to goods and services sold to other countries, while imports involve goods and services purchased from foreign nations. These interactions contribute significantly to India's economic growth and global presence.

Balance of Trade (BoT)

The Balance of Trade, also known as Trade Balance, measures the difference between a country's total exports and total imports. It can be divided into merchandise (goods) and services balance.

• Merchandise Balance of Trade = Exports of goods - Imports of goods
• Services Balance of Trade = Exports of services - Imports of services

Exports of India: Key Facts

India boasts a diverse range of export items that make a substantial contribution to its foreign trade revenue. Some of the top exported commodities include:

• Petroleum Products
• Precious Stones
• Drug Formulations & Biologicals
• Gold and Other Precious Metals

While India's merchandise exports are less than its imports, the trade balance improved significantly between 2009-14 and 2014-19, partly due to a decline in crude prices during 2016-17.

Imports of India: Key Facts

India's import portfolio includes crucial items that cater to the nation's demands and economic growth. Notable import items are:

• Crude Petroleum
• Gold
• Petroleum Products
• Coal and Coke

Interestingly, India's service exports outpace its service imports, indicating a net service surplus. However, the service surplus has been gradually declining concerning GDP.

Top Trading Partners of India

India maintains strong trade relations with several countries worldwide. Its top five trading partners include:

• USA
• China
• UAE
• Saudi Arabia
• Hong Kong

These nations play a vital role in shaping India's foreign trade landscape.

Top Export and Import Commodities

India's major export commodities include petroleum products, precious stones, drug formulations & biologicals, and gold, among others. On the other hand, the leading import commodities encompass crude petroleum, gold, petroleum products, and coal.

Top Countries for Exports and Imports

India exports to approximately 190 countries and imports from around 140 nations. The United States, UAE, China, and Hong Kong are among the top countries to which India exports the most. As for imports, China, the USA, UAE, and Saudi Arabia stand out as prominent partners.

Service Exports and Imports

The composition of India's service exports remains stable over the years, with software services taking the lead, followed by business services, travel, and transportation. Meanwhile, service imports in relation to GDP have been steadily rising, putting pressure on India's Balance of Payments (BoP).

Balance of Payments (BoP)

India's Balance of Payments (BoP) reflects its economic transactions with the rest of the world over a specific period. BoP statistics are systematically summarized, with the Reserve Bank of India (RBI) taking the prime responsibility for its compilation and dissemination. India's BoP position has significantly improved since the liberalization in 1991, with foreign reserves reaching substantial levels.

Global Trade and Ease of Doing Business

The global trade scenario witnessed growth in the past but experienced a slowdown in recent years. Incontrast, India made progress in the Ease of Doing Business report, ranking 68th among 190 countries under the indicator "Trading across Borders" as per the World Bank's 2019 report.

Logistics Industry and Foreign Remittances

India's logistics industry has a considerable market size, which is expected to grow further in the coming years. Additionally, net remittances from Indians employed overseas have been steadily increasing, reflecting the country's strong diaspora.

FDI and FPI Inflows

Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) have shown positive trends in India in recent years, indicating growing foreign interest in the country's economy.

External Debt and Foreign Trade Policy

India's external debt has remained relatively low compared to GDP, driven by factors such as FDI, portfolio flows, and external commercial borrowings. The Foreign Trade Policy, 2015-20, plays a crucial role in regulating India's international trade, empowering the Directorate General of Foreign Trade (DGFT) to oversee export trade.