Gross domestic savings as a proportion of GDP (at market prices) increased from 32.4% in 2004‑05 to 33.7% in 2009‑10.4 Gross capital formation (GCF), as a proportion of GDP, rose from 32.8% in 2004‑05 to 38.1% in 2007‑08. After a minor dip in 2008‑09, to 34.5%, the GCF picked up again to reach 36.5% of GDP in 2009‑10. Growing trends of savings and investment augur well for future growth.
Exports, Imports, and Trade Balance
The Indian economy in 2011 is far more open to the external sector than it was in 2006‑07. India's total trade in goods (exports plus imports) as a percentage of GDP increased from 32.9% in 2006‑07 to 39.7% in 2008‑09, though it came down to 33.7% the next year as a fallout of the global economic crisis (see Table 3). This increased openness has enhanced productivity and competitiveness, as reflected in India's export performance in recent years.
Source: India's Trade at a Glance, Department of Commerce, May 2011.
The growth of India's exports has been robust at over 20% since 2002‑03. The global recession only slightly moderated this growth, to 13.6% in 2008‑09. The compound annual growth rate (CAGR) of India's merchandise exports during the five year period 2004‑05 to 2008‑09 was 22% as against 14% during the preceding five year period. However in 2009‑10, export growth was negative at (‑) 3.5%, reflecting the effect of the global recession. The Government announced remedial measures in the Union Budget 2009‑10 and in the Foreign Trade Policy (2009‑14) to address the adverse effects of global developments. These measures, coupled with the recovery of the global economy, enabled exports to grow at 37.5% during 2010‑11.
In 2009‑10, the major commodity groups in India's export basket in terms of percentage shares were manufactured goods (63.6%); crude and petroleum products and coal (17.8%); agriculture and allied products (9.9%); and ores and minerals, excluding coal (5.5%).5
The CAGR of India's merchandise imports during the five year period 2004‑05 to 2008‑09 was 31.2% as compared to 13% during the preceding five year period. Imports witnessed negative growth in 2009‑10, but picked up in the following year to 21.6%. A revival of demand, coupled with reduction in import tariffs and controls, has resulted in strong import growth.
In 2009‑10, chemicals, iron and steel, non‑ferrous metals, professional instruments, optical goods and electronic goods, pearls, precious and semi‑precious stones, gold and silver accounted for 42.6% of India's import basket. Fuel (33.2%); capital goods (15%); fuel and allied products (3.7%); fertilizers (2.3%), paperboard manufactures and newsprint (0.5%) were the other major commodity groups.
In spite of the robust growth of exports, India's trade deficit continues to be large as the growth of imports has consistently outpaced the growth of exports. The trade deficit as a ratio of GDP increased from 5.5% in 2005‑06 to 9.5% in 2008‑09. In absolute terms, it remained more than US$100 billion during the past three financial years, 2008‑09 to 2010‑11.
Direction of merchandise trade
The directional pattern of India's trade has not changed much since 2007‑08, and the top 15 trading partners6 continue to hold a share of around 60% of the trade. Country‑wise, the United Arab Emirates (UAE) is India's largest trading partner since 2008‑09, followed by China and the United States. The UAE has also displaced the United States as the topmost destination of India's exports since 2008‑09 with an export share of around 13%. However, China remained the largest source of imports with a 12% share in India's total imports followed by the UAE, the Kingdom of Saudi Arabia, and the United States. Region‑wise, during the period 2010‑11 (April‑September), Asia was India's largest trading partner, followed by Europe and the Americas.7