HPAS/Allied Mains 2022 Answer Writing Challenge Day 200: Model Answer

Question: Discuss the direction of India’s Foreign Trade. (8 marks/ 120 words)

Answer:

Direction of foreign trade means those countries with which India has trade ties. It also helps to understand the diplomatic relationship maintained by India with other Countries of Trade. Direction of Indian foreign trade has undergone a considerable change after independence.

Direction of Exports

• During the year 1960-61 India’s major export partner was UK followed by USA, Japan, Russia, Germany and France. They accounted for 57.4% of our total export. The share of individual country to total India’s export was – UK (26.9%), USA (16.0): Japan (5.5%), Russia (4.5%), Germany (3.1%) and France (1.4%). The trade agreements between India and East European Countries on rupee payment started bearing fruits during 70’s.
• The policy of counter trade helped in rapid expansion of trade between India and USSR. As a result, USSR became the leading market for India during the year 1970-71. USSR remained the leading market for India’s export during the 80’s followed by USA, Japan, UK and Germany. Germany became fourth largest export partner of India during the year 1980-81.
• During the year 1990-91, Russia remained the major export market followed by USA, Japan, Germany, UK, Belgium and France.
• The significant change was witnessed in the direction of India’s export after 90’s as a result of collapse of USSR. The share of export to’USSR wend down from 16.1% in the year 1990-91 and subsequently changed trade policy also brought changes in the direction of India’s export.
• During the year 1996-97, India’s major export market was USA followed UK, Japan, Germany, Belgium, Netherlands and France. The significant growth rate and unification in the form of European Economic community facilitated India’s export to European countries.
• Hence, the share of export increased in European nations. The country wise share of export was – USA 19.8%, UK 6.1%: Japan 6.0, Germany 5.6%, Belgium 3.3%, Netherlands 2.5% and France 2.2%. These 6 countries accounted for 45.5% of total India’s export.
• The above trend shows that India’s export is highly concentrated in a few markets. It requires to formulate a suitable strategy to diversify the export market.

Direction of Imports

• During the year 1960-61 India’s major importing partner was USA (29.2%) followed by UK (19.4%), Germany (10.9%), Japan (5:4%), Iran (2.6%), France (1.9%,), Belgium and Russia (1.4%) each and Saudi Arabia (1.3%).
• The scenario has changed over a period of 60 years. For the year 1996-97 India’s major importing partner was USA (8.8%) followed by Saudi Arabia (7.3%), Germany (7.2%), Belgium (6.3%), Kuwait (6.2%), Japan (5.7%), UK (5.4%j; Iran (2.3%) and Russia (former USSR) 1.6%.
• India is the world’s third-largest oil importer, and it imports nearly 80% of its crude requirement. It imports 52.7% from Middle Eastern countries, 15% from Africa and 14% from the US.
• It sources around 86% of crude oil, 75% of natural gas, and 95% of LPG from members of the Organisation of the Petroleum Exporting Countries (OPEC+). Last year, it purchased 12 million barrels of crude oil from Russia, which is just 2% of its total imports.

Conclusion: The Objectives of India’s trade policy have been to promote exports and restrict imports to the level of foreign exchange available to the country. Government continuously makes efforts to promote exports.