IMPORTANCE OF EXPORTS : Look at Table for clear understanding of India's Exports Imports and Trade Balance. The table shows that India's Trade Balance was -2 Crores during 1950-5 1 and it has gone up to Rs. -16,325 crores during 1995-96. The trade deficit has been gradually increasing.
India's Exports, Imports and Trade Balance (Rs. in crores)
(P= Provisional)
A reduction in trade deficit is possible either by a deduction in imports or by an increase in exports. A reduction is not only necessary to curtail the trade deficit but also because, quite often, imported supplies are costlier than domestic supplies. Some of our imports consist of essential consumer goods which are necessary to maintain the domestic price stability. Any cut in these imports would adversely affect production leading to unutilised capacities and a cut in exportable surpluses. Capital goods which have shown a significant increase in the last few years now account for about 28 per cent of the total imports because of the need for technology up gradation. Fuel accounts for about 23 per cent of the total imports. It may be very difficult to curtail these imports because they contribute to the economic development of the nation.
In the past, we depended on foreign aid, largely consisting of loans, to finance our import surplus. India's total debt was US $92.2 billion at the end of March 1996. The debt service ratio was about 26% in the year 1995-96. Our debt service obligations have increased in terms of rupees because of continuous decline in the value of rupees. India's external debt is very high. The world Debt Tables ranked India as the fourth largest debtor among developing countries. Thus, there is no alternative but to intensify export effort. The expansion in export sector will be able to generate the revenue for meeting the import requirement.
Realising the importance of exports in the development of the economy, Government of India have been making continuous effort to promote the exports. The Government took major steps in July, 1991 by introducing reforms in industrial, trade and fiscal policy. The trade reforms aimed at creating environment to enable increase in exports' at a rapid pace. Country specific and commodity - specific measures were taken to promote exports. The Board of Trade in its meeting on Dec 13, 1991 identified 34 extreme focus products aimed at achieving 30% annual growth in exports. The Ministry of Commerce has undertaken in depth analysis for identifying countries and products for boosting exports. 15 products and 15 countries have been identified covering 75% of India's foreign trade. The identified products include: Gems and Jewellery, Cotton Yam, Fabrics 'and made-ups man-made yam, marine products,' transport equipment, metal manufactures, machinery and instruments, leather, organic and inorganic chemicals, Dyes intermediates, etc., plastic and linoleum products, agro-chemical and oil, etc. The identified countries are US, Japan, Germany, Belgium, UAE, Saudi Arabia, UK,Singapore, Russia, Italy, Bangladesh France, Netherlands, Hongkong and Thailand.