India's Foreign Trade (value : Rupees million) ______________________________________________________________________________ __

Year Exports Variation (%) Imports Variation (%) Balance of Trade _____________________________________________________________________________ ___ 1990-91 325,530 + 17.6 431,930 + 22.0 -106,440 1991-92 1992-93 1993-94 440,420 533,510 695,470 + 35.3 + 21.1 + 30.3 478,510 629,230 728,060 + 10.7 + 31.5 + 15.7 38,090 95,720 32,590

1994-95 823,380 + 18.4 887,050 + 21.8 6,210 _____________________________________________________________________________ ____

Top Seven Countries for Indian Exports in 1994-95 ( value : Rupees million) ________________________________________________________________
Export from India % of India's total (value) exports ________________________________________________________________ U.S.A. 157,478 mill. 19.12 % Japan Germany U.K. Hong Kong UAE 63,749 54,526 53,005 47,608 39,319 mill. mill. mill. mill. mill. 7.74 % 6.62 % 6.43 % 5.78 % 4.77 % Country

Italy 26,906 mill. 3.27 % ________________________________________________________________

Top Seven Countries for Indian Imports in 1994-95 ( value : Rupees million) _____________________________________________________________
% of India's total imports _____________________________________________________________ U.S.A. 89,302 mill. 10.06 % Germany Japan Saudi Arab U.K. UAE 67,313 62,882 49,388 48,365 48,238 mill. mill. mill. mill. mill. 7.58 % 7.08 % 5.56 % 5.45 % 5.43 % Country Indian Imports (value)

Kuwait 46,383 mill. 5.22 % _____________________________________________________________

Foreign Collaboration Policies India's effort to accelerate industrialisation & improve international competitiveness received a boost with the announcement of the New Industrial Policy in July 1991. A key element of the Industrial Policy & an important component of the reform program is the freah approach towards foreign investment & technological tie-ups. The Policy changes were designed to attract significant & sustained capital inflows into India, while encouraging technological collaboration between Indian & foreign companies. Foreign Investment Policies

Majority foreign equity, even upto 100%, is allowed in several sectors . Foreign investment upto 51% in 35 high priority areas is eligible for automatic aproval, provided by Reserve Bank of India, within 2 weeks of application. Use of foreign brand names & trademarks for sale of goods in India is allowed. Foreign companies are allowed to open branch offices in India. Hotels & tourism related industries are also eligible for automatic approval for direct foreign investment with upto 51% equity. Foreign Institutional Investors (FIIs) have been allowed to invest in the Indian capital market. Foreign investment has been allowed in off-shore funds promoted by Indian Finanacial Institutions. Indian companies have been allowed to float Global Depository receipts (GDRs), which are traded in majot international stock exchanges. There is now a market determined exchange rate for the rupee. Foreign exchange is freely available for a number of purposes like payment of royalites, lumpsum fees, dividends, business travel abroad etc.

Other proposals for foreign equity investment shall also be considered on case-tocase basis for clearance by Secretariat for Industrial Approvals.

Indian Joint Ventures Abroad Indian joint ventures (Jvs) & wholly owned subsidiaries are an important instrument for promoting exports, trade expansion & economic cooperation. India's foreign investment is the highest amongst 3rd world countries & is dispersed over 70 countries. As on 31st Decemeber 1994, there were 524 joint ventures, of which 177 were in operation & 347 at different stages of implementation. The Indian equity in the 177 Jvs was Rs 1,817 million in Dec 1994 & the approved Indian equity in the 347 Jvs was Rs 13,952 million. Impact of New Policy and Future Direction

The new Policy has brought about dramatic change in the foreign currency reserves of the Government of India - taking it to US$ 20.8 billion at end-March 1995. 7,200 foreign collaboration proposals were approved in the post-policy period from August 1991 to September 1995.

The focus of the government in 1994-95 continued to be on creating a free environment for trade, streamlining & simplification of procedures, increasing export production, sharpening competitive edges & focussing on quality & technological upgradation. During the year several measures were taken for export promotion, aimed at consolidating the growth of 18.3% achieved in (US) dollar terms in 1994-95. Some of the measures taken are :

Rupee has been made convertible on the current account Exporters & units in Export Processing Zones, Software Technology Parks, are now allowed to retain a higher percentage of their forex earnings National Centre for Trade Information has been launched to facilitate greater access to trade information The World Trade Organisation (WTO) agreement has been signed Pass Book Scheme has been introduced for all Export Houses/Trading Houses/Star Trading Houses/Super Star Trading Houses. A harmonised system of commodity classification known as Indian Trade Classification has been introduced.

However, India still has a long way to go - it's share in world exports was a mere 0.65% in 199495. India imported Rs.887 billion of goods in 1994-95, and exported Rs.823 billion.

External trade and investment

Further information: Globalisation in India and List of the largest trading partners of India [edit] Global trade relations A map showing the global distribution of Indian exports in 2006 as a percentage of the top market (USA - $20,902,500,000).

Until the liberalisation of 1991, India was largely and intentionally isolated from the world markets, to protect its economy and to achieve self-reliance. Foreign trade was subject to import tariffs, export taxes and quantitative restrictions, while foreign direct investment (FDI) was restricted by upper-limit equity participation, restrictions on technology transfer, export obligations and government approvals; these approvals were needed for nearly 60% of new FDI in the industrial sector. The restrictions ensured that FDI averaged only around $200 million annually between 1985 and 1991; a large percentage of the capital flows consisted of foreign aid, commercial borrowing and deposits of non-resident Indians.[99] India's exports were stagnant for the first 15 years after independence, due to general neglect of trade policy by the government of that period. Imports in the same period, due to industrialisation being nascent, consisted predominantly of machinery, raw materials and consumer goods.[100] Since liberalisation, the value of India's international trade has increased sharply,[101] with the contribution of total trade in goods and services to the GDP rising from 16% in 199091 to 43% in 200506.[18] India's major trading partners are the European Union, China, the United States and the United Arab Emirates.[102] In 200607, major export commodities included engineering goods, petroleum products, chemicals and pharmaceuticals, gems and jewellery, textiles and garments, agricultural products, iron ore and other minerals. Major import commodities included crude oil and related products, machinery, electronic goods, gold and silver.[103] In November 2010, exports increased 22.3% year-on-year to 85,063 crore (US$18.88 billion), while imports were up 7.5% at 125,133 crore (US$27.78 billion). Trade deficit for the same month dropped from 46,865 crore (US$10.4 billion) in 2009 to 40,070 crore (US$8.9 billion) in 2010.[104] India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and its successor, the WTO. While participating actively in its general council meetings, India has been crucial in voicing the concerns of the developing world. For instance, India has continued its opposition to the inclusion of such matters as labour and environment issues and other nontariff barriers to trade into the WTO policies.[105]
[edit] Balance of payments Cumulative Current Account Balance 19802008 based on IMF data

Since independence, India's balance of payments on its current account has been negative. Since economic liberalisation in the 1990s, precipitated by a balance of payment crisis, India's exports rose consistently, covering 80.3% of its imports in 200203, up from 66.2% in 199091.[106]

However, the global economic slump followed by a general deceleration in world trade saw the exports as a percentage of imports drop to 61.4% in 200809.[107] India's growing oil import bill is seen as the main driver behind the large current account deficit,[91] which rose to $118.7 billion, or 9.7% of GDP, in 200809.[108] Between January and October 2010, India imported $82.1 billion worth of crude oil.[91] Due to the global late-2000s recession, both Indian exports and imports declined by 29.2% and 39.2% respectively in June 2009.[109] The steep decline was because countries hit hardest by the global recession, such as United States and members of the European Union, account for more than 60% of Indian exports.[110] However, since the decline in imports was much sharper compared to the decline in exports, India's trade deficit reduced to 25,250 crore (US$5.61 billion).[109] India's reliance on external assistance and concessional debt has decreased since liberalisation of the economy, and the debt service ratio decreased to from 35.3% in 199091 to 4.4% in 2008 09.[111] In India, External Commercial Borrowings (ECBs), or commercial loans from nonresident lenders, are being permitted by the Government for providing an additional source of funds to Indian corporates. The Ministry of Finance monitors and regulates them through ECB policy guidelines issued by the Reserve Bank of India under the Foreign Exchange Management Act of 1999.[112] India's foreign exchange reserves have steadily risen from $5.8 billion in March 1991 to $283.5 billion in December 2009. [113]
[edit] Foreign direct investment in India Share of top five investing countries in FDI inflows. (20002010)[114]

Rank

Country

Inflows (million USD)

Inflows (%)

Mauritius

50,164

42.00

Singapore

11,275

9.00

USA

8,914

7.00

UK

6,158

5.00

Netherlands

4,968

4.00

As the fourth-largest economy in the world in PPP terms, India is a preferred destination for FDI;[115] India has strengths in telecommunication, information technology and other significant areas such as auto components, chemicals, apparels, pharmaceuticals, and jewellery. Despite a surge in foreign investments, rigid FDI policies were a significant hindrance. However, due to positive economic reforms aimed at deregulating the economy and stimulating foreign investment, India has positioned itself as one of the front-runners of the rapidly growing Asia Pacific Region.[115] India has a large pool of skilled managerial and technical expertise. The size of the middle-class population stands at 300 million and represents a growing consumer market.[116] During 200010, the country attracted $178 billion as FDI.[117] The inordinately high investment from Mauritius is due to routing of international funds through the country given significant tax advantages; double taxation is avoided due to a tax treaty between India and Mauritius, and Mauritius is a capital gains tax haven, effectively creating a zero-taxation FDI channel.[118] India's recently liberalised FDI policy (2005) allows up to a 100% FDI stake in ventures. Industrial policy reforms have substantially reduced industrial licensing requirements, removed restrictions on expansion and facilitated easy access to foreign technology and foreign direct investment FDI. The upward moving growth curve of the real-estate sector owes some credit to a booming economy and liberalised FDI regime. In March 2005, the government amended the rules to allow 100% FDI in the construction sector, including built-up infrastructure and construction development projects comprising housing, commercial premises, hospitals, educational institutions, recreational facilities, and city- and regional-level infrastructure.[119] A number of changes were approved on the FDI policy to remove the caps in most sectors. Fields which require relaxation in FDI restrictions include civil aviation, construction development, industrial parks, petroleum and natural gas, commodity exchanges, creditinformation services and mining. But this still leaves an unfinished agenda of permitting greater foreign investment in politically sensitive areas such as insurance and retailing. The total FDI equity inflow into India in 200809 stood at122,919 crore (US$27.29 billion), a growth of 25% in rupee terms over the previous period.[120]