INDIA’S TRADE POLICY PRE-TRADE: 1951-52 to 1975-76: This period

INDIA’S TRADE POLICY

PRE-TRADE:

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1951-52
to 1975-76:

This period covers the following plan:

Stage1: Due to poor
governance and backwardness there was a huge deficit in BoP amounting to
42 Cr. The strategy adopted was Inward Looking Development and Import
Substitution.
Stage2: There was
heavy import of machines, raw materials and food grains which raised the
BoP to 1725 Cr. The strategy adopted was a restrictive one.
Stage3: On account
of war between India- China and India-Pakistan, there were huge imports of
military equipments thereby increasing the BoP further to 1951 Cr.
Stage4: BoP became favorable
with increase in exports and decrease in exports, also considerable rise
in receipts from invisible items moved the BoP to 100Cr.The imports were
partially liberalized with multiple conditions.

 

1976-77
to 1979-80:

This was an era of comfort for trade in India as there
were lot of successive milestones achieved by our country. They were as
follows:

Green Revolution: crop
was produced by the use of artificial fertilizers, pesticides, and high-yield
crop varieties.
High remittances
were received by the Indians working in Gulf countries.
There was a rise in
domestic production of oil, electric motors and machine tools.
Centre of tourist
attraction

Due to these above mentioned favourable moments there
was reduction seen in BoP and it was in surplus of 3082 Cr thereby contributing
to 0.6% of GDP.

 

1980-81
to 1989-90:

Remittances declined
Inflation grew
Political Instability increased
Fiscal Deficit grew
Foreign help reduced
Oil prices increased

Due
to above reasons there was increase in current account deficit gradually rising
to 1.3-2.4% of GDP.India became the 3rd largest country which was
indebted after Brazil and Mexico. Indian economy was in a state of crisis.

1991 Crisis:

 

National Income was reduced at 0.8%
Inflation reached to the height of
16.8%.
BoP rose to the extent of 10,000 Cr
Deficit Financing was at 3%
Fiscal Deficit was more than 7.5%

 

Causes
of Trade Deficit in India

Rising Imports:
Large increase in developmental imports.
Large size in
imports of petroleum and other fertilizers, pearls and precious stones.
Modest Growth of
Exports
Disintegration of
Soviet Union
Low World Demand
Import Restriction
in Foreign Countries

Due to declining prices of primary goods and increasing
prices of manufactured goods causing the terms of trade to deteriorate
considerably over time, the underdeveloped countries acted as consumers of
primary commodities and producers of manufactured articles.

After world war-II, many underdeveloped countries
industrialized their economies which in turn reduced their dependence of
manufactured goods from the developed economies. In sixties Japan, Singapore
and Honk Kong ,South Korea and Taiwan achieved success as they adopted the
program of exporting promotion and import liberalization. This successful
movement also gave the GOI a momentum to offer trade liberalization in early
90’s.

To open the economy in international
economic order, trade policy reforms were announced in 1991 and thereafter WTO
was coined in 1995.The reforms included free import and export, tariff
structures were rationalized,current and capital account were
convertible,export and trading houses were established,the exporter and
agencies were privileged to get concession and exemption.

 

With implementation of these reforms
India’s foreign trade increased to 1% in 2006 from that of 0.8% in 1980.

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