india city traffic economy

INDIA AND THE GLOBAL ECONOMY: TRADE, EXPORTS, IMPORTS, CRISIS

Foreign trade/global trade 

India roads city economy gdp traffic

Foreign trade is the exchange of capital, goods, and services across international borders or territories, which involves the activities of the government and individuals. In most countries, it represents a significant share of gross domestic product (GDP). Foreign trade in India includes all imports and exports to and from India. At the level of central Govt, it is administered by the ministry of commerce.

The exchange of goods among people, states, and countries is referred to as trade. Trade between two countries is called international trade. Export and import are the components of trade. 

The balance of trade of a country is the difference between its export and import. There is a favorable balance of trade and an unfavorable balance of trade.  

Beginning in mid-1991, the GOVT of India introduced a series of reforms to liberalize and globalize the Indian economy.  Reforms in the external sector of India were intended to integrate the Indian economy with the world economy which depends upon achieving preconditions to ensure an orderly process of liberalization and ensuring macroeconomic stability. 

This approach leads to a significant change in the liberalization policy in India. The import policies prior to 1992 contained an open general License under which specific goods could be imported and exported by specific categories of importers and exporters subject to fulfillment of certain conditions. 


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In 1992 the policy was amended to open general license and allow imports and exports of all goods without a license, except those specifically mentioned in a small negative list. 

In the 1950s, India’s share in world trade was 1.78% which declined to 0.59% in 1990 and remained low for many years. India’s share in world trade is currently around 2%(2015) and an ambitious target of gaining 3.5% of world trade by 2020. 

As per the rankings of WTO for the year  2015, India was the 19th largest exporter(with a share of 2.34%) of merchandise trade in the world.

In commercial services, India is the 8TH largest exporter (with a share of 3.27%) and 10th largest importer (with a share of 2.65%). Service plus financed around53% of merchandise trade deficit during 2013-14. 

India pursuing market diversification policy export promotions – in Asia and Latin America and Africa (market initiatives and bilateral agreement).


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COMPOSITION OF INDIA’S FOREIGN  TRADE

India ship port import export economy gdp

The composition of Indian foreign trade means major commodities in which India is export and import. 

Imports

India’s imports are classified into Bulk Imports and Non- bulk imports.

Bulk imports

1. Petroleum, crude, and products.

2. Bulk consumption goods- cereals, pulse, edible oils, and sugar.

3. Fertilizers, metals, paper and paper boards, rubber, pulp, waste paper, iron, and steel.

Non–bulk imports

1. Capital goods- metals, machine tools, electrical and non-electrical machinery, transport equipment, and project goods. 

2. Pearls, precious and semi-precious stones,  organic and inorganic chemicals, textile, fabrics, and cashew nuts. 

3. Artificial and plastic materials, professional and scientific instruments, coal and coke, chemicals,non-metallic mineral manufacturers, etc.


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Exports

Exports from India are broadly classified  into four categories; 

1. Agriculture and allied products 

2. Ores and minerals  

3. Manufactured goods 

4. Mineral fuels and lubricants.

CURRENT DATA 

Mumbai sea line. India economy.

India’s overall exports (Merchandise and  Services combined) in April-June 2019-20* are estimated to be USD 137.26 billion, exhibiting a positive growth of 3.14 percent over the same period last year. 

Overall imports in April-June 2019-20* are  estimated to be USD 164.50 billion, exhibiting  a positive growth of 3.57 percent over the  same period last year

MERCHANDISE TRADE 

EXPORTS (including re-exports)

Exports in June 2019 were USD 25.01 billion, as compared to USD 27.70 billion in June 2018,  exhibiting a negative growth of 9.71 percent.  In Rupee terms, exports were Rs. 1,73,682.55  crore in June 2019, as compared to Rs.  1,87,800.20 crore in June 2018, registering a  negative growth of 7.52 percent. 

In June 2019, major commodity groups of  export showing positive growth over the  corresponding month of last year are


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IMPORTS

Imports in June 2019 were USD 40.29 billion  (Rs. 2,79,771.07 crore), which was 9.06 percent lower in Dollar terms and 6.85 percent lower in Rupee terms over imports of USD  44.30 billion (Rs. 3,00,351.83 crore) in June  2018. 

Major commodity groups of import showing  negative growth in June 2019 over the  corresponding month of last year are

Global economic crisis 

The financial crisis of 2007–2008, also known  as the global financial crisis and the 2008  financial crisis, was a severe  

The worldwide economic crisis is considered by many economists to have been the most serious financial crisis since the Great Depression of the 1930s.

Economic crisis graph. India.

CAUSES 

Subprime crisis

A situation starting in 2008 affected the mortgage industry due to borrowers being approved for loans they could not afford. The financial crisis in the mortgage industry also affected the global credit market resulting in higher interest rates and reduced availability of credit.


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Growth of the housing bubble 

Between 1998 and 2006, the price of the typical  American house increased by 124%. In contrast,  during the 1980s and 1990s, the national median home price ranged from 2.9 to 3.1  times the median household income. This ratio increased to 4.0 in 2004, and 4.6 in 2006. This housing bubble resulted in many homeowners refinancing their homes at lower interest rates or financing consumer spending by taking out second mortgages secured by the price appreciation.

Easy credit conditions 

Lower interest rates encouraged borrowing.  From 2000 to 2003, the Federal  

Reserve lowered the federal funds rate target from 6.5% to 1.0%.

Predatory lending 

Predatory lending refers to the practice of unscrupulous lenders, enticing borrowers to enter into “unsafe” or “unsound” secured loans for inappropriate purposes.

Commodities boom 

Rapid increases in commodity prices followed the collapse of the housing bubble. The price of oil nearly tripled from $50  to $147 from early 2007 to 2008, before plunging as the financial crisis began to take hold in late 2008.


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Impact of the global crisis on the Indian economy  

India currency economy

The impact of the global crisis has been transmitted to the Indian economy through three distinct channels, viz., the financial sector, exports, and exchange rates.

Depreciation of the Indian rupee

When foreign institutional investors (FIIs) sold their shares in  India they got rupees. They had to convert their rupees into dollars to send them abroad. This led to an increase in demand for dollars.  

Liquidity crunch in the banking sector

To prevent the fast depreciation of the rupee and maintain relative exchange rate stability, RBI intervened and supplied dollars from its foreign exchange reserves.

Exports and Balance of Payments

india city traffic.

Our foreign trade balance worsened during  2008-09. India’s foreign trade balance registered a deficit of $ 60 billion in the first half of 2008-09 as against $ 30 billion in the first half of 2007-08. Actually, our exports in  Oct. 2008 were not just down but declined  12.8% as compared to the same month of the previous year 2007.


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The slowdown in economic growth

When the powerful US economy witnessed a slowdown in economic growth and ultimately experienced recessionary conditions as a result of the financial crisis, its effect spilled over to Europe, Japan, and other Asian countries including INDIA.  Britain, Germany, Italy, and 15 nations sharing  Euro slumped into recession for the first time after several years.


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