External trade and investment

Global trade relations

Part of the top five countries in FDI investors.(1991-2004)Rank Country Inputs. (Million USD) Additions (%)

1 Mauritius 8,898 34.49%
2 United States 4,389 17.08%
3 Japan 1,891 7.33%
4 Netherlands 1,847 7.16%
5 United Kingdom 1,692 6.56%

Until the liberalization of 1991, India has been widely and deliberately isolated from the world markets, to protect its economy and the flight to achieve self-sufficiency. Foreign trade was subject to import tariffs, export taxes and quantitative restrictions, while foreign direct investment has been restricted by the upper limit of capital, restrictions on technology transfer, export obligations and governmental approvals, these approvals are necessary for almost 60% of new foreign direct investment in the industrial sector. The restrictions ensure that foreign direct investment averaged about $ 200 million annually between 1985 and 1991, a large percentage of capital flows consisted of foreign aid, loans and deposits of non-resident Indians.

Indian exports were stagnant for the first 15 years after independence, because of the predominance of tea, jute and cotton, manufactured products, for which demand has been generally inelastic. Imports from the same period consisted mainly of machinery, equipment and raw materials, because of the nascent industrialization. Since liberalisation, the value of international trade in India has become wider and rose to Rs 63080109 crores in 2003-04 to Rs.1250 crores in 1950-51. India's major trading partners are China, the United States, the United Arab Emirates, the United Kingdom, Japan and the EU. Exports during the month of August 2006 were $ 10.3 billion by 41.14% of imports and 13.87 billion was with an increase of 32.16% over the previous year.

India is a founding member of the General Agreement on Tariffs and Trade (GATT) since 1947 and its successor, the World Trade Organization. While actively participating in the meetings of the General Council, India has played a crucial role in expressing the concerns of the developing world. For example, India has continued its opposition to the inclusion of issues such as labour and environment and other issues of non-tariff barriers in the policies of the WTO.

Balance of payments

Since independence, India's balance of payments on current account has been negative. Since liberalization in the 1990s (precipitated by a crisis in the balance of payments), in India, exports have been steadily increasing, covering 80.3% of its imports in 2002-03, compared with 66.2% in 1990 -91. Although India is still a net importer since 1996-97, its overall balance of payments (ie, including the balance of the capital account) has been positive, in large part because of increased foreign direct investment and deposits of non-resident Indians, so far Time, the overall picture is positive only occasionally, as a result of foreign aid and loans. Accordingly, in India, the foreign currency reserves stood at $ 141bn in 2005-06. Now, the reserves have been sitting at 270 billion dollars that could be used in the development of the country's infrastructure if it is used effectively.

India is a net importer: in 2005, imports were $ 89.33bn and exports $ 69.18bn.India the dependence on external aid and loans has decreased since 1991-92, and from 2002-03, it was gradually repay these debts. Lower interest rates and reduced borrowing fell India ratio of debt service to 14.1% in 2001-02, 35.3% in 1990-91.