Trade policy reforms constitute the core of economic reforms in India. This paper analyzes India's external sector while highlighting the positive impact of India's trade policy reforms. The trends in India's foreign trade, changes in the composition and direction of India's exports and imports have been examined in detail in the paper. The study shows that there has been a consistent increase in India's exports and imports and degree of openness to trade since 1991. Further, diversification of the export and import basket and markets have reduced the vulnerability of the economy to external shocks. India's commitments to the WTO have also helped India to compete in world markets and strengthen its external sector.

Economic growth is linked with rapid export growth. In fact, all fast-growing economies of the developing world are export success stories. In an open economy framework, the strategy for development is generally focused on export-led growth through optimal utilization of the country's comparative advantage vis-a-vis the rest of the world. Export promotion has been and continues to be a major thrust of India's trade policy. However, India never subscribed to the policy of export-led growth; rather, it postulated a strategy of growth-led exports. Accordingly, export policies were aimed at creating an enabling environment by eliminating redundant procedures, increasing transparency and moving away from quantitative restrictions. These were supposed to improve the competitiveness of Indian industry and reduce the anti-export bias.

In fact, the new Foreign Trade Policy of the Government announced in August 2004 has the objective of increasing India's share in world exports to 2% by 2009. This can be achievable as the compound average growth rate of exports increased from 6.74% during the decade 1980-81 to 1989-90 to 9.89% during the decade 1990-91 to 1999-2000. In fact, India needs to achieve 11.9% Compound Annual Growth Rate (CAGR) for the exports from 2002-2007 to reach 1% of world exports. The Exim Policy of India is crucial to not only achieving this objective but also to make India's exports more competitive as well as profitable.

Exports, imports, degree, openness, trade, import basket, markets, vulnerability, economy, external shocks, India's commitments, growth rate, Compound Annual Growth Rate (CAGR), quantitative restrictions, fast-growing economies, trade policy.