Big picture
India has been a trading nation for thousands of years: its textiles, spices and gems reached distant lands. After independence, India's trade was limited by import substitution policies. Since the economic reforms of 1991, trade has grown rapidly, and India now trades with almost every country.
This chapter explains how India's trade has changed in volume, composition and direction, and describes the sea ports and airports through which it flows.
Learning goals
Describe the changing pattern and balance of India's trade.
Explain the changing composition of exports and imports.
Describe the direction of India's trade.
Describe India's major sea ports with their hinterlands.
Explain the role of airports in trade.
Core ideas
1. Changing pattern of India's trade
India's foreign trade has grown enormously since independence, particularly after liberalisation in 1991, when tariffs were reduced and exports encouraged.
Both exports and imports have grown, but imports have generally grown faster, so India usually has a negative (unfavourable) balance of trade. Major reasons: rising imports of crude petroleum, gold and precious stones, electronic goods and machinery.
Services such as software, IT-enabled services and business services have become a major source of export earnings and help offset the trade deficit in goods.
2. Changing composition of exports
Feature | Explanation |
|---|---|
Decline of agriculture and allied products | The share of traditional items such as coffee, spices, tea and pulses has declined, mainly because of international competition |
Rise of manufactured goods | Engineering goods have shown remarkable growth; gems and jewellery are a major export |
Petroleum products | Exports of refined petroleum products have increased (India imports crude oil, refines it and exports products) |
Other important exports | Chemicals and allied products, textiles and garments, pharmaceuticals, ores and minerals |
Software and services | India has emerged as a software giant; IT and business services earn large foreign exchange |
3. Changing composition of imports
Period | Feature |
|---|---|
1950s and 1960s | Mainly foodgrains, capital goods, machinery and equipment; there were food shortages |
After the Green Revolution (1970s) | Foodgrain imports declined; fertilisers and petroleum became major imports |
Present | Petroleum and petroleum products form the largest share, followed by pearls and precious stones, gold and silver, electronic goods, machinery, chemicals, coal, fertilisers and edible oils |
The rise in petroleum imports reflects rising industrialisation and a better standard of living. Imports of capital goods and machinery reflect industrial growth.
4. Direction of trade
India trades with most countries and regional blocs, including the EU, ASEAN, SAARC and others.
India's major trading partners include the USA, China, the UAE, Saudi Arabia, Hong Kong, Singapore and European countries such as Germany and the UK.
Asia and Oceania account for a growing share of India's trade, and the USA is one of India's largest export destinations, while China is one of India's largest sources of imports.
5. Sea ports as gateways of international trade
India's long coastline (about 7,517 km) has 12 major ports and about 200 minor ports. Major ports are controlled by the central government, and minor ports by state governments.
After independence, Kandla was developed to compensate for the loss of Karachi to Pakistan, and Kolkata's load was eased with Haldia.
A port's hinterland is the area it serves by supplying goods for export and receiving imports.
Ports on the west coast:
Port | Features |
|---|---|
Kandla (Deendayal Port), Gujarat | Developed after partition to serve the north-western states (Punjab, Haryana, Rajasthan, Gujarat); a tidal port, handling petroleum, fertilisers and foodgrains |
Mumbai, Maharashtra | A natural harbour and India's biggest port historically; serves Maharashtra and Gujarat |
Jawaharlal Nehru Port (Nhava Sheva), Navi Mumbai | Developed to decongest Mumbai port; a major container port |
Marmagao, Goa | At the entrance of the Zuari estuary; the main iron ore exporting port |
New Mangalore, Karnataka | Exports iron ore from Kudremukh |
Kochi, Kerala | A natural harbour at the head of the Vembanad Kayal, called the "Queen of the Arabian Sea" |
Ports on the east coast:
Port | Features |
|---|---|
Kolkata, West Bengal | A riverine port on the Hooghly, about 128 km inland; faces silting problems; serves a large hinterland in the Ganga plains and north-east |
Haldia, West Bengal | About 105 km downstream of Kolkata; developed to relieve congestion at Kolkata; handles bulk cargo |
Paradip, Odisha | A deep harbour port in the Mahanadi delta; exports iron ore |
Visakhapatnam, Andhra Pradesh | The deepest landlocked and well-protected port, carved out of solid rock; handles iron ore and petroleum |
Chennai, Tamil Nadu | One of the oldest, an artificial harbour; serves Tamil Nadu and adjoining areas |
Ennore (Kamarajar Port), Tamil Nadu | Developed about 25 km north of Chennai to relieve pressure on Chennai port |
Tuticorin (V.O. Chidambaranar), Tamil Nadu | Handles coal, salt, food grains and edible oils; serves the extreme south and trade with Sri Lanka and the Maldives |
6. Airports
Air transport carries high-value, light and perishable goods over long distances quickly, though it is expensive for bulky goods.
India's major international airports handle passengers and cargo; the Airports Authority of India manages many airports, and some are run through public–private partnerships.
A reliable approach to questions
Describe trends in volume and balance of trade, with reasons for the deficit.
Explain changes in the composition of exports and imports.
Name major trading partners and regions.
For ports, give the location, special features and hinterland of each.
Connections that matter
International trade (world) explains the basis of trade, balance of trade and types of ports.
India: transport and communication describes the transport links to ports.
Economics: liberalisation, privatisation and globalisation explains the 1991 reforms.
Common mistakes
Saying India has a trade surplus in goods. India usually runs a trade deficit, mainly because of petroleum imports.
Calling Visakhapatnam a riverine port. Kolkata is riverine; Visakhapatnam is a deep, landlocked harbour.
Saying Kandla was built to decongest Mumbai. Kandla compensated for the loss of Karachi; Jawaharlal Nehru Port decongested Mumbai.
Placing Marmagao in Karnataka. It is in Goa.
Revision checklist
I can describe trends in India's trade volume and balance.
I can explain the changing composition of exports and imports.
I can describe the direction of India's trade.
I can describe major ports on both coasts with their features.
I can explain the role of airports.