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A STUDY ON
COUNTRY
COMMODITY AND
CURRENCY
EXPOSURE OF
EXPORT
MANAGEMENT IN
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CHAPTER I
INTRODUCTION AND DESIGN OF THE STUDY
Chapter Description Page
No. No.
1.2 INTRODUCTION 1
1.2 STATEMENT OF THE PROBLEM 2
1.3 OBJECTIVES OF THE STUDY 3
1.4 SIGNIFICANCE OF THE STUDY 4
1.5 LIMITATIONS OF THE STUDY 5
1.6 OPERATIONAL DEFINITION OF CONCEPTS 5
1.7 METHODOLOGY 6
1.8 TOOLS OF ANALYSIS 7
1.9 SAMPLE DESIGN 7
1.10 PERIOD OF STUDY 9
1.11 HYPOTHESES OF THE STUDY 9
1.12 SCOPE OF THE STUDY 9
1.13 CHAPTERIZATION 10
References 12
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CHAPTER I
INTRODUCTION AND DESIGN OF THE STUDY
1.3 INTRODUCTION
Global trade is more than 3000 years old. India was exporting its goods
especially textiles even 2000 years back to Greece, Rome, Egypt, China and many
other countries. Global trade has been expanding very fast in the last 250 years.
After the Second World War, global trade has multiplied several times. There was
an increase of 80 percent in global exports during 1980-90 and it was 90 percent
during 1990-2000. The annual growth rate of global income (Production) has been
a little more than three percent and the annual growth of global trade has been
more than six percent. The value of global exports has gone up from $ 55 billion
in 1950 to more than $ 9,123 billion in 2004
1
.
India exports its commodities to well over 225 countries. The countries of
exports are classified into seven regions based on geographical proximities
2
. They
are also further categorized into WTO members and observers. The present study
is made with major objectives of studying the export exposure with respect to
country, commodity and currency. Country exposure is studied based on
geographical proximities, WTO members and observers, BRICS and SAARC
countries. The commodities of exports are classified broadly into four categories.
They are primary (Agriculture and Ores) , manufactured, petroleum and other
products. Pattern of commodity wise exports reveal commodity exposure.
Currency exposure is studied based on four major currencies. They are USD,
GBP, EURO and JPY. To substantiate the present study, Default pattern of export,
Balance of payments, Transaction cost, Government of India policy initiatives are
included.

1.2 STATEMENT OF THE PROBLEM
All the countries in the world are continuously initiating various measures
to increase the market share of its exports to augment their foreign exchange
inflow and Gross Domestic Product (GDP) so that the living standards of their
population will improve. India is no exception, but its efforts are yielding results
and they are not good enough to realize their full potential. The present study is
analyzing India’s exports to various countries, components of commodities and
four major currencies of invoices namely United States Dollar (USD), Great
Britain Pound (GBP), European Currency (EURO) and Japanese Yen (JPY) to
draw some meaningful conclusions. Impact of Indian exports to countries in
various geographical regions, WTO members and observers, BRICS and SAARC
countries is named as Country exposure.
There are four categories of principal commodities of exports. They are
Primary Products (Agriculture, Ores and Minerals), Manufacturing goods,
Petroleum Products and Others. Each region of the world has a different
composition of commodities and the present study analyzes the commodities of
exports, pattern of export and any significant relationship that exist among the
group of products is known as Commodity exposure
3
.
Exports are invoiced in foreign currencies and predominantly over 90 per
cent of exports from India are invoiced in USD (United States Dollar), GBP
(Great Britain Pound), EURO (Major Currency of Europe Region) and JPY
(Japanese Yen). The present study tracks down movements of four currencies
namely USD (United States Dollar), GBP (Great Britain Pound), EURO (Major
Currency of Europe Region) and JPY (Japanese Yen) for a period of 12 years and
explores to establish any correlation between the currency and export performance
is expressed as Currency exposure.
2

An Attempt was made to conduct an exploratory study by collecting
primary data relating to country, commodity and currency of export through a
structured questionnaire from about 500 exporters in Tamil Nadu, for a period of
10 years from 1999-2000 to 2008-09. 500 exporters were targeted on the basis of
information ascertained from the Office of the Director General of Foreign Trade,
Chennai.
Only about 113 responses could be received with full information. The
reason for non-response from other exporters was inferred that they were not
willing to disclose default details of their customers. The defaults in payment by
the buyers were analyzed and the reasons for such default have been ranked.
Country wise risk classification has been collected from Export Credit Guarantee
Corporation for the relevant period to find out the default pattern with respect to
the classification. Details of overall default in export realization for a period of
10 years from 1999-2000 to 2008-09 period were collected from Reserve Bank of
India, Mumbai.
Result of Indian International Trade is measured through a study of
Balance of Payment. Bottlenecks in the process of enhancing our export share
from the present level to future projections are also studied taking into account
Transaction cost of exports. Government of India has been taking various
initiatives through policy directions
4
to remove the bottleneck in order to facilitate
and compete with other countries to increase our market share.
At the end of the tunnel there lies a light, a visionary leader recognizes
with foresight. It has been aptly quoted in Thirukkural
“What clearly the eye discerns as right, with steadfast will and mind
unslumbering, man should fulfil.”
1.3 OBJECTIVES OF THE STUDY
1. To analyze India’s exports to seven geographical regions of the world
3

2. To study the relationship of our export performance among WTO members
and observers and the significance of export performance between the
countries of our economic cooperation such as BRICS and
SAARC.
3. To analyze the composition of various commodities of exports, their
relative share and the direction of exports.
4. To analyze the relationship among four major foreign currencies of export
namely USD, GBP, EURO and JPY and export performance to USA, UK,
Germany and Japan.
5. To analyze the countries, commodities and currencies of export, default in
payments and rank the reasons thereof.
6. To analyze India’s Balance of Payment with its various components and
Transaction Cost of export and Policy Initiatives of Government of India to
accomplish better performance of export.
1.4 SIGNIFICANCE OF THE STUDY
The need for the present study arises with an objective to provide some
insights to the policy makers and various stakeholders in the area of export
management to set the strategic measures to improve the export performance by
focusing on country, commodity and currency exposure. There are two key deficit
areas which hamper the growth of India. They are Trade Deficit
5
and Fiscal
deficit. The present study attempts to show the components of Trade Deficit which
is leading to Current Account Deficit (CAD). Foreign Trade Policies are initiated
to improve the export performance, narrow down the trade deficit thereby
reducing the Current Account Deficit. Improving export performance is as
important as that of realization of entire export values. An attempt is necessitated
to study the default pattern of export and also the transaction cost.

1.5 LIMITATIONS OF THE STUDY
1. The area of the study is broad and each area like Country, Commodity and
Currency exposure of export management themselves has a wide scope for
further research.
2. With respect to the exploratory study with the limited number of 113
samples, primary data were analysed.
3. Period of study has to be extended beyond the year 2009 as there has been
constraints in collection of primary data from exporters as the details of
default are sensitive.
4. Primary data have been collected from various predominant export
locations of Tamil Nadu, as the area of operation of entire nation is very
large.
1.6 OPERATIONAL DEFINITION OF CONCEPTS
1. Country Exposure: Country exposure is referred to in the research as the
countries of export where India is exporting and they are classified based
on geographical proximities, size of the economy and various economic
cooperation for trade entered into by Indian Government with other
countries.
2. Commodity Exposure: Commodity exposure is referred to in the research
as the commodities namely the goods excluding services exported from
India to the rest of the world and the composition of various commodities
and its share in Indian export.
3. Currency Exposure: Currency exposure is referred to in the research as
the currencies of invoices Indian exporters are making and the impact of
the currency fluctuation in the export performance.

4. Trade Openness : Trade openness is referred to in the research as the
openness of the country in its trade with the rest of the world. It is
calculated by sum of export and import to GDP expressed as percentage.
5. Exporters’ Default: Exporters are earning foreign exchange to their
countries and so they are precious. When the buyers default, exporters of
the value of export that results in exporters’ default and the default
percentage to a country is a loss of foreign exchange.
6. Balance of Payment: Balance of payment (BOP) is worked out from
Balance of trade as one of the components. Balance of trade is the
difference between export and import which may result either in a positive
or negative value. There will be invisible receipts other than exports and
also invisible payments other than imports. After adding/subtracting,
inflow of capital/outflow of capital, constitute net balance of payment.
Balance of payment is vital for any healthy economy.
7. Transaction cost: Transaction cost in export refers to various cost
elements exporters have to incur in order to earn foreign exchange to their
countries. They are cost of logistics, interest cost.
8. Government of India’s Foreign Trade Policy: In order encourage the
exporters and various stake holders in international trade, Commerce
Ministry, Government of India is announcing Foreign Trade Policy once in
five years and amendment to the policy every year is based on the mid-
term review of the performance. Research draws various policy initiatives
of Government of India and their impact on the export performance.
1.7 METHODOLOGY
The study comprises both primary and secondary data. Secondary data
have been collected from the published sources such as Commerce Ministry,
6

Government of India, Reserve Bank of India, Word Trade Organization and
various reports published in journals and reports. Primary data have been
collected from exporters through structured questionnaire.
1.8 TOOLS OF ANALYSIS
The secondary data were analyzed in SPSS 16.0 version. Descriptive
statistics were used to find the distribution of collected data. Bi-variate analysis,
independent t-test were used to find the significance between the two variables.
Pearson’s correlation was used to assess the strength of relationship between the
variables. (ANOVA) and Post hoc Duncan’s test used to find the difference in the
means of variables. Regression analysis was used to find the model fit of the
variables with enter method at the significance level of 0.05, kept for all the above
statistical tools. The primary data were collected by using non probability sample
and hence, the researcher has not used any parametric test.
1.9 SAMPLE DESIGN
Exploratory study is made by collecting primary data through a structured
questionnaire from exporters in Tamil Nadu, who have been exporters for a period
of 10 year from 1999-2000 to 2008-09 to establish the country, commodity and
currency of exports and the pattern of default. Additionally, any defaults of
payment from the buyers analyzed and the reasons for default have been ranked.
Population is not ascertainable and however, through Joint director general
of Foreign trade, Chennai who allocate Import Export Code (IEC) and there is no
data available to ascertain the numbers exporters active for 10 years till 2009.
Based on the formula it has been ascertained to obtain 113 samples and though
500 questionnaires administered to the respondents some of the sensitive data like
default have deterred respondents to respond and the research was undertaken till
the complete data were collected from 113 and
7

these data only supplement the study to find out the default pattern and compare
with the All India default pattern. The formula applied is given below:
The Sample size was calculated with Open Epi Software
with the confidence interval of 95 per cent
Hypothesized % frequency of outcome factors in the 50% +/- 5
Population (p).
Confidence limit as % of 100(absolute +/-%)(a) 5%
Design effect (for cluster surveys – DEFF).
Sample Size(n) for Various Confidence Levels
Confidence Level (%) Sample Size
95% 113
80% 81
90% 100
97% 119
99% 128
99.9% 138
99.99% 144
Equation : Sample size n = [DEFF*Np(1-p)]/[(d
2
/Z
2
1-a/2*(N+1)+p*(1-p)]

1.10 PERIOD OF STUDY
All the required secondary data were collected between April 1999 and
March 2011. The reference period for the primary data collected pertained to the
year from 1999-2000 to 2008-2009.
1.11 HYPOTHESES OF THE STUDY
1. There is no significant difference in the pattern of exports to seven regions
of the world during the period of study.
2. There is no significant relationship between WTO members and WTO
observers of seven regions of the world in regard to Indian exports during
the period of study.
3. There is no significant difference of export performance among the
countries of economic cooperation such as BRICS and SAARC during the
period of study.
4. There is no significant difference among various commodities exported
from India to different parts of the world during the period of study.
5. There is no significant relationship between volatility of foreign
currencies (USD, GBP, EURO and JPY) and export performance to USA,
UK, Germany and Japan during the period of study.
6. There is no significant relationship between export and import performance
of oil and non-oil in Balance of Trade.
1.12 SCOPE OF THE STUDY
Present study has set three major objectives on important areas of export
management in India namely country, commodity and currency exposure. Further,
the present study has also been made an attempt through an exploratory study by
interfacing with exporters who have been in the business of exports for
9

over 10 years prior to 2009 to analyze export performance, the default pattern and
rank the reasons thereof.
Components of exports to various countries have been classified into seven
geographical regions, WTO members and observers , BRICS and SAARC
countries.
Commodities of exports can be reconstituted periodically over a period of
time due to the ecosystem of the respective countries, competitiveness of export
and policy initiatives of respective Government. The product mix may
periodically change and the scope can be extended to study different strategies of
export management in the changing scenario.
The present study has made an observation about the relationship between
currency volatility and export performance. They are correlated at different
degrees for the four currencies during the study period.
An explorative study has been made to find out the exporters performance,
default pattern and ranking the defaults during the 10 year period from 1999-2000
to 2008-09.
The performance of good export management will have to reflect
comfortable balance of payment position, reduction in transaction cost and
proactive policy measures. The present study is an attempt to make a
comprehensive appraisal of export management in India by collating various data
pertaining to the period from 1999-2000 to 2010-11 from secondary data and
1999-2000 to 2008-09 from primary data.
1.13 CHAPTERIZATION
This thesis contains nine chapters.
Chapter I deals with introduction and design of the study.
Chapter II provides the review of literature.
10

Chapter III describes theoretical framework of Country, Commodity and
Currency Exposure.
Chapter IV analyses Country Exposure with respect to India’s exports to
various countries based on geographical proximities, WTO members and
observers, BRICS and SAARC countries.
Chapter V focuses on Commodity Exposure commodities such as primary,
manufactured, petroleum and other products.
Chapter VI throws light on Currency Exposure and the four major
currencies of India’s export namely USD, GBP, EURO and JPY and its exchange
fluctuations and the impact of corresponding export performance.
Chapter VII portrays Exporters’ Default in receiving export payment,
default pattern, ranking thereof.
Chapter VIII elaborates Balance of Payment, Transaction Cost and Policy
Initiatives of Government of India.
Chapter IX concludes with the Research Findings, Suggestions and
Conclusion.
11

References
1. M. Victor Louis Anthuvan’s, “The Dynamics and the Impact of
Globalisation”- A subaltern perspective, Amirtham Publications, May
2006, p. 25.
2. International Trade Statistics, WTO secretariat, 2011,
http://www.3dthree.org/ pdf_3D/Guide-075Ch2.pdf.
3. Hand book of Statistics on Indian Economy, RBI, 2011, pp. 205-206.
4. Foreign Trade Policies from Ministry of Commerce, Government of
India, since 2000, http://commerce.nic.in/eidb/default.asp.
5. Foreign Trade Statistics, Government of India, Ministry of Commerce
and Industries announced since 2000, http://commerce.nic.in/eidb/
default.asp.

CHAPTER IX
SUMMARY OF FINDINGS,
SUGGESTIONS AND CONCLUSION
Chapter Description Page
No. No.
9.1 INTRODUCTION 281
9.2 SUMMARY OF STUDY 281
9.3 SUMMARY OF FINDINGS 283
9.3.1 Country Exposure 283
9.3.2 Commodity Exposure 285
9.3.3 Manufactured Goods 285
9.3.4 Currency exposure 285
9.3.5 Rupee Invoicing and Asian Dollar 286
9.3.6 Exporters’ Default 286
9.3.7 Default pattern 286
9.3.8 Balance of Payment 287
9.3.9 Transaction cost and Government Initiatives 287
9. 3.10 Trade Openness 288
9.3.11 Foreign Exchange Reserve 289
9.4 SUGGESTIONS 289
9.5 CONCLUSION 293

9.6 SCOPE FOR FURTHER STUDIES 293
BIBLIOGRAPHY 295
282

CHAPTER IX
9.1. INTRODUCTION
Findings are based on the research work carried out from theoretical and
analytical frame work and presented in this chapter. Suggestions are made
appropriate to the findings and accordingly concluded with the scope for further
research. Findings are presented in two forms namely summary and list forms.
Theoretical framework is presented in summary form because it is descriptive in
character. The remaining findings are presented in the list forms as they are
analytical in nature. Findings, suggestions and conclusion provide a road map for
Indian exporters and some insight into the various stake holders in the field of
export management in India.
9.2 SUMMARY OF STUDY
The study is made to look into six important aspects in export management
through three major aspects of Country, Commodity and Currency exposure.
Country exposure is analyzed through India’s export to seven geographical
regions namely, North America, South and Central America and the Caribbean,
Europe, Asia, Middle East, Africa and CIS. Further, the study is made to analyze
India’s export performance among the countries with which it has an economic
cooperation namely BRICS and SAARC and also among WTO members and
observers.
The principal commodities of exports and the pattern of export and the
shift of commodities of export during the study period are presented.
The currencies in which exports are invoiced and four major currencies are
part of the study namely, USD, GBP, EURO and JPY and the export performance
to USA, UK, Germany and Japan. The relationship between the
appreciation/depreciation of those currencies with the performance of the export is
studied by using correlation and regression as a statistical tool.
281

An exploratory study is conducted by choosing 113 exporters who have
been exporting for well over 10 years prior to 2009. Data have been collected for
a period of 10 years from 1999-2000 to 2008-2009. This exploratory study is
made by choosing samples from Tamil Nadu. The study is to analyze the
exporting countries, value of export, commodities of export, payment default and
ranking the reasons for default. The default percentage has been compared with
All India default figures obtained from Reserve Bank of India, through Right to
Information Act., Countries risk classification has been obtained for select
countries from ECGC, Mumbai to find out any wider fluctuations in a country
when its risk classification is widely fluctuating and the impact of default.
Country’s Balance of payment through export-import performance, current
account balance after including invisible, net and adding the capital flow from
1999-2000 to 2010-2011 and the trade deficit and current account deficit which
are increasing year on year is the cause of concern to all the stake holders and the
economists of the country.
The transaction costs of exports in India has been studied from the task
force report of Government of India and the policy measures of Government of
India through various Foreign Trade policies during the study since 2000 to
minimize the transaction cost and maximize the export performance from India
and to compete with great economies namely USA and China and India is
expected to be the 3
rd
largest economies in the world by 2050.

9.3. SUMMARY OF FINDINGS
9.3.1. Country Exposure
11 India’s export has been consistently growing at a CAGR of 15-20 % and
the Government of India through its FTP (2009-2014) aims to achieve 25
% CAGR and to touch the export achievement of US$ 500 billion double
the market share by 2014.
12 Though India’s export decreased during 2008-09 by 3.7 per cent it is
contrary to the global contraction of 23 % during the same period and
hence, the impact of global recession has hit India at a lesser degree and its
dependence on external sector for its economy was not significant enough
to impact them severely though contagion effect has impacted Indian
economy too.
13 The result of the regional wise export performance among WTO members
and observers has revealed that there is significance between them except
common wealth of independent states.
4. India’s export to topmost five countries are UAE, USA, China,
Singapore and Honkong which contribute 40 % of India’s export and the
remaining 60 % is contributed by the remaining around 220 countries
where India is exporting to.
11 Singapore, Hongkong and UAE are the first, second and third largest re-
exporting countries and all these three countries are coming within the top
five countries of export from India and hence, the bilateral trade
relationship with these countries is very strategic in South East Asia and
Middle East regions to improve our export performance.
12 USA and China are in the top five exporting countries but the share of
those two countries import from India based on 2010 analysis as a sample
283

constitutes less than one per cent each and through bi lateral relationship
with these countries improving our market share of export is assuming
strategic importance.
7. BRICS account for more than 40 % of global population, nearly 30 % of
the land mass, 25 % of global GDP and India’s merchandise export among
these BRICS countries constitute 11.61 % of the share.
8. The share of the merchandise export from India to BRICS increased from
5.18 per cent in 1999-2000 to 11.61 % in 2010-2011 and BRICS are the
strong force to reckon with by the rest of the world.
9. BRICS proposes to start their own BRICS Bank and move towards
invoicing their exports in their home currencies.
10. India’s export to China is the highest among the BRICS countries.
11. India is poised to achieve the status of the top three economies of the
World by 2050 as per Goldman Saach’s predictions in BRICS report
(2007) .
12. SAARC constitutes 23 % of the world’s population and has 15 % of the
arable land, but only accounts for six per cent of global GDP and two per
cent of world goods trade.
13. SAARC region translated itself from a position of the slowest growing
region during the 1960s and the 1970s to one of the fastest growing regions
in the world since the 1980s.
14. India’s merchandize export among the SAARC regions was 3.88 per cent
in 1999-2000 and increased to 5.13 per cent in 2010-2011 and the
performance of the region is growing. India’s export to Bangladesh and Sri
Lanka are the highest among SAARC countries.
284

9.3.2. Commodity Exposure
5. Among the principal commodities of exports from India, Primary products
comprising Agriculture, Ores and Minerals contribute 13.9 % in 2010-
2011, which has fallen from 17.71 % in the years 1999-2000.
6. Manufacturing products share has also decreased from 80.7 % in the year
2000 to 66.07 % in the year 2011 and out of the manufacturing products
only Engineering products have gone up from 13.99 % in the year 2000 to
27.04 % in 2011.
7. Petroleum and crude oils have gone up sizably from a meager 0.11 per cent
in the year 2000 to 16.48 % and other products which are not part of the
three categories of exports, contributed 1.48 per cent in the year 2000 to
3.88 per cent in the year 2011
8. Manufactured goods rank first (69%)
,
followed by Primary products
second position (15%) and Petroleum and crude oils third position (13%)
and finally the other products form the fourth position (3 %) based on
commodities average performance of export from India from the period
1999-2000 to 2010-2011.
9.3.3 Manufactured Goods
Low cost technology products are bringing in quantum (69%) business in
volume but not the high value in US$ as that of USA and China.
Manufacturing sector is contributing a sizable export in India.
9.3.4 Currency exposure
Currency exposure has been studied for four major currencies namely.,
USD, GBP, EURO and JPY which constitute 91 % of exports and their
appreciation/depreciation from 1999-2000 to 2010-2011 as an independent
variable and export performance to USA, UK, Germany and
285

Japan for the corresponding periods as dependent variable has been
analyzed for its correlation and regression fit and there is no correlation
between both the variables and there must be demand-factors which may
be contributing to the export performance.
9.3.5 Rupee Invoicing and Asian Dollar
4. India’s exports are invoiced in foreign currencies to the tune of over 90 %
in 2008.
5. It was found that from 2010 to 2011, Export to Asian countries alone
constitutes 30 % of our exports and there is a strong case for introduction
of Asian Dollar.
9.3.6. Exporters’ Default
9. Default in payment for goods exported accounts for about 1 to 2 percent
from 1999 to 2009.
10. The major reasons for default are lack of quality and delay in shipment.
9.3.7. Default pattern
6. An exploratory study from Tamil Nadu reveals the direction of export in
the top five ranks of performance between 1999-2000 to 2008-2009 are
USA (54.73%), UK (21.17%), Germany (9.81%), Canada (4.16%),
Belgium (2.25%) and they all belong to North America and Europe
geographical regions.
7. With respect to commodities of export in the top five ranks of performance
are Hosiery, Ready-made garments and Knitted garments (54.85%),
Footwear and shoes (22.14%) Leather (12.36%), Granites (3.10%) and
Automobile, Auto casting and Auto components (2.73%) and default as a
percentage of export during the study period of 10 years (1999 to 2009)
work out to 1.81 per cent.
286

7. The causes for default are ranked in the order of Quality dispute, Non
adherence to shipping schedule, defect in export documentation, willful
default, bankruptcy of buyer, political development in buyers country and
any other reasons (Global recession).
8. All India export default works out to 1.1 per cent during the same period of
study and the countries are constantly keeping the status of A1 and A2
among the major countries obtained from ECGC during the study period
(1999 to 2009).
9.3.8. Balance of Payment
6. Balance of trade deficit that was around US $ 12 billion per annum from
1999-2000 to 2002-03 started escalating year after year. It reached the
level of US $ 130 billion by 2010-2011.
7. During the period of 1999-2000 to 2010-11, Exports increased by 6.76
times and import increased by 6.92 times thereby balance of trade deficit
keeps increasing. Oil import figure stood at US $ 106 billion in 2010-2011.
8. During the period of 2010 – 2011, though forex reserves have been
increasing over the period, which is on account of capital inflow, any
sudden flight of capital will deplete the forex reserves substantially.
9.3.9. Transaction cost and Government Initiatives
1. Transaction cost of exports in India is high. Contribution of India’s export
to GDP is 16 % in comparison to China (34.7%) and Thailand (65.6 %)
and the contribution to GDP must go up by reducing the transaction cost in
the year 2010.

2. Share of India’s merchandize trade stands at 1.2 per cent and that of China
at 9.6 per cent in the year 2009 which correspondingly went up to 1.4 per
cent for India and 10.4 % in 2010.
3. Even within the countries, Mumbai and Ahmadabad ports take 15 days to
export and other ports in India take around 25 days as per the task force on
transaction cost in exports report, 2010.
4. India ranks 94 out of 183 countries in terms of ease of trading across
borders as per task force on transaction cost in exports report, 2010.
5. Technology is an enabler in Singapore and Denmark to bring about
efficiency in international trade and bringing down the transaction cost.
6. Government has formed a taskforce in analyzing the transaction cost of
exports in India and the time bound planning is made and actions are
already initiated by Government of India and fruits of the efforts must
yield the desired results in achieving double the market share from USD
250 billion in 2011 and to touch the level of USD 500 billion in 2014 as
per the FTP 2009-2014.
9. 3.10. Trade Openness
1. India has opened its economy through trade openness. It has resulted in the
country registering an increase in GDP at 12.5 percent since 2008 at the
then prevailing USD/INR rate.
2. The trade openness of India has gone up from 21.5 percent in the year 2001
to 41.7 percent in the year 2008 which has correspondingly increased the
GDP of India during the period.
3. The country has set an objective to double its exports from USD 250
billion in the year 2011 to USD 500 billion in the year 2014 and doubling
India’s share of global exports by 2020.
288

4. India has laid a strong foundation by various policy initiatives through
ambitious plans enumerated in its Foreign Trade policies announced from
time to time.
5. A Task force constituted by Commerce Ministry, Government of India in
the year 2009, has brought out various reasons for increase in transaction
cost and suggested ways and means of minimizing the transaction costs
with an objective to make Indian exports competitive.
9.3.11 Foreign Exchange Reserve
1. India’s foreign exchange reserve in 1991 was less than one billion USD
which was just sufficient to meet 15 days’ imports.
2. In 2011, India’s foreign exchange reserve has improved to around 300
billion USD. Though in absolute terms, the forex reserve appears to be
substantial, in reality it is sufficient to meet only 7 months of import cost.
3. Import of Petroleum products, Gold and Coal accounts for major import
cost.
9.4. SUGGESTIONS
1. India needs to take greater measures to increase the existing market share
of international trade and compete with the two great economies namely
USA and China.
2. India’s focus must be in the race with USA and China in future by adopting
proactive approach in Trade and strengthening the bilateral relationship
with these countries.
3. Hindrance to ensure timely export has to be identified and removed
through appropriate policy measures

4. The various processes involved in the export procedures should be system
driven with due accountability as is available in countries such as
Singapore and Denmark.
5. Invoicing in Indian rupees will facilitate Indian exporters to manage their
exports receivable and the exposure in foreign currencies risk to exporters
will be reduced.
6. Introduction of a common currency namely Asian Dollar should be
attempted in respect of trade among Asian countries.
7. Introduction of a common currency among member countries of Asia will
go a long way to insulate our exports from the risk of exchange fluctuation.
8. A serious and sincere attempt must be made by the exporters to ensure that
quality of products in accordance with the terms of contract.
9. Appointment of an agency of international repute to pre-inspect the
exportable goods will go a long way in ensuring quality.
10. To avoid delay in shipment, the exporters should have proper planning,
meticulous execution and proper documentation.
11. Provision of incentive to exporters who are able to remove causes for
default on their part could be thought of and certain concessions in the
form of reduction in interest could be considered.
12. All Strategic measures must be aimed at, to increase the forex exchange
reserve by reducing oil imports, increasing exports, increasing the invisible
net and capital flow as preventive measures and not as reactive measures as
India did it in 1991.
13. Reform in Labour Laws, removal of administrative bottlenecks and
establishing accountability with responsibility are the need of the hour.
290

14. Serious efforts need to be made to encourage exploration and extraction of
petroleum products in our country to avoid external dependence of crude
oil.
15. Consumption of petroleum products should be curtailed ingeniously by
taking suitable steps like improving and encouraging public transport
system, car pooling, and discouraging petrol/diesel guzzlers.
16. Gold, apart from being used for jewelry, is used as an investment option in
a period of high inflation and inflation indexed deposits may be introduced.
17. The present export situation can be made comfortable and in fact this needs
to be improved further substantially by administrative reforms and
encouraging foreign investment into India.
18. Alternate attractive investment opportunities and promotion of e-gold
investment should be resorted to.
19. India is resorting to import coal on a large scale in spite of its availability in
India. The existing coal reserve should be exploited and imports
discouraged.
20. It is suggested that an exclusive bank like International Bank of India could
be established through the equity participation of various banks.
21. An exclusively specialized Bank like Women’s Bank will enhance the
capability of dealing staff and their efficiency in handling the specialized
nature of business.
22. Specialized Bank operations could suitably be interfaced with various
relevant agencies like R.B.I. ECGC, FIEO, Export Promotion Councils,
and DGFT and so on for the purpose of monitoring, control, MIS,

evolving suitable measures to augment export performance through trade
openness.
23. Transparency in forex operations, customs procedures, rules and
regulations and their implementation should be ensured in order to curtail
malpractices.
24. India, being a significant software power, should use technology to
expedite transactions, reduce cost of transactions and establish
accountability.
25. Risk of exchange fluctuation to the exporters should be mitigated by
moving towards invoicing our exports in Indian Rupees.
26. To start with, rupee invoicing should be attempted in respect of exports to
BRICS and SAARC Countries.
27. Once home currency invoicing is introduced, USD exposure will be
minimized and risk management of foreign currency will not significantly
affect the profitability of the international trade.
28. High value export has to be encouraged by utilizing better technology,
spending on Research and Development, FDI participation, high value
engineering products, encouragement to technocrats from premier
institutions like IITs, IIMs and so on in providing concessional finance
backed by insurance to cover the risk and remove the procedural
bottlenecks.
29. Bilateral trade relationship with major importing countries such as
Singapore, Hongkong, UAE, USA and China should be strengthened
strategically to enhance our exports substantially. Further, serious efforts
need to be made to explore unexplored countries for increasing our
exports.
292

30. With the advantage of availability of huge pool of technical manpower, we
should focus on manufacturing and exporting high value engineering
goods.
31. Continuous research should be carried out to identify the products which
have comparative cost advantage and encourage their large scale exports in
order to have scale of economies like that of China.
32. Value added products should be resorted to enhance value of our exports
and to curtail import of such items. This will help to create more
employment in the country.
33. Minimization of export cost, improvement of quality of goods, strict
adherence to time schedules and creation of necessary scale should be the
mantra not only to reach the third position in international trade by 2050
but also to have a respectable volume of trade.
9.5. CONCLUSION
India has a huge potential to improve its export performance. Though the
present level of performance is encouraging, it is not sufficient to the potentiality
it has. Hence, strategic measures like exploring new markets, bilateral
relationship, high value products and reduction of transaction cost make Indian
export competitive.
India has to improve its rank from the present level of 13
th
position among
the world countries to less than 10 ranks in 2-3 years and occupy the 3
rd
position
by 2030.
9.6. SCOPE FOR FURTHER STUDIES
1. The research studies the exports to seven regions based on geographical
proximity, relationship between WTO members and observers and BRICS
and SAARC countries. Further research can be undertaken to
293

study the country exposure with respect to India’s exports to various
economic groupings like developed countries, emerging economies and the
least developed countries in order to evolve suitable strategies to enhance
India’s exports.
2. This research confines to the study of commodities. The study can be
extended to Services export which constitutes a significant quantum of
exports and is on the increase.
3. Current research studies the four major currencies namely USD, GBP,
EURO and JPY which constitute over 90% of exports. Rupee invoicing
could also be studied as a separate topic for research in order to minimize
the exchange risk of exporters.
4. Transaction cost could be taken up for further research in-depth sector-
wise like logistics, Bank cost, Customs and duty draw back. This enables
various stake holders to understand and take appropriate measures to
reduce the transaction cost. This is the challenging factor in India’s export
that makes it uncompetitive globally.
5. Further research in the area of export performance of individual
commodity could be studied exclusively and its outcome can suggest
appropriate policy initiatives to increase commodity specific exports.
6. New Research in the area of Current Account Deficit can be taken up
based on the historical data of India and compared with that of other
countries. Outcome of the research can suggest to the policy makers of
India different strategies to bridge the gap of Current Account Deficit
which is the main concern of Indian policy makers.
7. Research in the area of Indian exporters’ default can be undertaken in
consultation with ECGC, RBI and Commerce Ministry with an objective to
save the precious foreign exchange.

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