The integration of the domestic economy through the twin channels of trade and capital flows has accelerated in the past two decades which in turn led to the India’s GDP reaching Rs 170.95 trillion (US$ 2.47 trillion) in 2017-18*, and Rs 190.54 trillion (US$ 2.76 trillion) in 2018-19**. Simultaneously, the per capita income also nearly trebled during these years. India’s trade and external sector had a significant impact on the GDP growth as well as expansion in per capita income.
Total exports from India (merchandise and services) have increased 8.73 per cent year-on-year in 2018-19 (up to February 2019) to US$ 483.92 billion, while total imports have increased by 9.42 per cent year-on-year to US$ 577.31 billion, according to data from the Ministry of Commerce & Industry. By 2018-19 end exports are expected to reach US$ 540 billion.
According to Mr Suresh Prabhu, Minister for Commerce and Industry, the Government of India is keen to grow exports and provide more jobs for the young, talented, well-educated and even semi-skilled and unskilled workforce of India.
India's foreign exchange reserves were US$ 405.64 billion in the week up to March 15, 2019, according to data from the RBI.
- In March 2019, the Government of India proposed to Africa to enter a ree trade agreement (FTA) or a preferential trade agreement (PTA).
- In November 2018, India and Iran had signed a bilateral agreement to settle oil trades in Indian currency through public sector bank United Commercial Bank (UCO) Bank.
- In June 2018, a Memorandum of Understanding (MoU) was signed between the Governments of India and China to export non-basmati rice to China. As of October 2018, total 24 mills got clearance to export the same.
- Bilateral trade between India and China reached US$ 84.44 billion in 2017 with 40 per cent increase in Indian exports to China.
- In August 2018, US upgraded India’s status as a trading partner on par with its North Atlantic Treaty Organization (Nato) allies.
- India’s external sector has a bright future as global trade is expected to grow at 4 per cent in 2018 from 2.4 per cent in 2016.
- Bilateral trade between India and Ghana is rising exponentially and is expected to grow from US$ 3 billion to US$ 5 billion over the coming three years, stated Mr Aaron Mike Oquaye Junior, Ghana's Ambassador to India.
- India has revised its proposal on trade facilitation for services (TFS) at the World Trade Organisation (WTO) and has issued a new draft, with the contents being more meaningful and acceptable to other member countries.
- The Union Cabinet, Government of India, has approved the proposed Memorandum of Understanding (MoU) between Export-Import Bank of India (EXIM Bank) and Export-Import Bank of Korea (KEXIM).
- The Goods and Services Network (GSTN) has signed a memorandum of understanding (MoU) with Mr Ajay K Bhalla, Director General of Foreign Trade (DGFT), to share realised foreign exchange and import-export code data, process export transactions of taxpayers under goods and services tax (GST) more efficiently, increase transparency and reduce human interface.
Foreign Trade Policy
- In the Mid-Term Review of the Foreign Trade Policy (FTP) 2015-20 the Ministry of Commerce and Industry has enhanced the scope of Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS), increased MEIS incentive raised for ready-made garments and made- ups by 2 per cent, raised SEIS incentive by 2 per cent and increased the validity of Duty Credit Scrips from 18 months to 24 months.
- In January 2019, the Government of India approved recapitalisation of the Export Import Bank of India (EXIM).
- As of December 2018, Government of India is planning to set up trade promotion bodies in 15 countries to boost exports from Small and Medium Enterprises (SME) in India.
- In September 2018, Government of India increased the duty incentives for 28 milk items under the Merchandise Export from India Scheme (MEIS).
- All export and import-related activities are governed by the Foreign Trade Policy (FTP), which is aimed at enhancing the country's exports and use trade expansion as an effective instrument of economic growth and employment generation.
- The Department of Commerce has announced increased support for export of various products and included some additional items under the Merchandise Exports from India Scheme (MEIS) in order to help exporters to overcome the challenges faced by them.
- The Central Board of Excise and Customs (CBEC) has developed an 'integrated declaration' process leading to the creation of a single window which will provide the importers and exporters a single point interface for customs clearance of import and export goods.
- As part of the FTP strategy of market expansion, India has signed a Comprehensive Economic Partnership Agreement with South Korea which will provide enhanced market access to Indian exports. These trade agreements are in line with India’s Look East Policy. To upgrade export sector infrastructure, ‘Towns of Export Excellence’ and units located therein will be granted additional focused support and incentives.
- RBI has simplified the rules for credit to exporters, through which they can now get long-term advance from banks for up to 10 years to service their contracts. This measure will help exporters get into long-term contracts while aiding the overall export performance.
- The Government of India is expected to announce an interest subsidy scheme for exporters in order to boost exports and explore new markets.
India is presently known as one of the most important players in the global economic landscape. Its trade policies, government reforms and inherent economic strengths have attributed to its standing as one of the most sought after destinations for foreign investments in the world. Also, technological and infrastructural developments being carried out throughout the country augur well for the trade and economic sector in the years to come.
With the Government of India striking is important deals with the governments of Japan, Australia and China, the external sector is increasing its contribution to the economic development of the country and growth in the global markets. Moreover, by implementing the FTP 2015-20, by 2020, India's share in world trade is expected to double from the present level of three per cent.
*Revised estimates at current prices, **Advanced estimates at current prices
Exchange Rate Used: INR 1 = US$ 0.0145 as on March 29, 2019