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Trade

In 2005-06, Indian export trade was valued at US $102 billion recording a growth of 23% over previous year. India has performed better despite an global slowdown, Iraq war, etc. the major sectors where moderate to high growth i.e. 30% and above was recorded in the export of Petroleum: Crude & Products, Transport Equipments, Dyes/Intermediates & Coar Tar Chemical and Other commodities. Low growth i.e. less than 15% was observed in case of Gems & Jewellery, Cotton yarn, fabrics, made ups etc., man made yarn, fabrics, made ups, Plastic & Linoleum products, Primary & semi-finished Iron & Steel. This strong performance of exports has boosted the central government's confidence to double its share in world exports by 2009 from the current status. The Finance Minister in his budget speech for 2005-06 announced an ambitious export target of US$ 150 billion by 2008-09. Among the top 15 countries for exports, Korea recorded the highest growth of 75% followed by Netherlands (53%), Sri Lanka (43%) UK (40%), Singapore (39%).

India's import value in 2005-06 reached US$ 142 billion recording a growth of 28% over the previous year. The export to GDP ratio reached 14.2% while the import to GDP ratio reached 19.7% in 2005-06. Moderate to high growth i.e. 40% and above was witnessed in the import of Iron & Steel, Artificial Resins, Plastic material, Metal ferrous & Metal Scrap, Petroleum: Crude & Products, Machinery except electric & electronic, and Non-Ferrous Metals. Low growth i.e. less than 15% was observed for Gold, Pearls Precious Semi Precious Stones. Vegetable Oils fixed (edible), and Transport equipments. Among the top 15 countries for imports, the highest growth was recorded by China PRP followed by Germany, Australia, Hong Kong and Korea RP. The Ministry of Commerce has targeted doubling of export share in world trade between 2004-09. This would require exports also to at least double during next five years or a CAGR of at least 15%. In the past five years (FY2002-06), the growth rate has been 17.7%. The country will have to sustain its growth momentum in the next three years if it wants to reach the target of a 1.7% share in world exports by 2008-09. The growth was primarily because of significant increase in exports of crude products, beverages, and manufactured goods.

In view of the economic reforms and liberalisation policies taken up by India in the beginning of the 1990s, trade scenario of the country has changed dramatically. Significant inflows of foreign investment and increased international trade have contributed considerably to the growth of the economy. A gamut of new policies, implemented at the same time and aimed at achieving rapid increase in exports, has led to a gradual conversion of the trade and economy from an inward-looking, protected perspective into an open, globally integrated one. The liberalisation of the economy has made substantial impacts on India's trade volume during the 1990s decade leading to progressive rise in the trade-GDP ratio. The growth has been aided by large scale investments to remove bottlenecks in infrastructure sector involving ports and communications technology, improvement in legal and customs procedures and effective application of right policies.

After a significant annual growth of 20 percent during the period of 1993-94 to 1995-96 on the back of rapid economic reforms, trade performance of the country had deteriorated to 5 percent per annum between the periods of 1996 to 1998 due to economic recession and subsequent financial crisis in South East Asia leading to overall recession of world economy. Concomitant to this, slump of economies of the major trading partners have also adversely affected the overall external trade. However, it regained in 1999-2000 with an annual growth of 13 percent after showing a dismal picture in 1998-99.

India's trade development depends significantly on the global economic and trade growth. Prime destinations for exports include OECD, Asia and OPEC region, where OECD countries particularly USA, European Union and Japan dominate the exports basket of India by consuming around 60 percent of the export volume in 1998-99. In case of the source of imports also, OECD region dominates by catering to more than 50 percent of the import requirement of the country followed by OPEC region, becoming the prime source for POL products.

Looking at the prospects of the trade, it has been ascertained that with the strengthening of the international prices of oil and continued revival of the industry, growth of external trade particularly imports is likely to rise. Setting up of Special Economic Zones (SEZ) and Exports Processing Zones (EPZ) by Union Government near the potential export cargo originating centers are likely to boost the trade volume of the country in future leading to a significant hike in seaborne trade of the country and is expected to cross 500 million tons by 2006-07.