This article examines the Indian terms of trade during the period 1980-81 to 2002-03. Through the study, it is found that the general index of Net Barter Terms of Trade (NBTOT) was unfavorable to India in the early few years of the study period; however, since 1983-84, it reveals a favorable trend. Further, it is noted that the Gross Barter Terms of Trade (GBTOT) is favorable throughout the study period. The Income Terms of Trade (ITOT) points out that the capacity of the country to import is encouraging almost in the entire study period. The author points out that the mean values of NBTOT for the commodity groups like, food and food articles, beverages and tobacco, animal and vegetable oil, fats and waxes, manufactured goods classified chiefly by material have deteriorated in the post-liberalization period compared to pre-liberalization period. On the contrary, some commodity groups like crude materials except fuels; mineral fuels, lubricants, etc; chemicals and related products; machinery and transport equipment; and miscellaneous manufactured articles, have indicated an improvement since the pre-liberalization period in terms of the mean values of NBTOT. This study suggests that the Indian exports can quote higher prices in the international market only when the quality and quantity of the products improve.
International trade is the engine of economic growth. Trade consists of two components:
Exports and imports. Since there are differences among the countries in the endowment of
natural, human, and financial resources, there is a need to depend on foreign trade. Every
country has to import certain commodities where it does not have the comparative cost
disadvantage. Similarly, a country can export certain commodities where it has the
comparative cost advantage. Since self-sufficiency is highly impossible, self-reliance is
accepted as a development strategy of India. It means the country cannot simply rule out the
possibility of imports and produce every thing on its own. A country can certainly allow the
imports, provided it has the capacity to pay the import bill. India has been experiencing
chronic disequilibria since its export earnings are lower than the import payments. In order
to measure the trade performance of a particular country, we take the terms of trade as a
measurement. In commodity trade, on export side there is a need to maximize the exports of
our country in terms of quantity and value addition. To pay for its essential imports and to
minimize the dependence on foreign countries, expansion of production and exports is very essential. It is also realized that the market for goods within India may not be adequate to
absorb the entire domestic production, and hence, a search for markets elsewhere is a
necessity. However, on import side India has been in a disadvantageous position vis-a vis
advanced countries which are capable of producing and selling almost every commodity at
low prices. It implies that India could not develop any industry without protecting it from
foreign competition. |
