India was a closed economy in the pre-1991 period with export value at US$ 13.87 billion and import value at US$ 19.35 billion in 1988. With liberalisation, privatisation and globalisation measures being adopted in 1991, there have been various trade reforms such as abolition of import licensing system, phased reduction in custom duty, devaluation of domestic currency, reduction in tariff rates and phased removal of quantitative restrictions on imports. These measures gave a push to India’s trade.
Measures were also adopted to increase capital inflows and FDI and liberalise the services sector. The Indian economy opened its doors to other countries leading to global integration. This led to a steady rise in India’s trade in both merchandise and services. But while India has maintained a strong services trade surplus, the high merchandise trade deficit remains a persistent challenge.
India’s exports have increased from US$ 13.87 billion in 1988 to US$ 323.06 billion in 2018.
On the other hand, imports have increased from US$ 19.35 billion in 1988 to US$ 507.58 billion in 2018.
Due to the higher increase in imports, India’s trade deficit increased from US$ 5.48 billion in 1988 to US$ 184.52 billion in 2018.
India’s export/import trends and shares from 2014-2018
Source: ITC Trade Map and WITS
India’s share in world exports has hovered around 1.65% over a period of 5 years and stood at 1.68% in 2018. On the other hand, India’s share in imports has increased from 2.42% in 2014 to 2.59% in 2018.
Source: WITS and ITC Trade Map
India’s export basket has included diverse products and is gaining competitiveness in many new categories over time. For the past five years i.e. from 2014-2018, the following ten products have sustained in the basket:
• Mineral fuels, mineral oils and products of their distillation • Natural or cultured pearls, precious or semi-precious stones, precious metals • Machinery, mechanical appliances, nuclear reactors, boilers • Vehicles other than railway or tramway rolling stock, and parts and accessories • Organic chemicals • Pharmaceutical products • Electrical machinery and equipment • Iron and steel, cotton • Articles of apparel and clothing accessories, not knitted or crocheted.
The top five products exported are mineral fuels and oils, natural or cultured pearls, machinery and mechanical appliances and vehicles and organic chemicals.
The main export markets are USA, UAE, China, Hong Kong, Singapore, Netherlands, Germany, Mexico and Bangladesh.
Some of the noteworthy changes in the export basket in the last 5 years.
• Animal product category has shown an increase as its export share has increased from 2.37% in 2012 to 3.68% in 2016 due to increase in the exports of fish and crustacean. • Transportation product export share increased from 6.3% in 2012 to 8.23% in 2016 due to increase in export of vehicles. • Chemicals have shown a rise in export share from 10.72% in 2012 to 12.86% in 2016 due to increase in exports of organic chemicals and pharmaceutical products. • Manufactured goods exports have increased in goods such as footwear, hides and skins (articles of leather), textile and clothing, in addition to this the product group stone and glass’s product share increases from 15.62% in 2012 to 17.41% in 2016 due to natural/cultured pearls product group.
India’s export value product-wise (2012-2016)
Source: WITS database
Export basket is shifting from agriculture to non-agriculture commodities and bending towards capital and intermediate goods. It is also diverting away from consumer and raw material product group.
The structure of the import goods basket is quite distinct from that of export products as mineral fuels and oils (i.e. crude oil) has occupied a significant position from the past few years. The other products in the basket are:
• Natural or cultured pearls, precious or semi-precious stones, precious metals • Machinery, mechanical appliances, nuclear reactors, boilers • Organic chemicals • Plastic and articles • Electrical machinery and equipment • Iron and steel • Animal and vegetable fats or oils • Optical photographic and cinematographic equipment • Inorganic chemicals
The top 5 major import products of India are mineral fuels and oils, natural or cultured pearls, electrical machinery and equipment, organic chemicals, machinery and mechanical appliances.
The major source countries for India’s imports are:
• China • US • Saudi Arabia • UAE • Iraq • Iran • Switzerland, Belgium • Hong Kong • Vietnam • Korea • Singapore • Germany • Japan
• India’s import share for capital goods has increased from 15.88% in 2012 to 22.72% in 2016, the main product contributing towards this increase is machinery, mechanical appliances and nuclear reactor products. • Consumer goods import product share has shown a slight increase from 9.94% in 2012 to 11.18% in 2016. • Intermediate goods have shown a slight increase in their import share from 30.1% in 2012 to 32.14% in 2016. The major items imported in this group are electrical machinery and equipment, organic and inorganic chemicals, animal or vegetable oil, optical photography and cinematographic goods and some part of mineral fuels and oils. • Raw material goods, which majorly includes mineral fuels and oils, natural or cultured pearls especially diamonds, plastic and articles and Iron and steel. Their share has shown a decline from 41.59% in 2012 to 30.98% in 2016.
India’s imports product-wise (2012-16)
Source: WITS Trade database
Import basket is moving towards capital goods and consumer goods. However, intermediate goods and raw material goods are still the bulky part of the import basket.
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