Indian export in last two decades show good economic growth, less impact of recession, decline in the RERx. Balance Of Payment problem of India was caused by numerous factors such as large trade deficit, fall in invisible surplus, sensitive behavior of foreign creditors, declining role of concessional external finance. For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/ZEcPAc

1. Chapter 21
Trade And BOP Of India
International Marketing
Chapter-21 Trade And BOP Of
India

2. Objectives
What is the outcome of India’s foreign
trade plan
What are the determinants of exports
What are major exports
What is the direction of India’s foreign
trade
What are the determinants of payments
balance
What are the major problems of India’s
export sector
International Marketing
Chapter-21 Trade And BOP Of
India

3. Introduction
This chapter provides a brief account of
the foreign trade of India under the
five plans, trends in the direction and
composition of trade, determinants of
exports and imports and trends in the
balance of payments.
International Marketing
Chapter-21 Trade And BOP Of
India

4. Foreign Trade Under The
Plans
a) The share of India in the total world exports fell
from about per cent in 1950 to 0.4 per cent in
1980. so there is some improvement in mid-
eights.
b) India was the 13th largest exporter in 1950, but
there are more than 30 countries above India
now.
c) India’s exports as a percentage of the GDP had
been stagnating around 5 percent. It has
improved since the liberalization, it is still very
low even in comparison with many other
developing countries.
International Marketing
Chapter-21 Trade And BOP Of
India

5. Determinants Of Exports
The external factors are
1. The rate of growth of the economies of
the importing countries
2. The rate of growth of the world trade
3. The rate of change in the price level in
the importing country
International Marketing
Chapter-21 Trade And BOP Of
India

6. The internal factors are
1. The rate of growth of the Indian
economy
2. The rate of change in the domestic
price level.
International Marketing
Chapter-21 Trade And BOP Of
India

7. Impact of The Inter-
relationship
Good growth in the economies of the
industrial countries has been associated
with good growth in India’s exports.
The volume of India’s exports broadly kept
pace with the growth in the economies of
the industrial countries.
During certain periods, despite modest
growth in the industrial countries and in
world trade, the volume of India’s exports
fell because of the rise in the RERx.
International Marketing
Chapter-21 Trade And BOP Of
India

8. Determinants Of Imports
1. The rate of growth of the Indian economy
2. The relative price of imports
3. In a number of years, the volume of imports
was kept down by moderate growth of the
economy together with relatively high price
of imports.
4. Large imports in several years were
associated with moderate growth of the
economy and substantial fall in the relative
price of imports
International Marketing
Chapter-21 Trade And BOP Of
India

9. Major Exports
After Independence, India has achieved
considerable diversification in exports, both
product-wise and country-wise.
Today manufactures account for about
three-fourths of the total exports compared
to 45 per cent in 1960-61
Though there has been a significant growth
of non-traditional items, a number of
traditional items continue to have
considerable weightage in India’s export
basket. International Marketing
Chapter-21 Trade And BOP Of
India

10. Export Product-Country Matrix
On 27 December 1995, Mr. P.
Chidambaram, the then Minister for
Commerce presented a 15 country –
15 product export matrix, proposing
an export thrust strategy.
International Marketing
Chapter-21 Trade And BOP Of
India

11. The 15 destination markets in the matrix
are United States, Japan, Germany, U.K.,
Hong Kong, U.A.E., Belgium, Italy, Russia,
Singapore, Bangladesh. Netherlands,
France, South Africa and Thailand.
The 15 products are jems and jewellery;
cotton and accessories; cotton yarn, fabric
etc.
International Marketing
Chapter-21 Trade And BOP Of
India

12. Major Imports
Petroleum oil lubricants now account for a
considerable part of India’s import bill.
Pearls and precious stones account for a
large share of the import bill. These imports
are mostly for export processing.
Other important import items, in terms of
value, are edible oils, fertilizers and fertilizer
materials; chemicals, iron and steel, cereals
and pulses and nonferrous metals.
International Marketing
Chapter-21 Trade And BOP Of
India

13. Balance Of Payments
The trade balance is often a major
determinant of the payments balance.
Trade deficit has often caused balance of
payments deficits for India.
One of the important reasons for the recent
balance of payments (BOP) problem was the
decline in the role of the invisibles surplus in
financing the trade deficit. Except for brief
periods, India’s BOP has shown deficit.
International Marketing
Chapter-21 Trade And BOP Of
India

14. BOP Problem Of India
1. Large trade deficit
2. Fall in the invisible surplus, caused by:
a) Sharp increase in the invisibles
payments due to the increase in the
debt service.
b) Setback to the invisible receipts,
mainly the emigrant remittances and
travel income.nternational Marketing
I
Chapter-21 Trade And BOP Of
India

15. 3. Sensitive behavior of foreign creditors,
including NRI foreign currency
depositors.
4. The declining role of concessional
external finance.
International Marketing
Chapter-21 Trade And BOP Of
India

16. Major Problems Of India’s
Export Sector
Lack of integrated approach
Problem recognition and action lags
Technological factors
High costs
Poor quality image
Unreliability
Supply problems
International Marketing
Chapter-21 Trade And BOP Of
India

17. Faceless presence
Infrastructural bottlenecks
Structural weakness
Uncertainties, procedural complexities
and institutional rigidities
Inadequacy of trade information system
International Marketing
Chapter-21 Trade And BOP Of
India

18. Summary
Indian export in last two decades show
1. Good growth in the economies
2. Low recession conditions
3. Decline in the RERx.
BOP problem of India was caused by
1. Large trade deficit
2. Fall in invisible surplus
3. Sensitive behavior of foreign creditors
4. Declining role of concessional external finance.
International Marketing
Chapter-21 Trade And BOP Of
India