The services which involve the activities of buying and selling of goods are termed as trade. Like transport, communication, banking, it is also a tertiary service and an important infrastructure for the development of economy including agriculture and industry in the country.
Trade may take place at various levels - local, regional, national or international.
The growth of trade depends on accessibility of a well developed market and well advanced communication system.
It involves selling and buying various commodities at the international level. International trade may be multilateral or bi-lateral; depending upon the number of parties involved. India’s international trade has grown very rapidly after Independence.
India’s total international trade in the year 1950-51 stood at Rs. 1,214 crore. Since then this has witnessed continuous increase with occasional down twins. During the year 2004-05 the value reached at Rs. 8,37,133 crores.
Though, India has trade relations with all the major trading blocks and all the geographical regions of the world, the major trade partners are the USA, Russia, countries of West Europe, Japan and Oceania. In dollar terms, Asia and Oceania accounted for 47.41% of India’s total exports followed by west Europe (23.80%) and America (20.42%) during 2004-05. India’s imports were highest from Asia and oceania (35.40%) followed by west Europe (22.60%) and America (8.36%) during the same period.
During the colonial era major commodities of our exports were either raw materials like cotton, jute, leather, spices, minerals or food items like wheat, tea, coffee and spices. All the trade was chanelised through Britain. After Independence there has been significant changes in the items of export because of the rapid industrial development in the country.
Now India exports nearly 7500 commodities. There has been a appreciable growth in exports since 1950-51 when it was worth only of Rs. 607 crores. It has increased to Rs. 3,56,069 crores by 2004-05.
While there are year to year variations, some of the major commodities whose exports have been increasing over the last few years and also in 2004-05 include engineering goods, gems and jewellery, chemical and related products, textiles, petroleum products, agriculture and allied products, and ores and minerals.
There has been a significant change in the export products since Independence. The largest value of exports is now obtained manufactured products.
After Independence, there has been a sharp increase in the value of imports in India. We now import about 6000 commodities. During pre-Independence period, main items of imports were machinery, manufactured goods, textiles, chemicals, medicines, etc. After independence in the early decades, India’s import consisted mainly of food grains because of the partition of the country.
India's total value of import in 1950-51 was of Rs. 581 crores which had increased to Rs. 4,81,064 crores in 2004-05. There has been significant increase in the imports during the last 55 years.
In the year 2004-05, bulk import as a group accounted for about 40% of the total imports. This group includes fertilizers, cereals, edible oils, news print and petroleum products. But only crude petroleum and products have 71% share among the bulk products import and about 28% share among the total import.
The other principal imports consists of pearls, precious and semi-precious stones, machinery, project goods, medicinal and pharmaceutical products, organic and inorganic chemicals, coal, coke and briquettes, artificial resins, etc.
At the time of Independence, India's foreign trade was very limited. India was the main exporter of primary commodities and imported manufactured products and machinery. After independence there has been a rapid progress in the field of industry and agriculture.
The international market has also expanded. The commodities of export and import have shown a great change in the last decades. India has developed trade relations with the countries of Asia, Africa and Oceania for the promotion of her exports.
Incentives such as, providing export credits at lower interest, and by removing restrictions and controls on the exports has helped in the promotion of export. Main stress is given to export of value added commodities.
We have also adopted a policy of liberalisation of imports. Adoption of new import policy has strengthened the economy of the country. Some commodities which help in the manufacturing industries can now be imported on easy terms.
During the past two decades, India’s imports have shown a considerable change. India’s foreign trade has risen rapidly from Rs. 1214 crores in 1950-51 to Rs. 837133 crores in 2004-05. There has been a great change in the foreign trade of India-especially in the commodities of export and imports.
Difference between value of exports and imports is termed as balance of trade. When the value of exports and imports of a country is equal it is a situation of balanced foreign trade. If exports exceed the imports, It is favourable; and on the other hand when imports are more than exports, it is unfavourable trade.
At the time of Independence, our foreign trade was favourable but after Independence, in the first two decades, the imports of India increased rapidly due to the imports of food grains. At present the imports of the country exceed the exports. Thus, our foreign trade has become unfavourable.
In rupee terms, the trade deficit in 2004-05 was Rs. (-) 123995. Our exports and imports have increased in volume and value remarkably. But over the past 55 years our share in world trade has decreased considerably. It is not even one per cent of the world trade.