The impact of liberalization policies and opening up of the Indian market on the Indian economy was a debatable issue in India for a long time. Some of the political parties were staunchly against it as the opinion was that it could damage the economy of India and adversely affect the Indian people. In the real sense, the impact of liberalization was felt in India only after 1990. This paper finds out whether there have been any significant changes in foreign trade i.e., export and import after liberalization. The paper is divided into three parts. The first part of the paper deals with the path traced by foreign trade in India, which is basically a literature survey. The second part consists of a comparison between the exports and imports of the pre- and post-liberalization periods, using the time-series analysis. The third part consists of the conclusion and the scope for further studies.
The above statement underlines the necessity of trade for any country, especially for a
country like India, which gained its independence less than 60 years ago. A key driver in
the external sector of any economy is the level of exports, because it directly impacts the
domestic economic performance. Side by side, one should also look into the level of imports
as imports and exports together constitute the trade balance of a country, and ideally, a
country should not have a highly skewed trade balance. One should look at India’s
performance in the last two decades, which shows that the country has progressed a lot,
especially in the last decade. Almost all the sectors have witnessed considerable growth.
The exports and imports in particular have witnessed phenomenal growth from 1990.
The scenario was not the same earlier. The following section gives a brief overview of
India’s foreign trade from Independence till the present day.
Before Independenence, India was a British colony, and so, the foreign trade basket
consisted mostly of food stuffs and raw materials for export and manufactured goods for
imports. Most of the trade was done with Britain. The absence of independence led to the
decay of the Indian handicrafts and did not permit industrialization to take place.
However, with Independence, the pattern of trade needed to be changed. The most
important things for an economy in such a case should be imported.