EXPORT GROWTH IN INDIA

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Introduction
India's exports have grown much faster than GDP over the past few decades. For
example, its exports have grown over 11% per annum while growth in GDP is about 5%
during 1970-98 periods. Exports have grown even faster since 1945-95. Several factors
appear to have contributed to this phenomenon including foreign direct investment (FDI)
which has been rising consistently especially from the early 1990s.


II The Opening Up of the Indian Economy and the Magnitude of FDI

(a) Foreign Investment Policy
The Industrial Policy resolution of 1948 and subsequent resolutions mark the beginning
of the import-substitution (IS) era in India. Although these resolutions recognized the
importance of foreign capital and technology in industrialization, the government evolved
a complex legal and institutional control under the Foreign Exchange Restriction Act
(FERA)5 and Monopolies and Restrictive Trade Practice (MRTP) Act6 to ensure a
marginal and highly circumscribed role of FDI in the economy.



III. India's Export Performance
Two notable developments have taken place in India's export front since 1970s. First, as
stated earlier its exports have grown much faster than GDP. Second, there has been a
substantial change in India's export mix. Several factors appear to have contributed to
these developments, namely the real depreciation of exchange rate, liberalization in
investment policy especially from the early 1980s and the provision of export subsidies to
reduce the anti-export bias created by the IS policy. Export subsidies took in may formduty
draw back, subsidized credit and direct subsidies- which help reduced the bias
against exports.11 Whenever the real devaluation was maintained, growth in exports
continued.