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Saturday, December 25, 2010

How Foreign Trade Affects the Indian Markets?

Foreign trade affects the domestic trade and markets of a country and India is not an exception in this scenario. India is a part of the globalization and any effect, positive or negative, on the global trade is bound to affect the Indian markets. The global economic downturn and the recent Dubai crisis are two examples to understand this fact.

India, like other countries participating in globalization, has been exporting and importing products and services to and from other countries. The following discussion highlights the effects that foreign trade has on the Indian markets.

It was until 1991 that India followed a socialist-democratic approach which kept it uncommitted to the foreign countries. The Swadeshi ideology enforced public ownerships and an approach of ‘India First’. In other words, self-sufficiency was the motive advocated by the governments that ruled the country till 1990s.

The India’s expedition towards economic liberalization began in 1991 and it opened the door for foreign trade and foreign investments. Within 10 years or so, India showed the potential of being a contender as the world’s fastest growing economy. In fact, the country secured its position as the second fastest growing economy in 2008.

The Indian markets have started entertaining increased number of foreign consumers, along with the domestic consumers. At least five important changes have been introduced in the Indian markets by this changed scenario:
  • Rise in technological entrepreneurships.
  • Growth of small and medium sized enterprises.
  • Recognition of quality management as an important measure of manufacturing goods.
  • Growth of rural areas as the participants in the Indian markets.
  • Privatization of financial and lending institutions in the country.

The entry of the foreigners into the Indian markets was initially criticized but the scene is not the same anymore. The Indian Foreign Trade Policy of 2009-2014 has added 26 new markets to its aim of achieving the export target of US$ 200 billion and export growth target of 15 percent for the first two years. Other aims of the policy are to double India’s export of goods and services by 2014 and to double India’s share in global merchandise trade by 2020. The upcoming decade will play a significant role in fortifying the country’s trading capabilities.

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