International Trade of India

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Unit IV
Chapter 11

INTERNATIONAL TRADE

You have already studied about the various aspects of International trade in the bk Fundamentals of Human Geography. International Trade is mutually beneficial as no country is self-sufficient. India’s International trade has undergone a sea change in recent years in terms of volume, composition as well as direction. Although India’s contribution in the world trade is as low as one per cent of the total volume, yet it plays a significant role in the world economy. Let us examine the changing pattern of India’s International trade. In 1950-51, India’s external trade was worth Rs.1,2140 million, which rose to Rs.8,37,1330 million in 2004-05. Can you calculate the percentage growth in 2004-2005 over 1950-51? There are numerous reasons for this sharp rise in overseas trade, such as, the momentum picked up by the manufacturing sectors, the liberal policies of the government and the diversification of markets. The nature of India’s foreign trade has changed over the years (Table 11.1). Though there has been an increase in the total volume of import and export, the value of import continued to be higher than that of exports. There has also been an increase in trade deficit over the last couple of years. This increase in deficit is attributed to the price rise of crude petroleum which forms a major component of India’s import list.

Changing Pattern of the Composition of Pa India’s Exports India’s Exports

Source : Statistical Abstract, 2005
Fig. 11.1

Table 11.1 India’s Foreign Trade (in Million Rs.)
Year 1994-95 2000-01 2004-05(P) Exports 826,740 2,03,5710 3,56,0690 Imports 899,710 2,30,8730 4,81,0640 Total Trade 1,72,6450 4,34,4440 8,37,1330 Trade Deficit -72,970 -273,020 -1,24,9950

*P- Stands for provisional data Source : Statistical Abstract, 2005

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The decline in traditional items is largely due to the tough international competition. Amongst the agricultural products, there is a great decline in the exports of traditional items such as coffee, spices, tea, pulses, etc. though an increase has been registered in floricultural products, fresh fruits, marine products and sugar, etc. Manufacturing sector alone accounted for 75.96 per cent of India’s total value of export in 2003-04. Engineering goods have shown a significant growth in the export list. Textile sector could not achieve much in spite of the liberal measures taken by the government. China and other East Asian countries are our major

Table 11.2 : Composition of India’s Export, 1997-2004 (Percentage share in Exports)
Commodities Agriculture and allied products Ore and Minerals Manufactured goods Petroleum and crude products Other commodities 1997-98 18.93 3.03 75.83 1.01 1.2 1999-2000 15.27 2.5 80.93 0.08 1.22 2000-01 13.55 2.62 77.9 4.29 1.64 2003-04 11.8 3.71 75.96 5.59 2.94

Source : Foreign Trade and Balance of Payments, Centre for Monitoring Indian Economy.

As has already been mentioned, the composition of commodities in India’s international trade has been undergoing a change over the years. The share of agriculture and allied products has declined whereas shares of petroleum and crude products and other commodities have increased. The shares of ore minerals and manufactured goods have largely remained constant over the years from 1997-98 to 2003-04. The increase in the share of petroleum products is due to a rise in petroleum prices as well as increase in India’s refining capacity.
126 India : People and Economy

competitors. Gems and jewellery contributes a larger share of India’s foreign trade.

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Changing Patterns of the Composition of India’s Import India faced serious food shortage during 1950s and 1960s. The major item of import at that

Table 11.3 : Export of Principal Commodities
Commodities Agriculture and allied Products Ore and Minerals Leather and manufactures Gems and Jewellery Chemical and related products Engineering goods Electronic goods Textiles Handicrafts Carpets Petroleum products 2004-05 (00 Rs.) 27,111 18,842 10,286 61,581 56,961 65,543 8,106 53,996 1,543 2,679 30,518

Source : India 2006, Publication Division, Ministry of Information and Broadcasting, Govt. of India

industrialisation and better standard of living. Sporadic price rise in the international market is another reason for the same. Import of capital goods maintained a steady increase due to rising demand in the export-oriented industrial and domestic sectors. Non-electrical machinery, transport equipment, manufacturers of metals and machine tools were the main items of capital goods. Import of food and allied products declined with a fall in imports of edible oils. Other major items of India’s import include pearls and semi precious stones, gold and silver, metalliferrous ores and metal scrap, non-ferrous metals, electronic goods, etc. The details of Indian imports of principal commodities during 2004-05 have been given in table 11.5.
Bsd o tbe 1., fw atvte my b ae n al 15 e ciiis a e undertaken: Arne te ies i rag h tm n acnig o sedn r dsedn odr ad wie te nms o ecnig re n rt h ae f te frt fv mjr ies o Idas ipr h is ie ao tm f ni’ mot ls o 20-5 it f 040. Wy de Ida ipr eil ol ad ple h os ni mot dbe i n uss i sie o big a arclual rc n pt f en n giutrly ih country? Slc fv ms iprat ad fv lat eet ie ot motn n ie es iprat ies ad rpeet te b br motn tm n ersn hm y a diagram. Cn yu ietf sm ies o iprs fr a o dniy oe tm f mot o wih sbttts cn b dvlpd i hc usiue a e eeoe n Ida ni?

time was foodgrain, capital goods, machinery and equipments. The balance of payment was adverse as imports were more than export in spite of all the efforts of import substitution. After 1970s, foodgrain import was discontinued due to the success of green revolution but the energy crisis of 1973 pushed the prices of petroleum, and import budget was also pushed up. Foodgrain import was replaced by fertilisers and petroleum. Machine and equipment, special steel, edible oil and chemicals largely make the import basket. Examine the changing pattern of imports in Table 11.4 and try to comprehend the shifts. Table 11.4 shows that there is a steep rise in imports of petroleum products. It is used not only as a fuel but also as an industrial raw material. It indicates the tempo of rising

Table 11.4 : India Composition of Import 1997-2004 (In percentage)
Commodities Petroleum crude and products Capital goods Chemical and related products Textile yarn and fabrics Food and related items Pearls and semi-precious stones Gold and Silver Others 1997-98 19.68 19.18 11.33 0.99 4.04 8.06 7.64 29.08 2000-01 31.32 11.48 7.71 1.19 3.37 9.62 9.28 25.53 2003-04 26.32 13.99 7.99 1.61 4.36 9.12 8.77 27.84

Source : Foreign Trade and Balance of Payments, Centre for Monitoring Indian Economy.

International Trade

127

Table 11.5 : Import of Principal Commodities (in million rupees)
Commodities Fertilisers Edible oil Pulp and waste paper Paper board and manufactures Newsprint Non-ferrous metals Metalliferous ores and metal scrap Iron and steel Petroleum crude and products Pearls, precious and semi precious stones Machinery Pulses Coal, Coke and briquettes Non-metallic minerals manufactures Medicinal and Pharma products Chemical products Other textile yarn, fabrics, etc. Professional instruments, etc. Gold and silver Source : India 2006 2004-05 5,53 10,75 2,12 3,04 1,70 5,63 10,65 11,67 1,34,09 42,34 48,12 12,58 2,03 23,97 6,27 2,46 3,98 43,75 48,63

India aims to double its share in the international trade within the next five years. It has already started adopting suitable measures such as import liberalisation, reduction in import duties, de-licensing and change from process to product patents. Asia and Oceania accounted for 47.41 per cent of India’s export followed by West Europe (23.80 per cent) and America (20.42). Similarly, India’s imports were highest from Asia and Oceania (35.40 per cent) followed by West Europe (22.60 per cent) and America (8.36 per cent) in 2004-05.

Direction of Trade India has trade relations with most of the countries and major trading blocks of the world. Region-wise and sub-region-wise trade during the period 2004-05 has been given in table 11.6.
Table 11.6 Direction of India’s Import trade (in million rupees)
Region Imports 2003-04 West Europe East Europe CIS and Baltic states Asia and Oceania Africa America Latin American countries Source : India 2006 85,88 43 5,79 1,24,76 14,69 31,82 5,35 2004-05 1,08,71 85 8,32 1,70,28 16,80 40,20 8,55

Fig. 11.2

The U.S.A. is India’s largest trading partner and the most important destination of India’s export. Other countries in order of significance include the U.K., Belgium, Germany, Japan, Switzerland, Hong Kong, the U.A.E., China, Singapore and Malaysia.

Da a mlil br darm t rpeet te mjr rw utpe a iga o ersn h ao taig prnr. rdn ates

Most of India’s foreign trade is carried through sea and air routes. However, a small portion is also carried through land route to neighbouring countries like Nepal, Bhutan, Bangladesh and Pakistan.

128 India : People and Economy

Table 11.7 India’s Major Trading Partners’ Percentage share in total trade (Export + Import)
Country U.S.A. U.K. Belgium Germany Japan Switzerland Hong Kong U.A.E. China Singapore Malaysia Total 2000-01 13.0 5.7 4.6 3.9 3.8 3.8 3.7 3.4 2.5 2.5 1.9 48.6 2003-04 10.3 3.7 3.7 3.5 2.7 3.3 2.8 6.2 6.4 3.4 1.7 47.7

provides a smooth surface for very cheap transport provided there is no turbulence. India has a long tradition of sea faring and developed many ports with place name suffixed with pattan meaning port. An interesting fact about ports in India is that its west coast has more seaports than its east coast.
Can you find out the reasons for the variations in the location of ports along the two coasts?

Source : Economic Survey 2005-06

Por orts Gate tew International Sea Ports as Gateways of International Trade
India is surrounded by sea from three sides and is bestowed with a long coastline. Water

Fig. 11.3 : Unloading of goods on port

Though ports have been in use since ancient times, the emergence of ports as gateways of international trade became important after the coming of the European traders and colonisation of the country by the British. This led to the variation in the size and quality of ports. There are some ports which have very vast area of influence and some have limited area of influence. At present, India has 12 major ports and 185 minor or intermediate ports. In case of the major ports, central government decides the policy and plays regulatory functions. The minor ports are there whose policy and functions are regulated by state governments. The major ports handle larger share of the total traffic. The 12 major ports handle about 75 per cent of the country’s oceanic traffic. The British used the ports as suction points of the resources from their hinterlands. The extension of railways towards the interior facilitated the linking of the local markets to regional markets, regional markets to national markets and national markets to the international markets. This trend continued till 1947. It was expected that the country’s independence will reverse the process, but the partition of the country snatched away two very important ports i.e. Karachi port went to Pakistan and Chittagong port to the erstwhile east-Pakistan and now Bangladesh. To compensate the losses, many new ports like the Kandla in the west and the Diamond Harbour near Kolkata on river Hugli in the east were developed. Despite this major setback, Indian ports continued to grow after the Independence.
International Trade 129

Fig. 11.4 : India – Major Ports and Sea Routes

130 India : People and Economy

Today Indian ports are handling large volumes of domestic as well as overseas trade. Most of the ports are equipped with modern infrastructure. Previously the development and modernisation was the responsibility of the government agencies, but considering the increase in function and need to bring these ports at par with the international ports, private entrepreneurs have been invited for the modernisation of ports in India. The capacity of Indian ports increased from 20 million tonnes of cargo handling in 1951 to more than 500 million tonnes at present. Some of the Indian ports along with their hinterlands are as follows : Kandla Port situated at the head of Gulf of Kuchchh has been developed as a major port to cater to the needs of western and north western parts of the country and also to reduce the pressure at Mumbai port. The port is specially designed to receive large quantities of petroleum and petroleum products and fertiliser. The offshore terminal at Vadinar has been developed to reduce the pressure at Kandla port. Demarcation of the boundary of the hinterland would be difficult as it is not fixed over space. In most of the cases, hinterland of one port may overlap with that of the other. Mumbai is a natural harbour and the biggest port of the country. The port is situated closer to the general routes from the countries of Middle East, Mediterranean countries, North Africa, North America and Europe where the major share of country’s overseas trade is carried out. The port is 20 km long and 6-10 km wide with 54 berths and has the country’s largest oil terminal. M.P., Maharashtra, Gujarat, U.P. and parts of Rajasthan constitute the main hinterlands of Mumbai ports. Jawaharlal Nehru Port at Nhava Sheva was developed as a satellite port to relieve the pressure at the Mumbai port. It is the largest container port in India. Marmagao Port, situated at the entrance of the Zuari estuary, is a natural harbour in Goa. It gained significance after its remodelling in 1961 to handle iron-ore exports to Japan. Construction of Konkan railway has considerably extended the hinterland of this

port. Karnataka, Goa, Southern Maharashtra constitute its hinterland. New Mangalore Port is located in the state of Karnataka and caters to the needs of the export of iron-ore and iron-concentrates. It also handles fertilisers, petroleum products, edible oils, coffee, tea, wood pulp, yarn, granite stone, molasses, etc. Karnataka is the major hinterland for this port. Kochchi Port, situated at the head of Vembanad Kayal, popularly known as the “Queen of the Arabian Sea,” is also a natural harbour. This port has an advantageous location being close to the Suez-Colombo route. It caters to the needs of Kerala, southernKarnataka and south western Tamil Nadu. Kolkata Port is located on the Hugli river, 128 km inland from the Bay of Bengal. Like the Mumbai port, this port was also developed by the British. Kolkata had the initial advantage of being the capital of British India. The port has lost its significance considerably on account of the diversion of exports to the other ports such as Vishakhapatnam, Paradwip and its satellite port, Haldia. Kolkata port is also confronted with the problem of silt accumulation in the Hugli river which provides a link to the sea. Its hinterland covers U.P., Bihar, Jharkhand, West Bengal, Sikkim and the north-eastern states. Apart from this, it also extends ports facilities to our neighbouring land-locked countries such as Nepal and Bhutan. Haldia Port is located 105 km downstream from Kolkata. It has been constructed to reduce the congestion at Kolkata port. It handles bulk cargo like iron ore, coal, petroleum, petroleum products and fertilisers, jute, jute products, cotton and cotton yarn, etc. Paradwip Port is situated in the Mahanadi delta, about 100 km from Cuttack. It has the deepest harbour specially suited to handle very large vessels. It has been developed mainly to handle large-scale export of iron-ore. Orissa, Chhattisgarh and Jharkhand are the parts of its hinterland. Visakhapatnam Port in Andhra Pradesh is a land-locked harbour, connected to the sea by a channel cut through solid rock and sand.
International Trade 131

Fig. 11.5 : India – Air Routes

132 India : People and Economy

An outer harbour has been developed for handling iron-ore, petroleum and general cargo. Andhra Pradesh is the main hinterland for this port. Chennai Port is one of the oldest ports on the eastern coast. It is an artificial harbour built in 1859. It is not much suitable for large ships because of the shallow waters near the coast. Tamil Nadu and Pondicherry are its hinterland. Ennore, a newly developed port in Tamil Nadu, has been constructed 25 km north of Chennai to relieve the pressure at Chennai port. Tuticorin Port was also developed to relieve the pressure of Chennai port. It deals with a variety of cargo including coal, salt, food grains, edible oils, sugar, chemicals and petroleum products. Airports Air transport plays an important role in the international trade. It has the advantage of taking the least time for carriage and handling high value or perishable goods over long distances. It is very costly and unsuitable for

carrying heavy and bulky commodities. This ultimately reduces the participation of this sector in the international trade as compared to the oceanic routes. At present, there are 12 international airports and 112 domestic airports functioning in the country. They are– Ahmedabad, Amritsar, Bangalore, Chennai, Delhi, Goa, Guwahati, Hyderabad, Kochchi, Kolkata, Mumbai and Tiruvanantapuram. You have already studied about the air transport in the previous chapter. You consult the chapter on transport to find out the main features of air transport in India.

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EXERCISES
1. Choose the right answers of the following from the given options. (i) Trade between two countries is termed as (a) (b) (ii) (a) (b) (iii) (a) (b) (iv) (a) (b) Internal trade External trade Vishakhapatnam Mumbai Land and sea Land and air U.K. China (c) (d) (c) (d) (c) (d) (c) (d) International trade Local trade Ennor Haldia Sea and air Sea Germany U.S.A.
International Trade 133

Which one of the following is a land locked harbour?

Most of India’s foreign trade is carried through

Which one of the following is India’s largest trading partner (2004-05)

2.

Answer the following questions in about 30 words. (i) (ii) (iii) (iv) (v) Mention the characteristics of India’s foreign trade. Distinguish between port and harbour. Explain the meaning of hinterland. Name important items which India imports from different countries. Name the ports of India located on the east coast. Describe the composition of export and import trade of India. Write a note on the changing nature of the international trade of India.

3.

Answer the following questions in about 150 words. (i) (ii)

134 India : People and Economy

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