Major Trading Partners of India (Economics)

ASSIGNMENT
Make a presentation of the major trading partners of India in the last 15 years. Specify the major changes that have taken place in the Last five years.

Introduction

India, one of the so-called BRIC economies, is one of the major emerging national economies and an important player in the global economic landscape. Its trade policies, government reforms and inherent economic strengths have made it one of the most sought-after destinations for foreign investments in the world. Also, technological and infrastructural developments being carried out throughout the country will help the trade and economic sector in the years to come.

Trade is a basic economic concept that involves the buying and selling of goods and services with compensation paid by a buyer to a seller, or the exchange of goods or services between parties. Trade can take place between countries or within a country between producers and consumers.

India’s key exports are petroleum products, followed by precious stones, and drug formulations. India’s key imports include crude oil, electronic goods and machinery, and gold and silver. India exports mostly to Asia, Europe and North America, whereas imports from US and Asia have surged in recent years.

The government keeps a close eye on India’s imports and exports to understand the country’s trade patterns and to identify opportunities.

Who is a Trading Partner?

Trade involves buying and selling of products, commodities or services. It involves a buyer and a seller. A Trading partner is each one of the two companies / countries which are involved in a business relationship with one another, carrying out trade between them.

A trading partner agreement is an agreement drawn up by two parties that have agreed to trade certain items or information. The trading partner agreement lays out the responsibilities of each party and to help prevent disputes on agreed-upon terms.

The agreement outlines the terms of the trade or trading process, including responsibilities, who’s involved, how goods or information will be delivered and received, and duties or fees.

Countries trade with each other when, so that they can export products and services that is easier to produce within the country, and import those products/services for which there is a scarcity within the country.

India’s Major Trading Partners

Along with improving export competitiveness, it is also important to improve information base regarding trade policy regime of India’s main trading partners and to identify areas which prevents market access of Indian goods and services.

According to the ministry of commerce, the fifteen largest trading partners of India represent 60% of the total trade by India.

These include US, China, United Arab Emirates, Hong Kong, Singapore, United Kingdom, Bangladesh, Germany, Netherlands, Nepal, Belgium, Vietnam, Malaysia, Italy, Saudi Arabia. All these trade partners of India import and export to India in compliance with the trading partner agreements.

In recent years, India has witnessed increase in imports from Asian trade partners, especially from China, for electrical and electronic equipment. India also imports from US, Europe and Arab countries.

India exports mostly to Asia, followed by Europe, North America, Africa and Latin America.

In recent years, India’s trade with the United States has improved a lot, and the US is now India’s top trading partner in 2019-20. This indicates increasing economic ties between the two countries. In 2018-19, the USA surpassed China to become India’s top trading partner. The USA is one of the few countries with which India has a trade surplus. Trade with China has dipped in the last few months due to the increased norder tensions between India and China.

There is a huge potential to boost bilateral trade between India and US on account of increasing anti-China sentiment in both the nations – US as well as India.

What India exports most

The top exports of India are refined petroleum, jewellery, diamonds, gems and precious metals, vehicles and transport equipment, pharmaceuticals, packaged medicaments, cotton, readymade garments, and rice.

Engineering goods, gems and jewellery, and ready-made garments (textiles) are the top sectors contributing most to India’s export, and also provides high employment.

India leads the way when it comes to rice exports, and is also the third-largest sugar exporter.

When it comes to export of rice, India has an advantage because Indian rice happens to be cheaper compared to the rice exported from other competitors. There is a great demand for Indian basmati rice in gulf countries such as Iran.

In recent years, there has been demand for non-basmati rice from Africa as well as prices of Thai rice have skyrocketed. So, there is going to be good demand for non-basmati rice in the coming months from Africa.

The gems and jewellery sector plays a significant role in the Indian economy, contributing around 7 per cent to country’s GDP and 15 per cent to India’s total merchandise export, and employs several million people. It is one of the fastest growing sectors, it is extremely export oriented and labour intensive. Most Indian diamond mines were depleted several decades ago and the country is no longer considered a source for rough diamonds. India is no longer a source for rough diamonds but India is the leading exporter for polished diamonds.

India is a major exporter of refined Petroleum, and also exports aluminum to the United States and the United Arab Emirates.

Bulk of India’s exports of aluminium products are to freight friendly destinations in US and Europe. Aluminium billets, which are majorly used in building & construction as well as the transportation industry is one of the most sought-after products in foreign countries.

What India imports most

India’s top imports are crude oil, electronic goods and machinery, gold and silver, electrical machinery and equipment, electronic equipment including computers, iron & steel, organic and inorganic chemicals.

India’s economy has been growing at a faster rate, compared to the rest of the world. This has resulted in a rising demand for electrical and electronic equipment, mineral fuels, mineral oils and products for use in India’s domestic manufacturing market.

India’s top commodity imports include products like Crude Petroleum, Gold, Raw diamonds, palm oil, and copper. Besides these, India also imports several electronics and industrial products such as Telephones, Semiconductors, Vehicle parts, cyclic Hydrocarbons and Special Purpose Ships.

Changes in the last 5 years

India is the world’s largest independent democratic country, the seventh-largest country in the world, with a population of 130 crores.

India is among the fastest growing economies in the world and is currently the 18th largest export economy in the world.

The growth however has created a negative trade balance that has widened steadily in the last fifteen years`. In the fiscal year (FY) 2018-19, India’s exports were US$330 billion, whereas India’s total imports amounted to US$514 billion.

As per the 2019 trade figures, the United States happens to be one of India’s top trading partners, after having overtaken China. India exported $ 54.2 billion of total merchandise to the US, which is about 16.8% of India’s total exports.

The most recent exports are led by Refined Petroleum, followed by Diamonds, whereas the most recent imports are led by Crude Petroleum, followed by Gold.

India is a leading exporter of rice in the world; India’s rice production has increased almost three-fold over the last 50 years. Iran recently lifted the ban on the import of basmati rice from India and this could be a significant development for India as Iran is the world’s largest importer of aromatic rice.

India is now the largest producer of milk in the world and now produces more milk compared to all the European Union countries combined.

Conclusion

The gap between India’s export and import has been growing bigger over the years. It crossed the $100 billion mark in 2008-09 and has remained above that since, clocking $184 billion in 2018-19.

Higher the negative trade balance, higher the current account deficit (CAD) and higher the drag on foreign exchange reserve, which has been a cause of concern for the government.

Experts suggest that India should adopt an export-oriented approach and specialise in industries with higher export potential. It should improve trade related infrastructures like ports, logistics and single-window clearing system. India should also skill its labour force which inturn will lead to export efficiency. The US-China trade war also presents a big opportunity for India to boost its exports significantly to the US and to other markets. However, in order to do that, India’s products will have to become more competitive.

 

Bibliography

India’s Trading Health Analysed: Imports & Exports Revealed – 2020 Guide
https://commodity.com/india/

On World Milk Day, a look at how India became the largest producer and why it continues to be so
https://www.financialexpress.com/economy/on-world-milk-day-a-look-at-how-india-became-the-largest-producer-and-why-it-continues-to-be-so/695991/

India’s Export and Import Trends 2018-19
https://www.india-briefing.com/news/indias-export-import-trends-2018-19-18958.html/

Decoding Slowdown: India’s export needs a paradigm shift
https://www.businesstoday.in/top-story/decoding-slowdown-india-export-needs-a-paradigm-shift/story/378486.html