India in 2020

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India’s Trade in 2020:
A Mapping of Relevant Factors

Nagesh Kumar

A paper prepared for the
Committee on Vision 2020 for India,
Planning Commission,
Government of India

Revised Version: 22 May 2001

Research and Information System for the Non-aligned and Other Developing Countries, Zone 4B, India Habitat Centre, Lodi Road, New Delhi-110003.
Tel.: 468 2175, Fax: 468 2174;
Email: nagesh@ndf.vsnl.net.in

An earlier version of the paper was presented at the Fifth Meeting of the Committee on Vision 2020 for India, Planning Commission, on 8 February 2001. I benefited from discussions with Dr V.R. Panchamukhi, and from comments of Dr S.P. Gupta and other participants at the Meeting The usual disclaimer applies.

India’s Trade in 2020:
A Mapping of Relevant Factors

Introduction

India's trade has generally grown at a faster rate compared to the growth of GDP over the past two decades. With the liberalization since 1991 in particular, the importance of international trade in India’s economy has grown considerably. As a result the ratio of international trade to GDP has gone up from 14 per cent in 1980 to nearly 20 per cent towards the end of the decade of 1990s. Given the trends of globalization and liberalization, the openness of Indian economy is expected to grow further in the coming two decades. The more exact magnitude of India's trade in 2020 and its proportion to India's national income would be determined by a variety of factors. Many of these factors are in the nature of external shocks and are beyond the control of national policy making. One illustration is the recent surge in the crude oil prices in the international market to unprecedented levels that have impacted the country’s imports in a significant manner. In addition, the implementation of various WTO agreements are likely to affect the India's trade. India's trade is also likely to be affected by various bilateral/ regional preferential trade arrangements that have been concluded and those that might take shape in the coming years.

This paper attempts to provide a mapping of different factors that are likely to shape the patterns and magnitudes of India's imports and exports over the coming two decades. These factors are classified into three, namely: 1) factors affecting the demand for India's exports of goods and services; 2) factors affecting the supply of India's exports of goods and services; and 3) factors affecting the demand for India's imports.

The supply of imports may be assumed to be elastic and hence is not discussed.

The structure of the paper is as follows. Section 1 maps out various factors affecting demand for India’s exports, Section 2, factors affecting supply of India’s exports. Section 3 lists the factors that are likely to affect demand for India’s imports. Section 4 briefly summarizes emerging patterns of India’s comparative advantage in exports of good and services. Section 5 makes some concluding remarks.

1.Factors Affecting the Demand for Exports

There is a multitude of factors that are likely to affect the demand for India's exports of goods and services as seen below.

3 Growth Performance of World Economy and Key Trading Regions

The growth rates of the world economy and world trade do influence the overall demand for India's exports. For instance, the rates of stagnation in the growth rate of world trade in the period since 1996 have affected the growth of India's exports. Some broad correspondence between the growth rates of world trade and Indian exports is evident from Figure 1. Depending upon the intensities of India's trade relations the growth prospects in these specific regions may also affect the demand for India's exports. The regions which may be particularly important for India's exports include North America, the European Union, Middle East, East and Southeast Asia and South Asia. Therefore, it will be...
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