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Foreign trade of India

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Foreign trade in India includes all imports and exports to and from India. At the level of the Central Government, trade is administered by the Ministry of Commerce and Industry.[1] Foreign trade accounted for 48.8% of India's GDP in 2018.[2]

History

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See also: Economic history of India and Indo-Roman trade relations

Even before independence, the Government of India maintained semi-autonomous diplomatic relations. It had colonies (such as the Aden Settlement), who sent and received full missions,[3] and was a founding member of both the League of Nations[4] and the United Nations.[5] After India gained independence from the United Kingdom in 1947, it soon joined the Commonwealth of Nations and strongly supported independence movements in other colonies, like the Indonesian National Revolution.[6] The partition and various territorial disputes, particularly that over Kashmir, would strain its relations with Pakistan for years to come. During the Cold War, India adopted a foreign policy of non-alignment policy itself with any major power bloc. However, India developed close ties with the Soviet Union and received extensive military support from it.

Around 100CE

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The Periplus of the Erythraean Sea is a document written by an anonymous sailor from Alexandria around 100 CE, describing trade between countries, including India.

Around 1500

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In 1498, Portuguese explorer Vasco da Gama landed in Calicut (modern day Kozhikode in Kerala), and was the first European to ever sail to India. The tremendous profit made during this trip made the Portuguese eager for more trade with India and attracted other European navigators and tradesmen.[7]

Pedro Álvares Cabral left for India in 1501 and established Portuguese trading posts in Calicut and Cochin (modern day Kochi), returning to Portugal in 1501 with pepper, ginger, cinnamon, cardamom, nutmeg, mace, and cloves. The profits made from this trip were substantial.[8]

1991 economic reform

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Main article: Economic liberalisation in India

Prior to the 1991 economic liberalisation, India was a closed economy due to the average tariffs exceeding 200 percent and the extensive quantitative restrictions on imports. Foreign investment was strictly restricted to only allow Indian ownership of businesses. Since the liberalisation, India's economy has improved mainly due to increased foreign trade.[9] Reforms in India in the 1990s and 2000s aimed to increase international competitiveness in various sectors, including auto components, telecommunications, software, pharmaceuticals, biotechnology, research and development, and professional services. These reforms included reducing import tariffs, deregulating markets, and lowering taxes, which led to an increase in foreign investment and high economic growth. From 1992 to 2005, foreign investment increased by 316.9%, and India's GDP grew from $266 billion in 1991 to $2.3 trillion in 2018.[10][11]

Trade in services

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See also: Business process outsourcing to India and Information technology in India

As of 2023, India is the seventh largest exporter of commercial services in the world,[12] accounting for 4.6% of global trade in services. India's service exports grew by 27%.[13] In September, India's prominent services industry experienced an acceleration in growth, buoyed by robust demand in the sector. A recent survey also indicated that businesses displayed the highest level of optimism in over nine years. According to S&P Global's India services purchasing managers' index, there was an increase to 61.0 last month from August's figure of 60.1. This surpassed projections in a Reuters poll, which had anticipated a slight dip to 59.5. [14] [15]

The spectrum of India's services exports encompasses a diverse array of sectors, ranging from information technology (IT)[16] to the provision of medical services by professionals overseas. The RBI, while not providing monthly disaggregated data on services exports, periodically releases a classification of such exports as part of its quarterly balance of payment data. This classification encompasses transport, travel, construction, insurance and pensions, financial services,[17] telecommunications, computer and information services, as well as personal, cultural, recreational services, among other business services.

Within India's services export landscape, software exports retain a dominant position. However, noteworthy is the recent surge in "other business services" exports, which constituted 24 percent of the total services exports in the initial nine months (April-December) of FY23.[18] This marks a notable increase from the 19 percent reported in FY14. This category encompasses a range of services including legal services, accounting, auditing, book-keeping, tax consultancy services, management consulting, managerial and public relations services, as well as advertising, market research, and public opinion polling services.

Exports and imports

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Main article: List of exports of India

India exports approximately 7500 commodities to about 190 countries, and imports around 6000 commodities from 140 countries.[19]

Pharmaceutical industry

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This section is an excerpt from Pharmaceutical industry in India.[edit]

The pharmaceutical industry in India was valued at an estimated US$42 billion in 2021 and is estimated to reach $130 billion by 2030.[20] India is the world's largest provider of generic medicines by volume, with a 20% share of total global pharmaceutical exports. It is also the largest vaccine supplier in the world by volume, accounting for more than 60% of all vaccines manufactured in the world.[21] Indian pharmaceutical products are exported to various regulated markets including the US, UK, European Union and Canada.[22][23]

According to Economic Survey 2023, the turnover in the domestic pharmaceutical market was estimated to be $41 billion.[24] India's pharmaceutical exports revenue was $25.3 billion in fiscal year 2022–23, according to the data released by Pharmexcil.[25] India ranked third globally in terms of dollar value of drugs and medicines exports.[26]

Major pharmaceutical hubs in India are (anticlockwise from northwest): Vadodara, Ahmedabad, Ankleshwar, Vapi, Baddi, Sikkim, Kolkata, Visakhapatnam, Hyderabad, Bangalore, Chennai, Margao, Navi Mumbai, Mumbai, Pune, Aurangabad, Pithampur, and Paonta Sahib.

Oil and gas industry

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This section is an excerpt from Oil and gas industry in India § Foreign trade.[edit]

India is the second biggest oil importer after China and is highly dependent on imported crude oil.[27] The net imports of crude oil rose from 171.73 Mt during 2011–12 to 226.95 Mt during 2020–21. The net imports of natural gas increased from 18 BCM in 2011–12 to 32.86 BCM in 2020–21, recording a CAGR of 9.44%. Despite the dependence on imports, India has developed sufficient processing capacity over the years to produce different petroleum products. As result, India is a net exporter of petroleum products. The export of petroleum products increased from 38.94 Mt in 2008–09 to 56.76 Mt during 2020–21.[28]

India has an 82.8% import dependence for crude oil and 45.3% for natural gas.[29] Due to lack of adequate petroleum reserves, India has to depend mostly on crude oil imports for the near future till its renewable energy resources, such as solar, wind, hydro and biomass, are developed adequately to achieve energy security by replacing petroleum products consumption, which also significantly contributes to air pollution.[30]

Diamond Processing

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This section is an excerpt from Bharat Diamond Bourse § India's diamond industry.[edit]

India's diamond industry, which is estimated to grow by an average 10 to 15 percent each year in the next five years, accounts for 70–75 percent of total diamond exports in the world and employs 850,000 people, making it the largest cutting hub by value and number of employees. Last year, the country's import of rough diamonds rose 24.5 percent to 149.8 million carats against a year earlier, and export of cut and polished diamonds witnessed a surge of 28.3 percent to 59.9 million carats. The old market is located at Opera House and Prasad Chambers (Charni Road).

The cutting and polishing of diamonds occurs mainly in the city of Surat, which is also known as 'Diamond City'. The cutting and polishing units in Surat vary from large firms employing several thousands of diamond cutting and polishing workers to very small informal enterprises having a few workers. The larger Cutting and Polishing of Diamonds (CPD) units have relatively better work and employment conditions and even provide for elaborate benefits. Most of the CPD units are owned by Kathiawadis, who were originally farmers from Northern Gujarat region. The whole diamond cutting and polishing industry is largely community oriented, where most of the owners and workers are Kathiawadis.[31] In the recession of 2008, while many of the small and medium-sized CPD units were closed down with lay-off of workers, there were still some big CPD enterprises who managed to retain their workforce. This was primarily because of the paternal approach of owners, by which they consider workers as extended family members[32]

Automotive Industry

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This section is an excerpt from Automotive industry in India § Exports.[edit]
2007 Mahindra Scorpio in service with Italy's CNSAS

India's automobile exports have grown consistently and reached $4.5 billion in 2009, with the United Kingdom being India's largest export market, followed by Italy, Germany, the Netherlands, and South Africa.[33]

According to The New York Times, India's strong engineering base and expertise in the manufacturing of low-cost, fuel-efficient cars has resulted in the expansion of manufacturing facilities of several automobile companies like Hyundai, Nissan, Toyota, Volkswagen, and Maruti Suzuki.[34]

In 2008, South Korean multinational Hyundai Motors alone exported 240,000 cars made in India. Nissan Motors planned to export 250,000 vehicles manufactured in its India plant by 2011.[35] Similarly, US automobile company, General Motors had announced its plans to export about 50,000 cars manufactured in India by 2011.[36]

In September 2009, Ford Motors announced its plans to set up a plant in India with an annual capacity of 250,000 cars, for US$500 million. The cars were manufactured both for the Indian market and for export.[37] The company said that the plant was a part of its plan to make India the hub for its global production business.[38] Fiat Motors had announced that it would source more than US$1 billion worth auto components from India.[39]

A Tata Safari on display in Poznań, Poland

In 2009, India (0.23m) surpassed China (0.16m) as Asia's fourth largest exporter of cars after Japan (1.77m), Korea (1.12m) and Thailand (0.26m).[40]

In July 2010, The Economic Times reported that PSA Peugeot Citroën was planning to re-enter the Indian market and open a production plant in Andhra Pradesh that would have an annual capacity of 100,000 vehicles, investing €700M in the operation.[41] Citroën entered the market in 2021 with their first offering being the Citroën C5 Aircross.[42]

In recent years, India has emerged as a leading center for the manufacture of small cars. Maruti Suzuki and Hyundai are the two biggest exporters of cars from the country. Nissan also exports small cars from its Indian assembly line. Tata Motors exports its passenger vehicles to several Asian and African markets. In the 2000s, Mahindra & Mahindra prepared to introduce its pickup trucks and small SUV models in the U.S. market, but canceled its plans. As of 2019, it is assembling and selling an off-road vehicle (Mahindra Roxor; not certified for road use) in limited numbers in the U.S.[43] It is also sold in Canada. While the possibilities for the Indian automobile industry are impressive, there are challenges that could thwart future growth. Since the demand for automobiles in recent years is directly linked to overall economic expansion and rising personal incomes, industry growth will slow if the economy weakens.[44]

Trade statistics

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Summary table of recent India foreign trade (in billion $):[45][46] [47]

Year Export Import Trade Deficit
1999 36.3 50.2 -13.9
2000 43.1 60.8 -17.7
2001 42.5 54.5 -12.0
2002 44.5 53.8 -9.3
2003 48.3 61.6 -13.3
2004 57.24 74.15 -16.91
2005 69.18 89.33 -20.15
2006 76.23 113.1 -36.87
2007 112.0 100.9 11.1
2008 176.4 305.5 -129.1
2009 168.2 274.3 -106.1
2010 201.1 327.0 -125.9
2011 299.4 461.4 -162.0
2012 298.4 500.4 -202.0
2013 313.2 467.5 -154.3
2014 318.2 462.9 -144.7
2015[48] 310.3 447.9 -137.6
2016 262.3 381 -118.7
2017 275.8 384.3 -108.5
2018 303.52 465.58 -162.05
2019 330.07 514.07 -184
2020 314.31 467.19 -158.88
2021 420 612 -192
2022[49] 676.53 760.06 -83.53
2023 770.18 [50] 892.18 -122

Trading partners of India

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This section is an excerpt from List of largest trading partners of India.[edit]

According to the Ministry of Commerce and Industry, the fifteen largest trading partners of India represent 61.67% of total trade by India in the financial year 2022–23.[51] These figures include trade in goods and commodities, but do not include services or foreign direct investment.

The two largest goods traded by India are mineral fuels (refined / unrefined) and gold (finished gold ware / gold metal). In the year 2013–14, mineral fuels (HS code 27) were the largest traded item with 181.383 billion US$ worth imports and 64.685 billion US$ worth re-exports after refining. In the year 2024–2025, gold and its finished items (HS code 71) were the second-largest traded items with 558.465 billion US$ worth imports and 41.692 billion US$ worth re-exports after value addition. These two goods are constituting 53% total imports, 34% total exports and nearly 100% of total trade deficit (136 billion US$) of India in the financial year 2013–14.[52] The services trade (exports and imports) are not part of commodities trade. The trade surplus in services trade is US$70 billion in the year 2017–18.[53]

Counting the European Union (EU) as one, the World Trade Organisation ranks India fifth for commercial services exports and sixth for commercial services imports.[54]

The two primary destinations of India's exports are the EU and the United States, whereas the China and the EU are the two primary countries from which India's imports come from.[51]

These figures include trade in goods and commodities, but do not include services or foreign direct investment.

See also

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References

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