Essays on Assessment 1 Essay

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INDIA CHARACTERISTICS & PERFORMANCES OF EXPORTS TABLE OF CONTENTSEXECUTIVE SUMMARY 3INTRODUCTION 4EFFORTS TO INTEGRATE WITH WORLD ECONOMIES 5EXPORTS TRENDS IN INDIA 7SWOT ANALYSIS 13REFERENCES 171. EXECUTIVE SUMMARYIndia has registered outstanding growth performances in recent years. Its growth along with that of China has been anticipated to help sustain growth of global economy as economic prospects world over are not bright. Indian economy grew at more than 8% after 2003. India’s trade has shown impressive increase at the growth rate of 11% after 1978 which is much above economy’s growth rate.

Its export share has grown from 0.4% to 1.2%. But still it is a minor in terms of its share. In spite of this, expectations are huge regarding India’s growth, as China’s expansion may be constrained by its rising cost and comparative disadvantage of geographical dividend with respect to India. India’s trade restructuring has not been very intensive. Service trade is very important from India’s perspective, as this also forms major chunk of economy. China on the other hand has focused more on manufacturing and hence been able to transform from low technology labor intensive to more technology and capital intensive goods.

This difference is mainly because of role of Foreign direct investment in China, which in turn was determined by overall business friendliness and openness to world economy. The outlook for trade of Indian economy is not very certain. India’s trade has not undergone complete restructuring unlike China. It continues to depend upon exports of low skilled labor intensive goods. Moreover as India still spends huge amount of precious foreign exchange on import of energy needs, it is very risky because of price fluctuations.

Moreover in terms of industrialization also, India has to go a long distance. 2. INTRODUCTIONAccording to Macroeconomic accounting, Exports are a component of National Income as per the equation: Y = C+I+G+(X-M)Where Y, C, I, G, X, M are consumption, investment, government expenditure, exports, imports respectively. In standard macroeconomic theory, exports are are independent of national income unlike imports. But exports do have a significant effect on national income through Foreign trade multiplier. In current phase, exports and imports are not independent of each other. As an increase in exports raises national income which raises imports.

Further, in most of the cases, exports are based on imported raw material, intermediate products and capital equipment. Hence imports may generate value added exports. Countries which prefer protectionist policies with high tariff and non tariff barriers often face similar retaliation from other countries. This was view was not so popular until a few decades ago. India and China were world’s 1st and 3rd largest economies at the onset of industrial revolution i. e. a few centuries ago. Even in late 70s both seemed to have similar fate.

But then China turned into miracle economy. It happened because of its decision to pave way for economic reforms in 1978. This helped China leap forward and India remained stagnant. In 1991-92, when India’s economy worsened, India had no option other than systematically adopting to the phenomenon of Globalisation, Liberalisation and Privatisation. Internal debt was 50 % of GDP with 39% of revenue collections were used for interest payments only. Inflation reached at a high of 14%. Rupee depreciated by 26 % against Dollar.

India’s credit rating fell from AAA to BB+. .

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