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Foreign Trade Impact on Indian Economy Growth

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Indian foreign trade has come a long way in value terms from the time of gaining independence in 1947. After Liberalization of 1991, India trade growth has picked up place. In the last decade and at present, the composition of trade is dominated by manufactured goods and services. The share of exports of Indian service sector in global exports is more than double of that of Indian exports. Under the central governments “MAKE IN INDIA” projects going upon in our economy.


Foreign trade is recognized as the most significant determinant of economic development of a country, all over the world. The foreign trade of Indian is governed by the foreign trade Act, 1992 and the values and orders issued there under. Payments for import and export transactions are governed by foreign Exchange Management act, 1999.Custom Act, 1962 governs the physical movements of goods and services through various modes of transportations. To make India a quality producer and exporter of goods and services, apart from projecting such image, an important Act- Export Act, 1963 has been vogue.

Even the Exim policy 2002-2007 lays its stress to simplify procedures, sharply to further reduce transactions costs. International trade is a vital part of development strategy and it can be an effective instrument of economic growth, employment generation and poverty alleviation Market condition change, almost daily, requiring quick response and more importantly, anticipation of the future requirement, it is essential that the frame work as to remain in pace.

Literature Review

India’s Foreign Trade Policy was recently announced in the backdrop of reduced global trade growth forecast and lack of growth momentum in India’s export growth. For the last three to four years, the merchandise export growth has been flat. Recently, the World Trade Organization has also revised its global trade growth forecast to 3.5 percent from its earlier forecast of 4 percent on account of continued slowdown in the global market.

The government is relying on strategic, systematic and structure changes to be able to realize the ambitious goal. It aims to bring missionary zeal in support of export growth by brining all ministers, departments and state governments in sync, by easing exporting procedures and documentation, and by ensuring better competitiveness and branding of products and services exported from India.

There are three key elements in the government export growth strategy. Firstly, the government intends to catalyse merchandise export by diversification of market and products by participation in global value chain, by improving branding and competitive of India’s products, and by reducing transactions cost through online processing of authorizations thus improving ease of doing business.

Secondly, the government, part of the strategy is to boost to services export by allowing fiscal incentives in the form of SEIS scrip, and ensuring that the agreement that India proposes to sign or has signed in the recent past.

The third, and the most important, part of the strategy is to increase focus on utilization o trade agreement routes for accelerating export of goods and services. India has existing agreements on the trade of goods with Japan, Korea, Singapore…etc, but use of agreement has been very low.

Objective of Indian Foreign Trade:

  1. To understand the importance of foreign trade in the world.
  2. To understand the relationship between foreign trade and economic development of India.
  3. To connect rules, procedure and incentives for exports and imports with other initiatives such as “Make in India”, Digital India “and Skills India” to create an “Export Promotion Mission” for India.

Indian Foreign Trade Overview

  • The period 19001914 saw expansion in India’s foreign trade. The rise in the output of such crops as oilseeds, cotton, jute and tea was largely due to a flourishing export trade. The First World War was a serious setback to India’s foreign trade.
  • India’s foreign trade was severely hit by the great depression of 1930s due to decline in consumers purchasing power and discriminatory trade policies.
  • During the Second World war, India achieved huge export surplus.
  • License raj period:

Import and export neglected by Govt., GDP decreased, restriction on new license.

  • Post liberalization Era:

New licensing rule, modified export import policy.

Components of Indian Foreign Trade:

In India, exports and imports are regulated by the Foreign Trade act,1992, which replaced the imports and exports Act,1947 and gave the government of India enormous powers to control it.

Salient features of the Act are follows: –

  1. It has empowered the Central Government to make provisions for development and regulation of foreign trade by facilitating imports into, and augmenting exports from India and for all matters connected therewith or incidental thereto.
  2. The Central Government can prohibit, restrict and regulate exports and imports, in all or specified cases as well as subject them to exemptions.
  3. Under the Act, every importer and exporter must obtain an ‘Importer Exporter Code Number ‘from Director General of Foreign trade or from the officer so authorized.
  4. It provides for the appointment of a Director General of Foreign trade by the Central Government for the purpose of the Act. He shall advise Central Government in formulating export and import policy and implementing the policy.
  5. The Director General or any other officer so authorized can suspend or cancel a license issued for export or import of goods in accordance with the Act. But he does it after giving the license holder a reasonable opportunity of being heard.

The Principle objectives of the EXIM POLICY 2015-2020

  • To facilitate sustained growth in exports of the country so as to achive larger percentage share in the global merchandise trade.
  • To provide domestic consumers with good quality goods and services at internationally competitive price as well as creating a level playing field for the domestic producers.
  • To stimulate sustained economic growth by providing access to essential eaw materials, intermediates, components, consumables and capital goods required for augmenting production and providing services.
  • To enhance the technological strength and efficiency of Indian agriculture, industry and services, thereby improving their competitiveness to meet the requirements of the global markets.
  • To generate new employment opportunities and to encourage the attainment of internationally accepted standards of quality.

Besides this Act, there are some other laws which control the export and import of goods. These include:

  1. Tea Act,1953
  2. Coffee Act, 1942
  3. The Rubber Act,1947
  4. The tobacco Board Act, 1975
  5. The Export (quality control and Inspection) Act, 1963

The matters relating to foreign trade are dealt with by the following divisions of the Department: –

  • Administrative and General division
  • Economic Division
  • Foreign trade territorial Division
  • Export Industries Division
  • Supply Division
  • Finance Division
  • Trade policy Division
  • Export Products division
  • Export Services Division

Indian Foreign Trade New Era

The Confederation of Indian Industry said in a release that, ‘The much-awaited Foreign Trade Policy 2015-20 seems to be a visionary policy which is in sync with government’s campaigns like Make in India, Digital India and Skills India, which indicates that India is geared up to realize the aim of improving the ease of doing business.’ India’s exports contracted 15% in February, the third successive month of decline, because of a global slowdown and the appreciation of the rupee against a basket of currencies. Merchandise exports account for about one-fifth of the country’s $2 trillion economy. Several promotional schemes such as focus product and focus market schemes for goods have been consolidated into a single Merchandise Export from India Scheme (MEIS). Under the scheme, incentives will be given for export of specific goods to specific markets. The Services Export from India Scheme (SEIS) will replace the Serve from India Scheme (SFIS), giving a push to sectors such as medical tourism, accountancy and architecture.


Conditions int the business world is constantly changing. Customer needs and preferences change; competitors are constantly shifting their product or service offerings, pricing, business strategies and promotional strategies; and market environments are subject to shifts caused by external factors. International trade research enables companies to monitor these changing conditions and alert managers to potential problems in advance.

  • Estimating the demand for a product or service in an international market is a vital component of strategic and financial planning. Research enables companies to make a realistic assessment of the strengths of their products or services and the amount of competition in a potential market.
  • Research provides the basis for informed decision making. It helps managers decide which markets to target and what approaches to use in entering them. It reduces the risk of making costly errors and identifies potential threats before they become harmful.
  • Research enables companies to identifies new opportunities for products and services or new markets. Research enables potential opportunities to be evaluated so that the most suitable ones can be acted upon.
  • Research can help a company minimse its risk exposure in new markets by exposing the signs of instability in a market.
  • Research is used to track customer satisfaction, guide operations and new initiatives. It also helps companies determine which markets are profitable and which are not. Using international trade research to help strategic planning when gathered and analyzed correctly, international trade research will increase the chances that a business decision will be the correct one, and thus increase the possibility of successfully trading.


With the Liberalization, Privatization and Globalization of the Indian economy and following liberal foreign trade, there had been changes in the business environment. With the development of science and technology there is a change in the nature of the Indian economy. There had been increase in the trade volume in the India’s international trade, and the exports from Indian also have increased.


  1. Dr.T. Lalitha Devi, “International Business” Second Semester Calicut University.
  2. Bhagwati J. “Indian Balance of payments Policy and Exchange Auctions” Oxford Economic Papers, February.
  3. Bhagwati J. ‘Why Export Receipts Lag behind Exports’ Economic Weekly, vol: 27,24 July.      

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Foreign Trade Impact On Indian Economy Growth. (2021, October 25). GradesFixer. Retrieved November 28, 2021, from
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