Chapter 11 International Trade

International trade involves the exchange of goods and services between different countries. It is a mutually beneficial activity, as no single country possesses all the resources or capabilities needed to be entirely self-sufficient.

India's international trade patterns have undergone significant transformations in recent years regarding the total volume of trade, the types of goods traded (composition), and the countries India trades with (direction).

Although India's share in the total volume of world trade is relatively small (around one per cent), its international trade activities play a notable role in the global economy.

The value of India's external trade has increased dramatically over the decades, growing from $\textsf{₹}1,214$ crore in 1950-51 to $\textsf{₹}44,29,762$ crore in 2016-17.

This substantial rise is driven by several factors, including the growth momentum in India's manufacturing sectors, supportive government policies promoting trade liberalization, and the diversification of India's trading partners and markets.

An examination of India's foreign trade data (Table 11.1) shows that while both exports and imports have increased in total value, the value of imports has consistently been higher than the value of exports, resulting in a trade deficit.

Year	Exports (Rs. Crores)	Imports (Rs. Crores)	Trade Balance (Rs. Crores)
2004-05	3,75,340	5,01,065	-1,25,725
2009-10	8,45,534	13,63,736	-5,18,202
2013-14	19,05,011	27,15,434	-8,10,423
2016-17	18,52,340	25,77,422	-7,25,082

Changing Pattern Of The Composition Of India’s Exports

The types of commodities India exports have changed significantly over the years.

Analysis of the percentage share of different commodity groups in India's total exports (Table 11.2) indicates shifts:

• The share of agriculture and allied products in total exports has generally declined over the long term, although it saw some fluctuation in the periods shown.
• The share of petroleum and crude products and other commodities has increased.
• The shares of ore and minerals and manufactured goods remained relatively stable or showed minor changes in the presented periods (2009-10 to 2010-11 and 2015-16 to 2016-17).

Commodities	2009-10 (%)	2010-11 (%)	2015-16 (%)	2016-17 (%)
Agriculture and allied products	10.0	9.9	12.6	12.3
Ore and Minerals	4.9	4.0	1.6	1.9
Manufactured goods	67.4	68.0	72.9	73.6
Crude and petroleum products	16.2	16.8	11.9	11.7
Other commodities	1.5	1.2	1.1	0.5

The decline in the export of traditional agricultural items (like coffee, cashew) is often attributed to intense international competition. However, there has been growth in the export of newer items within this sector, such as floricultural products, fresh fruits, marine products, and sugar.

Manufactured goods constitute the largest component of India's exports, accounting for 73.6% of the total value in 2016-17. Within this category, engineering goods have shown significant growth in exports. India faces strong competition in manufactured goods from countries like China and other East Asian nations.

Another significant contributor to India's foreign trade is the export of gems and jewellery.

Commodities	Value (in crore rupees)
Agriculture and allied products	228001
Ores and Minerals	35947
Manufactured goods	1363232
Mineral fuels and Lubricants	216280

Changing Patterns Of The Composition Of India’s Import

The types of commodities India imports have also changed over time, reflecting shifts in the country's economy and global market dynamics.

In the 1950s and 1960s, during a period of serious food scarcity, major import items included foodgrains, capital goods, machinery, and equipment. India had an adverse balance of payments due to high imports, despite efforts to promote import substitution (producing goods domestically instead of importing).

Commodity Group	2009-10 (%)	2010-11 (%)	2015-16 (%)	2016-17 (%)
Food and allied products	3.7	2.9	5.1	5.6
Fuel (Coal, POL)	33.2	31.3	25.4	26.7
Fertilisers	2.3	1.9	2.1	1.3
Paper board manufacturing and news print	0.5	0.6	0.8	0.9
Capital goods	15.0	13.1	13.0	13.6
Others	42.6	47.7	38.1	37.0

Following the success of the Green Revolution in the 1970s, foodgrain imports largely ceased. However, the global energy crisis of 1973 caused a surge in petroleum prices, increasing the import bill for fuel.

Fertilizers and petroleum became major import items, replacing foodgrains. The import basket is now largely composed of machinery and equipment, special steels, edible oils, and various chemicals.

Table 11.4 highlights shifts in import composition. There is a significant rise in the import of petroleum products. This reflects not only its use as fuel but also its increasing importance as an industrial raw material, indicating rising industrialization and improving living standards. Fluctuations in international oil prices also contribute to the value of these imports.

Import of capital goods (machinery, transport equipment, metal manufacturers, machine tools) has shown a steady increase, driven by rising demand from export-oriented and domestic industries.

Import of food and allied products has generally declined, although edible oils remain a significant import item.

Other important import commodities include pearls and precious/semi-precious stones (like gold and silver), metallic ores, metal scrap, non-ferrous metals, and electronic goods.

Commodities	Value (in crore rupees)
Fertilisers and fertiliser manufacturing	33726
Edible oils	73048
Pulp and waste paper	6537
Non-ferrous metals	262961
Iron and steel	55278
Petroleum, oil and lubricants	582762
Pearls, precious and semi-precious stones	159464
Medicinal and Pharma products	33504
Chemical products	147350

Direction Of Trade

India maintains trade relationships with a large number of countries and major trading blocs globally.

Data on India's import trade direction (Table 11.6 for 2010-11 and 2016-17) shows that Asia and ASEAN is the largest source region for India's imports, followed by Europe, North America, Africa, and Latin America.

Region	Imports 2010-11 (Rs. Crores)	Imports 2016-17 (Rs. Crores)
Europe	323857	403972
Africa	118612	193327
North America	100602	195332
Latin America	64576	115762
Asia and ASEAN	1029881	1544520

While most of India's foreign trade is conducted via sea and air routes, a smaller portion is carried out through land routes with neighboring countries like Nepal, Bhutan, Bangladesh, and Pakistan.

India aims to increase its share in international trade, implementing measures such as import liberalization, reducing import duties, abolishing licensing requirements for imports, and shifting towards product patents.

Sea Ports As Gateways Of International Trade

India's peninsula is surrounded by sea on three sides, providing a long coastline with numerous ports and harbors that serve as the primary gateways for its international trade.

Water transport is advantageous due to its cost-effectiveness, especially for bulky goods.

India has a long history of maritime activity, with many places having names ending in 'pattan' (meaning port). The west coast of India has historically developed more ports compared to the east coast.

While ports have existed for centuries, their significance as gateways for extensive international trade grew substantially with the arrival of European traders and British colonization, leading to variations in port size and quality.

India currently has 12 major ports and around 200 minor or intermediate ports. Major ports are governed by the Central Government's policies and regulations, while minor ports are under the jurisdiction of state governments.

Major ports handle the bulk of India's total maritime traffic.

During the British colonial era, ports were primarily used to extract resources from the hinterland (the area served by the port) and send them to Britain. Railways connected the interior to the ports, linking local, regional, and national markets to international ones.

After India's Independence, Partition significantly impacted trade infrastructure, with Karachi port going to Pakistan and Chittagong port to East Pakistan (now Bangladesh). To compensate for these losses, new ports were developed, such as Kandla on the west coast and Diamond Harbour near Kolkata on the Hugli river.

Indian ports have continued to grow and handle increasing volumes of domestic and international trade. Most ports are equipped with modern infrastructure. Historically managed by government agencies, there is now increased involvement of private entities in the development and modernization of ports to meet international standards and handle rising traffic.

The area served by a port, from which it collects goods for export and to which it distributes imported goods, is called its hinterland. The boundary of a port's hinterland is not fixed and can overlap with that of other ports.

Descriptions of some major Indian ports and their hinterlands:

• Kandla Port: Located at the head of the Gulf of Kuchchh (Gujarat). Developed post-Independence to serve western and northwestern India and reduce pressure on Mumbai port. Specializes in handling petroleum, petroleum products, and fertilizers. Vadinar offshore terminal helps reduce pressure on Kandla. Its hinterland covers parts of western and northwestern India.
• Mumbai Port: A natural harbor and India's largest port. Situated strategically on major international trade routes (Middle East, Mediterranean, Europe, North America). Its hinterland includes Maharashtra, Madhya Pradesh, Gujarat, Uttar Pradesh, and parts of Rajasthan.
• Jawaharlal Nehru Port (Nhava Sheva): Developed near Mumbai as a satellite port to relieve pressure on Mumbai port. It is India's largest container port, specializing in container traffic.
• Marmagao Port: A natural harbor in Goa, located at the entrance of the Zuari estuary. Gained importance for iron-ore exports to Japan, especially after remodelling and the construction of the Konkan Railway which expanded its hinterland to Karnataka, Goa, and southern Maharashtra.
• New Mangalore Port: Located in Karnataka. Caters to the export of iron ore and concentrates, and handles fertilizers, petroleum products, edible oils, coffee, tea, wood pulp, yarn, granite, molasses, etc. Karnataka is its major hinterland.
• Kochchi Port: Situated at the head of Vembanad Kayal (Kerala), known as the 'Queen of the Arabian Sea'. A natural harbor close to the Suez-Colombo route. Serves Kerala, southern Karnataka, and southwestern Tamil Nadu.
• Kolkata Port: Located on the Hugli river, 128 km inland from the Bay of Bengal. Developed by the British, historically important as the capital of British India. Its significance has reduced due to diversion of traffic to other ports (Vishakhapatnam, Paradwip) and its satellite port, Haldia. Faces problems with silt accumulation in the river. Its hinterland covers Uttar Pradesh, Bihar, Jharkhand, West Bengal, Sikkim, and northeastern states, also serving landlocked Nepal and Bhutan.
• Haldia Port: Located downstream from Kolkata (105 km). Built to ease congestion at Kolkata, handles bulk cargo like iron ore, coal, petroleum, fertilizers, and also jute/cotton products.
• Paradwip Port: Situated in the Mahanadi delta (Odisha). Has a deep harbor suitable for large vessels, developed mainly for large-scale iron-ore export. Hinterland covers Odisha, Chhattisgarh, and Jharkhand.
• Visakhapatnam Port: In Andhra Pradesh, a land-locked harbor connected to the sea by a cut channel. An outer harbor handles iron ore, petroleum, and general cargo. Andhra Pradesh and Telangana are its main hinterland.
• Chennai Port: One of the oldest on the eastern coast, an artificial harbor built in 1859. Less suitable for large ships due to shallow coastal waters. Hinterland includes Tamil Nadu and Puducherry.
• Ennore Port: A newer port in Tamil Nadu (25 km north of Chennai) built to relieve pressure on Chennai port.
• Tuticorin Port: Also developed to relieve pressure on Chennai port. Handles a variety of cargo including coal, salt, food grains, edible oils, sugar, chemicals, and petroleum products.

Airports

Air transport plays a role in international trade, primarily for high-value or perishable goods that need fast carriage over long distances. However, its high cost and unsuitability for heavy/bulky commodities limit its overall participation in international trade compared to sea routes.

As of 2016-17, India had 25 major airports facilitating air transport.

These included airports at Ahmedabad, Bengaluru, Chennai, Delhi, Goa, Guwahati, Hyderabad, Kolkata, Mumbai, Thiruvananthapuram, Srinagar, Jaipur, Calicut, Nagpur, Coimbatore, Cochin, Lucknow, Pune, Chandigarh, Mangaluru, Vishakhapatnam, Indore, Patna, Bhubaneswar, and Kannur.

Exercises

This section contains exercises designed to test understanding of India's international trade patterns, infrastructure, and related concepts.

Choose The Right Answers Of The Following From The Given Options

Multiple-choice questions testing recall of facts and understanding of definitions and classifications related to international trade and ports.

Answer The Following Questions In About 30 Words

Short answer questions requiring brief explanations of key characteristics, distinctions between terms like port and harbor or hinterland, and identification of specific import items or port locations.

Answer The Following Questions In About 150 Words.

Longer answer questions prompting more detailed discussions on the composition of India's export and import trade and the evolving nature of India's international trade.