INDIA’S TRADE POLICY

[A-] | [A+]Objectives of India’s trade policy

Trade policy of a country refers to the set of policies which govern the external sector of its economy. As India is a developing country trade policy is one of the many economic instruments used to suit the requirements of economic growth. On the one hand, India seeks to promote export, on the other hand see the level of imports to the level of foreign exchange available to the government. For a developing country such as India the basic problem is the domestic non-availability of certain crucial inputs like industrial raw minerals, machinery and technology. These can be produced through imports. Though imports can be financed through foreign aid in the short run, imports must be financed by additional exports in the long run. The basic objective of India’s trade policy revolves round the instruments and techniques of export promotion and import management.

Present Objectives of India’s export policy

1. To earn adequate foreign exchange to finance the required volume of imports.

2. To effect a change in the directional pattern to reduce development on a single

country/limited number of countries.

3. To supplement domestic demand for increasing employment opportunities.

4. To raise unit value realization where inter se competition is severe.

5. To impose minimum price regulation where inter se competition is severe.

6. To impose control when domestic availability is less adequate.

Importance of export

In the context of development planning the importance of exports was first recognized in India during the middle of Second Plan when contiguous foreign reserves built up during Second World War faced a virtual exhaustion. The Second Plan placed great emphasis on the development of capital intensive industries. This resulted in large volume of imports which resulted in severe balance of payments crisis in the absence of a corresponding increase in exports.