Foreign Exchange and Economic Development
In the past two decades India has transformed itself successfully from a rigid centrally-planned economy to an increasingly open and market-oriented economy, with GDP growing at an annual average rate of nearly 10%. The path and forms that India took to transform its economy were far from conventional. India’s reform centred on improving incentives, hardening budget constraints and creating competition by regional decentralization of government and adopting a dual-track approach to market liberalization. This approach determines that India’s reform has been partial, gradual and experimental in nature. With the implementation of its “reform and opening up” decision made in 1991, India has successfully broken through the state monopoly of foreign trade and achieved significant progress in trade liberalization. Direct administrative controls of foreign trade have been substantially reduced, while trade has been conducted increasingly in accordance with its comparative advantage. In line with its foreign trade system reform, India’s foreign exchange reforms since 1991 have aimed to achieve a more realistic exchange rate for its currency through regulations by Reserve Bank of India.
To become a major player in world trade, a comprehensive approach needs to be taken through the Foreign Trade Policy of India. Increment of exports is of utmost importance, India will have to facilitate imports which are required for the growth Indian economy. Rationality and consistency among trade and other economic policies is important for maximizing the contribution of such policies to development. Thus, while incorporating the new Foreign Trade Policy of India, the past policies should also be integrated to allow developmental scope of India’s foreign trade. This is the main mantra of the Foreign Trade Policy of India. Foreign Exchange:
Foreign exchange literally...