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Trade and External Sector

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Trade and External Sector

July, 2011

The trade and external sector in India is witnessing significant momentum due to the growth in exports, increase in capital inflows and addition in the foreign exchange (Forex) reserves.

India has been ranked at the second place in global foreign direct investments (FDI) in 2010 and will continue to remain among the top five attractive destinations for international investors during 2010-12, according to a report on world investment prospects titled, 'World Investment Prospects Survey 2009-2012' released by the United Nations Conference on Trade and Development (UNCTAD).

Capital Inflows

India's foreign exchange (Forex) reserves increased by US$ 1.68 billion to register US$ 310.22 billion for the week ended May 27, 2011.

In addition, Japan International Cooperation Agency (JICA) has agreed to give US$ 1.64 billion (Rs 7,361 crore) as a soft loan to India for various infrastructure projects in the country.

The Central American Republic of El Salvador is looking forward to increase trade and investments from India and wants to strengthen bilateral relations between the two countries.

India has also agreed to an arrangement to facilitate and expand the system of settling in local currencies all trade transactions among Brazil, Russia, India, China and South Africa (BRICS) Group of countries. The expanded system of settling trade in local currencies would provide impetus to trade between intra-BRICS countries.

The BRICS countries are among the best countries representing the emerging markets and account for a combined gross domestic product (GDP) of US$ 11 trillion, or 16 per cent of the world’s total GDP.


India attracted FDI inflow of US$ 4.66 billion in May 2011, which is the highest monthly inflow in 39 months, while the cumulative amount of FDI equity inflows from April 2000 to May 2011 stood at US$ 205.96 billion, according to the latest data released by the Department of Industrial Policy and Promotion (DIPP).

The services service (including financial and non-financial) sectors attracted highest FDI equity inflows during April-May 2011-12 at US$ 910 million. India received maximum FDI from countries like Mauritius, Singapore, and the US at US$ 56.31 billion, US$ 13.25 billion and US$ 9.71 billion, respectively, during April 2000-May 2011.

The first half of 2011 witnessed the total merger and acquisitions (M&A) and private equity (PE) (including qualified institutional placement (QIP)) deals with 524 Deals valued at US$ 32.48 billion, according to the data released by, an accounting and consulting firm, Grant Thornton India. The global M&A activity has been upbeat so far in 2011 clocking deals worth US$ 1.5 trillion.

Furthermore, the total value of outbound deals, Indian companies acquiring businesses outside India, in the first half of 2011 was recoded at 86 deals worth US$ 5.89 billion. PE deals value s amounted to 203 deals worth US$ 5.09 billion in the first half of 2011 as compared to 125 deals worth US$ 2.95 billion during the corresponding period in 2010.


Net investments by the foreign institutional investors (FII) were recorded over US$ 38.69 million and US$ 183.73 million were made by the foreign investors from the Indian capital market in equity and debt respectively as on July 22, 2011, according to data released by Securities and Exchange Board of India (SEBI).

PE investments in India stood at US$ 6,141 million in value terms, while the number of deals increased by 33 per cent to 195, during January-June 2011, according to data compiled by a research service focussed on PE and M&A, Venture Intelligence.


Exports increased by 34.42 per cent in April 2011 to record US$ 23.8 billion, continuing the fast paced growth of the previous fiscal. India's exports grew a record 37.6 percent in 2010-11, due to high growth in sectors including the engineering sector, gems & jewellery and petroleum products.

India's exports from Special Economic Zones (SEZs) also registered a robust 43 per cent growth in 2010-11 at US$ 70.07 billion (Rs 3,15,867. 85 crore), against US$ 48.96 billion (Rs 2,20,711.39 crore) in the last fiscal.

Furthermore, India has entered the club of top 20 exporters of goods and reclaimed its position among top 10 services exporters in 2010. India's goods exports rose by 31 per cent in 2010, thereby improving India’s world ranking by moving up two places to 20 from 22 (in 2009). Trade in goods rebounded to grow by 14.5 per cent in terms of volume in 2010, as per a report titled the 'World Trade Report 2011', released by the World Trade Organisation (WTO). The report further stated that the engineering and petroleum exports now account for 42 per cent of exports as compared to 14 per cent in 2000.

“This high export growth clearly indicates that diversification to other destinations has taken place apart from changes in the composition of goods," according to Mr Pranab Mukherjee, the Union Finance Minister.

A target of achieving US$ 500 billion exports by 2013-14 has been set by the Ministry of Commerce and Industry. The Ministry has framed strategies, such as, diversification of products and markets and technological advancement to enhance India’s foreign trade.