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LIST OF FIGURES


Figure No.

Title

Page No.










1.1

Top Export Items

4

1.2

Export Destination 2011-12

5

1.3

India’s Export of Services in Major Categories

6

2.1

World Market Share in Merchandise Trade

31

2.2

Share of Developing Countries Imports and Exports of Services in Total World Imports and Exports of Services

32

2.3

Volume of Exports of Developed, Developing and Transition Economies: 1990-2009

35

2.4

Share of Developing Economies in the Value of World Exports, by Region: 1990 to 2009

35

2.5

Evolution of Non-Tariff Barriers use by Broad Category

37

2.6

Receipts through Export of Goods and Services

41

2.7

Share of Few Export Items in Total Export Products

45

2.8

Share of Few Import Items in Total Export Products

45

2.9

Trends in Trade Openness in India

48

5.1

Compound Annual Growth Rate of Export of Selected Developed Countries and India

121

5.2

Share of Merchandise Exports of Selected Developed Countries and India in World Exports

122

5.3

Compound Annual Growth Rate of Export of Selected Developing Countries and India

125

5.4

Share of Merchandise Exports of Selected Developing Countries in World Merchandise Export

126

5.5

Annual Growth Rate in India’s Exports in Post-WTO Period

131

5.6

Share in World Merchandise Exports

132

5.7

Share of Principal Categories in Total Exports (In Pre WTO Period)

135

5.8

Share of Principal Categories in Total Exports (In Post WTO Period)

139

5.9

Share of Agriculture and Allied Products in Total Exports

140

5.10

Share of Manufactured Goods in Total Exports

142

5.11

Share of Petroleum Products in Total Exports

143

5.12

Annual Export Growth Rate of Petroleum Products

143

5.13

Share of India’s Export Markets in Pre-WTO

146

5.14

Share of India’s Export Markets in Post-WTO

148

5.15

Share of OECD Countries in India’s Exports

149

5.16

Share of OPEC Countries in India’s Exports

149

5.17

Share of Developing Countries in India’s Exports

150

5.18

India’s Export to Top 6 Destinations

150

6.1

Agriculture Exports as % Agriculture GDP

159

6.2

Agricultural Exports as % of Total Exports

159

6.3

India’s Share in World Agricultural Exports

162

6.4a

Leading Exporters of Agricultural Products in 2001

163

6.4b

Leading Exporters of Agricultural Products in 2005

163

6.4c

Leading Exporters of Agricultural Products in 2008

163

6.4d

Leading Exporters of Agricultural Products in 2010

164

6.4e

Leading Exporters of Agricultural Products in 2011

164

6.5a

Export Destination of Tea

192

6.5b

Export Destination of Coffee

192

6.5c

Export Destination of Rice

193

6.5d

Export Destination of Tobacco

193

6.5e

Export Destination of Spices

193

6.5f

Export Destination of Cashew incl. CSNL

194

6.5g

Export Destination of Oil Meals

194

6.5h

Export Destination of Marine Products

194

7.1

Share of Manufacturing Sector in Country’s GDP

208

7.2

Labour Intensity across Manufacturing in India

209

7.3

MSME Employment

210

7.4

Share of India’s Manufactured Export in World Manufactured Export in Post WTO Period

214

7.5a

Leading Exporters of Manufactured Products in 2001

216

7.5b

Leading Exporters of Manufactured Products in 2005

216

7.5c

Leading Exporters of Manufactured Products in 2011

217

7.6

Leading Exporters of Chemical Products in 2011

238

7.7

Leading Exporters of Pharmaceutical Products in 2011

239

7.8

India’s Share in World Exports of Gems and Jewellery

256

8.1

Compound Annual Growth Rate of Services of Selected Developed Countries and India

286

8.2

Compound Annual Growth Rate of Services of Selected Developed Countries and India

287

8.3

Compound Annual Growth Rate of Services of Selected Developing Countries and India

289

8.4

Compound Annual Growth Rate of Services of Selected Developing Countries and India

291

8.5a

Top 10 Exporters of Other Commercial Services (incl. India) in 2001

292

8.5b

Top 11 Exporters of Other Commercial Services (incl. India) in 2005

292

8.5c

Top 10 Exporters of Other Commercial Services (incl. India) in 2008

293

8.5d

Top 10 Exporters of Other Commercial Services (incl. India) in 2011

293

8.6

Share of Merchandise and Service Exports in World Exports

295

8.7

Annual Growth Rate in Export of Goods and Services

295

8.8

Compound Annual Growth Rate of Major Categories of Services

301


CHAPTER I

INTRODUCTION

1. EXPORTS AND ECONOMIC GROWTH

Export plays a significant role in a country’s growth and development process. The importance of export as one of the contributing factor in the development of any country has long been recognised by many economists. Export growth is seen as a determinant of import capacity, which, in turn, is a determinant of the level of domestic activity. However, it is misleading to assess the contribution of the export sector solely in terms of foreign exchange earnings, as many underdeveloped countries, while stressing exports, also hope to reduce their relative dependence on foreign markets as economic development proceeds at a more rapid pace. Thus, it is stressed that the export sector assumes a much broader and useful role than that reflected in terms of foreign exchange earnings (Hultman, 1967)1. The growth and expansion of global export facilitates the progress of global economy.

Export expansion can play an instrumental role in promoting rapid economic growth. Since exports are a component of GDP, rapid export growth means an even faster growth of GDP, through the Keynesian multiplier process. Moreover, export expansion increases efficiency in the economy, which further stimulates economic growth. The increase in income that comes directly from exports leads in time to a rise in demand for a wide range of products, including non-tradable. These demand pressures are reflected in a higher rate of capacity utilization and ultimately involves investment in facilities providing such products. This tends to increase the scale of production and leads to various economies of scale, which ultimately reduces the cost and price of the product. Export industries also have the high intensity to absorb surplus of labour force of developing country which thereby leads to the creation of employment and increase in income which leads to rise in savings which is transferred into investment in physical and human capital, and thus in the rate of economic growth. The expansion of exports sector leads to the inflow of foreign direct investment, foreign loans and advance technology. Apart from above, through export activities the international trade relations is developed between the foreign countries which promotes healthy political relations among different economies of the world and at the time of any economic and natural crisis the trading partner countries are the first to come to rescue.
Consequently, export growth is that component of demand that provides the foreign exchange and allows other components of demand in an economy to grow faster, such as investment, consumption and government expenditure. The contribution of export growth has varied from country to country depending on how the import capacity has been deployed to promote overall economic growth. At the micro level, export creates exposure to competitive global market that offers exporting industries greater incentive for technological improvement and induce them to adopt more efficient management, marketing and organisational technique.

The advantage of division of labour and specialisation as given by classical economists like; Adam Smith and David Ricardo can be enjoyed only through the export of commodities in which the country enjoys comparative advantage in production and through import of those commodities where it has comparative disadvantage in production.

Until 1980s, most of the countries did not realised the significance of exports in their economy but later on the countries emphasised on export expansion as it proved to be the engine of economic growth for many emerging economies. Even the various studies undertaken in the past showed there existed positive relationship between exports and economic growth. The export led growth hypothesis, as it pertains to India has been examined by Nandi and Biswas (1991), Sharma and Dhakal (1994), Mallick (1996), Dhawan and Biswas (1999), Anwer and Sampath (2000) and Nidugala (2001). The study of Nidugala revealed that the export had a significant role in influencing the GDP growth in the 1980s2. Anwer and Sampath find that exports and economic growth in India are co -integrated but do not find any strong evidence of causality from exports to economic growth or vice versa3. Rashmi Banga (2005) found that export orientation of the industry have a significant positive effect on employment4. Depending upon MPC and propensity to import, exports has multiplier effect on Gross National Income (Bannock et al 1992)5.

As per few economists like; Chennery (1979), Kavoussi (1984), Ram (1987) and Moon (1998), exports, by fostering specialization helps to benefit from comparative advantage; utilizing the full capacity of plant size where domestic demand is less than full capacity production, getting benefit of greater economies of scale due to large market; expanding aggregate demand, increasing the rate of investment and technological changes, enabling import of essential raw materials and capital goods, results in industrialization and thus economic growth in developing economies6.

Jagdish N Bhagwati opines that a country can reap lot of benefit from an export oriented trade policy as an export-oriented industrialisation encourages high taking and seizing opportunities, which are basic requirement for economic development. Thus, we can say that an export is of paramount importance in country’s growth and development process. Owing to this growing importance of exports, many countries including India adopted an export oriented outward looking strategy in 1980s and 1990s.

In 1991, India adopted economic reforms, which aimed at greater market orientation and more liberalisation of country’s economy through deregulation of government controls. With this objective India’s external sector has underwent significant changes and since 1991 India’s foreign trade policy focussed more on export expansion. Prior to reform, India’s trade policy was very complex and adopted import substitution policies and imposed quantitative restrictions on import and export of commodities but as it was realised that export is vital for country’s growth, initiative was undertaken to promote and enhance export. Since then several provision was made in India’s foreign trade policies to promote exports like removing of quantitative restrictions on export, establishment of SEZs, EXIM banks, ECGC, STC, IIFT etc., introduction of incentive schemes like DEPB, advance licensing EPCG etc. Beside above measures, India entered into various regional, bilateral and multilateral trade agreements with other countries. India being the founder member of WTO underwent various trade negotiations with other member countries of WTO conducive to it export growth. The WTO has provided an export friendly environment to all its members with simplified procedure for trade facilitation.



2. PRESENT POSITION OF INDIA’S EXPORTS

In recent years, India’s export sector has exhibited remarkable resilience and dynamism compared to that of many other developing economies. Though the recent period of global recession in 2008 and 2009 has affected India’s exports leading to negative export growth rate but marginally compared to other economies and soon it recovered to register a high positive growth phase in succeeding years. The present position of India’s exports is satisfactory and the value of merchandise and services exports has been more than the target set.

The export-GDP ratio increased from 12.4 per cent in 2005-06 to 16.5 per cent in 2011-12. The value of merchandise exports reached to US$ 305 billion in 2011-12 from US$ 103 billion in 2005-06 and US$ 185 billion in 2008-09. However during the global recession period the export growth rate declined and recorded a negative growth rate of -3.2 per cent in 2009-10 but soon it recovered in the financial year 2010-11 with growth rate of 40.2 per cent and registered value of merchandise exports as US$ 251 billion (2010-11) and US$ 305 billion in 2011-12. The Compound Annual Growth Rate of merchandise export during the period 2005-06 to 2011-12 was 19.8 per cent.

Table 1.1: Recent Trends in India’s Value of Merchandise Exports

(Values in US$ billions)

Year

Value







2005-06

103

2006-07

126

2007-08

163

2008-09

185

2009-10

179

2010-11

251

2011-12

305

CAGR (2005-06-2011-12) of 19.8 per cent

Source: Ministry of Commerce, Government of India

The share of India in world merchandise exports remained unchanged at 1.0 per cent between 2005 and 2006 but thereafter it started rising and reached to 1.1 per cent in 2007, 1.3 per cent in 2009, 1.5 per cent in 2010 and 1.67 per cent in 2011.

There has been a major compositional change in India’s export basket in recent years. The share of primary products in India’s total exports has continuously declined and reached to 14.9 per cent in 2011-12 from 16.2 per cent in 2004-05. In agriculture and allied products share and export growth rate of cereals, oil meals, marine products, and raw cotton was better in 2011-12 while that of tea and coffee was less. Ores and minerals registered negative growth in first half of 2010-11 due to ban on export of iron ore by state of Karnataka and Orissa. The share of petroleum crude and products increased to 18.25 per cent in 2011-12 from 8.4 per cent in 2004-05. During global recession, it recorded a negative growth rate of -2.9 per cent in 2008-09 but soon recovered to register a growth rate of 47.1 per cent in 2010-11. The share of manufactured goods in India’s total exports declined to 61.3 per cent in 2011-12 from 77.8 per cent in 2003-04. The inter sect oral compositional changes within the manufacturing exports have also been remarkable with increase in the share of engineering goods from 15.7 per cent in 2000-01 to 22.2 per cent in the first half of 2011-12. The share of electronic goods too increased, while the share of chemicals and related products, gems and jewellery changed marginally in recent years. There was decline in the share of labour intensive manufactures like textile, leather and leather manufactures and handicrafts with share of 8.7, 1.6 and 0.3 per cent in the first half of 2011-2012 from 23.6, 4.4 and 2.8 per cent in 2000-01.
Figure 1.1: Top Export Items (In FY 2012, in US$ billions)
Source: Ministry of Commerce, Government of India
The direction of India’s exports in recent years is more towards southern countries particularly Asia and Africa region. The share of Asia, Africa and Latin American countries increased from 47 per cent in 2001-02 to 62 per cent in 2011-2012, of this, share of Asian region rose from 40 per cent to 52 per cent during this period. The UAE has become the top most destination of India’s export since 2008-09 with export share of 13 per cent and had displaced U.S.A. to the second position and China being at the third position. India’s export to these top three destination countries registered a growth of 43.3, 30.8 and 69.1 per cent in 2010-11.

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