INDIAN EXPORT

INTRODUCTION

India’s trade figures have improved. This is especially true for the period following reforms. Although there were few reforms in the 1980s, comprehensive reformsin the true sense of the word started in earnest in 1991. The effect of reforms on India’sexternal sector has been positive considering the following facts

India’s trade deficit as a percentage of GDP fell from 4.6 per cent in 1980/81to 3 per cent in 1990/91 .

Since 1947 the rupee value of exports increased more than 10 per cent in each of the three successive periods (financial year): 1972/73 to 1976/77; 1981/82 to 1984/85; and 1986/87to 1996/97.

India’s share in world merchandise exports increased from a mere 0.4 percent in 1981 to 0.5 per cent in 1991 and further to 0.91 per cent in 2006.

India’s exports figure crossed the $100 billion mark in 2005/06. There has been an increase in both the volume and the value of exports.

During 2005/06,exports in terms of volume increased by a record 45.4 per cent.

It is evident that India’s progress in terms of exporting goods and services has been remarkable since the mid-1990s, especially compared with India’s position in the early 1990s.

It is evident that India’s progress in terms of exporting goods and services has been remarkable since the mid-1990s, especially compared with India’s position in the early 1990s.

Reforms in the domestic economy have been able to reduce excessive government control of economic decision-making.

There are almost no sectors in which the entry of the private sector is restricted by discretionary central government policy. Budget pronouncements since 1991 have ensured this.

The further liberalization of FDI inflows awaits political consensus, but there are no serious business restrictions.

Additionally, reforms in the capital market have lowered the borrowing cost of capital. All these steps have helped the business environment immensely and propelled growth in India’s exports.

FACTORS AFFECTING EXPORTS

Exports are influenced mainly through two channels

Demand-side factors Supply-side factors

Major factors affecting Indian exports Supply Demand Potential Price Trade Infrastructure Procedural demand competitiveness barriers bottlenecks Relative Domestic price Competitors exchange-rate domestic price adjustment

Demand-side factors Price competitiveness

Exports of price-sensitive items, such as agricultural and textile products, have witnessed a fall in recent years. For example, between 2004 and 2005, the growth of agricultural and textile products,

Potential demand The GDP of importing economies

is also considered to be an important variable for estimating export demand functions (Goldstein and Khan, 1978; Magee, 1975). imports by India’s major trading partners are based on derived demand, demand for Indian exports refers to potential rather than actual demand.

Trade barriersThe major export items of India

that face these restrictions in the United States, European Union and Japan primarily fall under four categories. Using the two-digit Harmonized

Supply-side factors

Factor productivityFrom the supply-side

perspective, growth in exports can be an outcome of improved factor productivity. During the previous decade to 4.5 per cent in the period 1993-1999. The agricultural sector lagged behind, with output per worker rising to only 2.4 per cent from1993 to 1999, compared with 1.5 per cent during the previous decade.

Procedural bottlenecks Exporters face a maze of

government orders, regulations, rules and procedures, which raise the cost of production and hence affect exports. Enforcing a contract in India takes an average of 1,420 days and involves 56 different procedures

InfrastructureTo sustain the rapid growth of

exports, it is necessary to have a well-functioning infrastructure, including electric power, road and rail connectivity, telecommunications, air transport, and efficient ports

CONCLUSIONS

The recent growth in Indian exports is primarily led by an increase in factor productivity, growth in world trade, increase in intra-industry trade and external sector reforms.