A Project Report On Direction & Composition Of Foreign Trade

In partial fulfillment of requirement for Master 0f Business Administration

SCHOOL OF MANAGEMENT STUDIES PUNJABI UNIVERSITY, PATIALA 2010-2012

Submitted To: Submitted By: - Prof.Amanpreet Singh Karamjeet Kaur Rai

Roll no: - 5738 MBA 2ND Year

ACKNOWLEDGMENT
Acknowledgement is an art, One can write glib stanzas without meaning a word, On the other hand one can make a simple expression of gratitude I want to express deep gratitude to my institutions and my heartiest thanks to our Head of Department Prof. Pushpinder Singh Gill & members of faculty for their blessings & encouragement. I would like to take this opportunity to thanks Prof. Amanpreet Singh, asst. prof. , MBA department, SMS, Punjabi university, Patiala who has been guiding force for my report on Direction &composition of foreign trade and for her support and encouregement without her making this report has been impossible.

Ms.Karamjeet kaur rai Roll no: -5738

MBA Global 2nd year

Introduction Introduction to India's Foreign Trade

Foreign Trade is one of the significant macro fundamental variable of an economy. India till recently was predominantly a primary goods exporting and mainly an industrial goods importing country. In 1950s, India's share in the world trade was 1.78% which was decline to 0.59% in 1990 and continues to remain around 0.60% till now. India's share in world exports was 0.8% in 2006. A. Composition of India's Exports

Britishers strongly believed that India was a country well suited to supply raw materials and other primary goods and a good market place for British manufacturers. So at the time of our independence our exports were predominantly of primary goods and imports were of manufacturers. At the time of independence agricultural commodities and light manufactured consumer goods dominated India's export basket. During the post independence period India's composition of exports changed. Now exports of India's are broadly classified into following four categories.

The composition of India's export can be summarised as follows :1. Agricultural and Allied Products

The share of agriculture items in the total exports of India has declined between 1990-91 to 2005-06. The share of agriculture exports was 19.5% in 1990-91. It came down to about 10.2% in 2005-06. The top items of agriculture exports include :1. Fish Products, 2. Rice, 3. Oil Cakes, 4. Fruits and Vegetables The most important export item in 'Agriculture and Allied products' group over the period 1991-92 to 2005-06 has been 'Fish and Fish Preparations'. From $ 585 millions in 1991-92 export earnings from fish and fish preparations rose to $ 1,589 millions in 2005-06. However, in percentage terms, their share fell slightly from 3.3 percent in 1991-92 to 1.5 percent in 2005-06. As far as agricultural exports are concerned, a significant development during the period since 1991 has been the considerable exports of rice in certain year. In fact, exports of rice were as high as $ 1,366 millions in 1995-96 which was 4.3 percent of total export earning in that year. In 2005-06, exports of rice were worth $ 1,405 millions which was 1.4 percent of total export earning in that year.

2. Ores and Minerals

The overall export performance of ores and minerals is not satisfactory. In percentage terms, the export performance of ores and mineral has increased from 4.4% in 199091 to 5.2% in 2005-06. A major share of ores and minerals exports comes from the export of iron ore.

3. Manufactured Goods The share of manufactured items in the total export earnings of India is on the increase. In 1990-91, the share of manufactured items in the total export earnings was about 73% of the total export earnings. In 2005-06, the share of manufactured items in the total export earnings of India remained stagnant at 72%. The top manufactured export items include :1. Engineering Goods, 2. Gems and Jewellery, 3. Chemicals and Allied products, and 4. Readymade Garments The export of engineering goods increased from $ 2,234 millions in 1991-92 to $ 21,315 million in 2005-06. In percentage terms the share of engineering goods rose from 12.5% in 1991-92 to 20.7% in 2005-06. Over the period 1991-92 to 2002-03, engineering goods occupied the second position in India's export earnings after gems and jewellery. However, thereafter engineering goods have occupied the first place. In 2005-06 they contributed 20.7% (i.e. one-fifth) of total export earnings. For most of the period since 1991, largest export earnings came from the exports of gems and jewellery. The share of gems and jewellery in India's total export was 15.3% in 1991-92 and 15.1% in 2005-06. However, gems and jewellery industry is a highly import intensive industry requiring large amount of imports of pearls and precious stones. Exports of chemicals and allied products rose significantly from $ 1,583 millions in 1991-92 to $ 11,935 millions in 2005-06. In percentage terms, their share stood at 11.6% in 2005-06 and they occupied the third place in India's export earnings in this year. In percentage terms, readymade garments maintained an almost constant share all through the period since 1991. They contributed 12.3% of export earnings in 199192 and 12.5% of export earnings in 2000-01. In 2003-04, their share fell to 9.8% and in 2005-06 to 8.3%.

4. Mineral Fuel and Lubricants

There has been an improvement in the export of mineral fuels and lubricants both in terms of value and in terms of percentage. In percentage terms, its share has increased from less than 2.9% in 1990-91 to 11.5% in 2005-06.

Some other facts regarding structural change in India's export since 1991 are as follows :1. There are indication that during 1990s, some of Indian exports have moved upwards in value addition chain whereby instead of exporting raw materials, the country has switched over to export of processed goods. 2. There were significant compositional shift within the major manufactured product groups such as engineering. goods, chemicals and allied products, etc.

B. Composition of India's Imports In 1947-48 the main items of India's imports were machineries, oil, grains, cotton, cutlery, hardware implements, chemicals, etc. They constituted 70% of India's imports. After that due to the emphasis on industrialisation during the second 5Year plan necessitated the imports of capital goods. Now imports of India's are broadly classified into following four categories.

The composition of India's imports can be summarised as follows :1. Petroleum Products Imports of petroleum oil and lubricants rose significantly from $ 5364 millions in 199192 to $ 43,963 millions i.e. more than eight times. Due to high price of crude oil, the POL imports jumped to $ 15,650 millions in 2000-01. In 1990-91, petroleum products accounted for nearly 25% of total imports of India. In 2005-06, it has further increased to nearly 31% of the total import bill of India.

2. Capital Goods The imports of capital goods was $ 3,610 millions in 1991-92. In 1995-96 due to sharp rise in non-electrical machinery imports, the imports of capital goods jumped upto $ 8,458 millions. However due to slowing domestic demand imports of capital goods fell subsequently. The capital goods and related items were 24.1% of the total imports of India in 1990-91, which has come down slightly in 2005-06 to about 22.3%.

3. Pearls and Precious Stones To meet the requirements of the gems & jewellery industry pearls and precious stones are imported in large quantities. In 1990-91, the share of pearls and precibus stones was 8.7% which has reduced in percentage terms to 6.4% in 2005-06.

4. Iron and Steel The imports of iron and steel have declined over the years in percentage terms. In 1990-91, the share of iron and steel imports was 5%, which has come down to 3% in 2005-06. This is because, a good amount of iron ore is now extracted in India which has reduced imports.

5. Fertilizers Import of fertilizers in 1991-92 stood at $ 954 millions. In 2003-04 expenditure on import of fertilizers was $ 635 millions. The import of fertilizers have declined, which indicates less dependence of India on imported fertilizers. The share in total imports of fertilizers was 4.1% in 199091, which came down to 1.5% in 2005-06.

INDIA SHARE TOTAL 15 SELECTED ITEMS IN GERMANYS IMPORTS

Shell-fruits and dried fruits Paints, varnishes and mastics Prefabricated chemicals, not mentioned elsewhere Prefabricated chemicals, not mentioned elsewhere Apparel of silk or man-made fibres, excl. knitted or crocheted fabrics Apparel of cotton, excl. knitted or crocheted fabrics Textile products, not mentioned elsewhere

4.80% 2.10% 1.69% 5.20% 1.64% 4.34% 5.08%

Footwear Articles of leather and leather clothes (excl. footwear) Jewellery, goldsmith's or silversmith's wares Articles of metal, not mentioned elsewhere End products, not mentioned elsewhere Engineering Goods Pharmaceutical products Articles of rubber TOTAL OF THE ABOVE 15 TOP ITEMS REST ITEMS GRAND TOTAL

3.16% 9.47% 6.85% 0.50% 1.06% 0.19% 3.78% 0.75% 0.77% 0.24% 2.33%