MAJOR EXPORTS OF INDIA FROM 1947 TO 1990 (TRENDS AND DIRECTIONS)

-By Nishant Chaturvedi

ABSTRACT- This paper discusses the evolution of the major exports of India from 1947 to 1990 against the background of significant changes in economic, political, and social trends. The paper identifies such significant export sectors through a historical analysis of data and statistical evidence, mainly products of agriculture, textiles, and manufactured goods, accompanied by shifts in trade policies and global market dynamics that affected these trends. It revealed a slow transition from the agricultural export base over time to a diversified portfolio, influenced by government initiatives, economic liberalization, and shifts in international demand. This analysis provides insights into India’s economic development trajectory and contributes to understanding the broad implications of export strategies in emerging economies. The paper concludes with reflections on how these historical trends have shaped current Indian trade policies.

INTRODUCTION- Before Independence, Indian trade was essentially colonial and biased against the Indian economy, favoring British interests. Once independence was achieved, the trading pattern of India became suited to a developing nation’s needs. Foreign trade increased from ₹12.5 billion in 1950-51 to ₹190 billion in 1980-81 and further to ₹2,281.10 billion in 1995-96. Yet between 1951 and 1971, the trade value was only 2.5 times, and in 1950-51 India accounted for just 2.1% of the world’s trade. India’s foreign trade trend showed two major aspects: a sharp increase in imports and only minimal increases in exports. Imports have constantly increased since 1951 due to increased industrialization, free imports to encourage exports, and consistent food grains imports triggered by fluctuating crude oil prices. Exports only minimally increased in the first three five-year plans. There has been no export growth for nearly 15 years during this period. This was mainly because traditional goods dominated and production costs were high, making exports from India uncompetitive. The devaluation of the Indian Rupee in 1966 and subsequent governmental measures towards exports led to some expansion in the 1970s, which was insufficient to offset rising imports. Large exports were of jute, tea, cotton, and oilseeds. Most of these items exported to the world market earned a low price. Another fact that restrained the achievement of an export surplus was the growing consumption of commodities like sugar, meat, and vegetables at home. Protectionist policies of developed countries also restricted imports from India, making the trading scenario more complex. In summary, although India could diversify its trade, it was still hindered by the high cost of production, low price of primary commodities, and other issues of external trade barriers from attaining a balanced surplus trade.

India’s Foreign Trade Policies- India’s foreign trade policies from 1950 to 1990 reflect the overall objectives of the country in the form of self-reliance, industrialization, and economic independence. The policies developed were based on both domestic needs and changing conditions abroad, which reflected India’s need to protect its fledgling industries while maintaining control over its scarce foreign exchange resources. The period can be divided into distinct phases, each with its policy focus: starting from post-independence protectionism to gradual liberalization by the late 1980s.

1950s – 1960s – Imports Substitution and Protectionism

In the early years of post-independence, India’s foreign trade policy was organized around import substitution industrialization (ISI)- a program aimed at reducing the country’s dependence on foreign goods, especially manufactured goods, by promoting domestic production. The strategy lies in an overall vision of building an autonomous economy, thereby removing vulnerabilities created by external dependencies. To achieve this, the government introduced a set of stern regulations on foreign trade. In particular, the Foreign Trade (Development and Regulation) Act of 1947 gave the state a permit to regulate imports and exports through the use of licensing. As such, import licenses were necessary to have raw materials or capital goods imported by industry and had therefore greatly reduced the entry of foreign goods and technology. This limited access to modern industrial inputs for India and thus held the nation’s technological progress. Besides this, the government paralleled these measures by bringing high tariffs as well as quotas on imports to protect domestic industries from foreign competition. Although high tariffs were applied to finished goods, raw materials as well as capital goods entering the country paid lower tariffs that reflected the needs of the former to ensure the growth of industries. During this period, India’s exports were based mostly on traditional agricultural commodities, including tea, jute, cotton, and spices, and the role of manufactured goods was negligible in the export list since the industrial sector was still not developed much during this time.

1970s: Intensification of Protectionism and Economic Crisis

The period after the 1970s saw the continuance of self-reliance and industrialization as yardsticks for India’s economic strategy, though the global economic scenario was experiencing significant changes, particularly the oil crisis, inflation rising, and stagnation in the general growth of the economy. This trend in international economies caused India to be inward-looking about its trade policies. This involved making the government’s protectionist measures more stringent, increasing import controls, and further focusing on the development of local industries. The oil crisis in 1973 seriously affected India, where imports of petroleum skyrocketed dramatically. Energy security was highly focused by the government to look for ways of decreasing dependence on foreign oil through the development of domestic sources of energy. All of this failed, and India’s export bases remained highly unstructured for raw materials and agricultural products without diversity in manufactured goods, giving rise to a widened deficit through trade. Imports were taken heavily to fulfil industrialization without any proper attempt on its part to liberalize trade further. This was partly because of having hardly opened up the protectionism policies. Meanwhile, its dependency on capital goods imports and imports of oil further exerted such pressure on foreign exchange reserves that it led to a foreign exchange crisis. The government introduced policies related to the conservation of foreign exchange, restricting non-essential imports and emphasizing increases in export earnings for a return to stable economic situations

1980s: Limited Liberalization and Gradual Economic Reforms

The government started to look more into liberal policies, even though this change was slow and still incomplete. During the reign of Prime Minister Rajiv Gandhi from 1985 until 1989, more emphasis began to be focused on improving industrial productivity in terms of global competitiveness, thus opening up limited forms of trade liberalization for economic modernization. Export promotion focused area with policies set and followed by the government in providing manufactured goods such as clothing and garments, and more importantly, engineering products; establishment of EPZ’s attracted foreign investment, enhancing the development of export-oriented manufacturing.

In 1981, the government allowed the rupee to depreciate against the dollar to make Indian goods competitive in international markets and enhance export growth. India’s fixed exchange rate regime did not change, but more flexibility was introduced into the management of the exchange rate regime to support export growth and ease pressure on the trade balance. Import-Export Policy 1985-88 marked the first formal steps toward liberalizing the trade regime of India. It was aimed at helping in the liberalization of the export procedures, to reduce dependency on the public sector for trading, and to enhance private sector involvement in foreign trade. The government also started to institutionalize support for export-oriented industries through bodies like the Engineering Export Promotion Council (EEPC) and the Development Commissioner for Handicrafts. This was the beginning of a more export-oriented approach to economic policy. Though not radical, the 1980s were a critical turning point in India’s trade policy, paving the way for the more fundamental economic reforms of the 1990s.

1990s: The Crisis and Major Economic Reforms (Liberalization)

It was during the early 1990s that India experienced one of its worst balance of payments crises, brought about by various factors, including the rising price of oil, growing fiscal deficits, and increasing foreign debt. Additionally, the country’s foreign exchange reserves were at alarmingly low levels. This crisis forced a dramatic shift in the Indian government’s economic policies. It finally led to economic liberalization in 1991, which culminated in the devaluation of the rupee in July 1991 and symbolized the beginning of sweeping reforms meant to open up the economy.

Devaluation, along with other reforms, brought a fundamental change in India’s foreign trade policy. It focused on trade liberalization with the government taking initiatives aimed at fully integrating India with the global economy. The import licensing system, one of the first dismantled measures initiated by the government, was in place since the early 1950s. This import system-controlled imports through bureaucratic controls. This reform reduced bureaucracy and freed more parts of the goods coming into the market, increasing competition and minimizing dependence on the state. By the same time, India was reducing its duties on a wide range of products with a tendency towards free trade and further liberalization. At the same time, the 1992 Export-Import Policy was enacted to promote exports through various incentives, including duty-free importation of raw materials for export-oriented industries and more liberalized export incentives. These reforms provided a foundation for Indian integration into the world economy and transformation into a more market-oriented, outward development model.

The volume of Trade-

Volume refers to the size of imports and exports of a nation. Since different types of goods are exported and imported and different types of goods are expressed in different units, it is not possible to find the aggregate sum of all physical units. The sum of these money values constitutes the value of trade. The values of India’s foreign trade increased fast from 1950 to 1991, as can be seen from the table below-

India’s Foreign Trade 1950-1991 (in crores)

YEAR	EXPORTS	IMPORTS	B.O.T.
1950-51	606	608	-2
1960-61	642	1122	-480
1970-71	1,535	1,634	-99
1980-81	6,711	12,549	-5,838
1990-91	32,553	43,198	-10,645

Source – Macrotrends.

India had witnessed a phenomenal growth in foreign trade from 1950 to 1991, but the imports had grown faster than exports during the period. Thus, the trade deficit continued to exist throughout the period. The result of such a situation was that India could not maintain a balanced trade account; instead, it faced difficulty in financing its growing import requirements. Although the volume of trade was increasing, India’s share in world trade remained low, from 1.8% in 1950-51 to only 0.5% in 1991. The country’s relatively low level of integration into the global economy resulted primarily from the protectionist policy and a self-sufficient approach adopted by the government. Still, following the initiation of economic reforms in 1991, the country began to climb the ladder in world trade. By 2013, India’s share in export trade had reached 1.7%, while that of its share in import trade reached 2.5%. These factors liberalization of trade policies, reduction of tariffs and import barriers, and increased integration into global supply chains have mainly contributed to such improvements.

Composition of India’s Export –

Primary products were the major exports from India during 1947-1990, mainly in the form of agricultural products such as tea, rice, and spices; raw materials like cotton, jute, and minerals; and manufactured goods, which were in small numbers. The country’s industrial sector was nascent, and its exports were mainly traditional sectors like agriculture and raw materials. It began to diversify more seriously toward the end of this period, but it would only be after the reformist measures taken at the beginning of 1991 that India witnessed a better transformation toward manufactured goods and services.

In the post-independence period, India’s exports were primarily focused on agriculture-based commodities, as the country was still largely agrarian. Major agricultural exports included:

Tea- India was the world’s major producer and exporter of tea, particularly from regions such as Assam, Darjeeling, and Nilgiri. Tea was India’s biggest export commodity. The country shipped large quantities of tea to leading markets in the UK, Russia, and the Middle East.

Rice—India was a major exporter of rice, especially Basmati and non-basmati varieties, to countries in the Middle East, Southeast Asia, and Africa.

Spices—India has been known for its spice exports for decades. Spices such as cardamom, black pepper, turmeric, and cumin powder were mainly exported to Europe, the Middle East, and South Asia.

Cotton- Cotton was also another major export commodity as India was one of the world’s largest producers of cotton. The main export destinations were countries with large textile industries, including the UK, the US, China, Japan, and various European and Middle Eastern nations.

The 1980s was a transition- India laid the foundation for future economic and export growth. India, though still relatively closed with protectionist policies, realized that industrialization and opening up toward the global economy would be inevitable for prosperity in the future. Textiles, engineering goods, and pharmaceuticals, amongst others, have had growth, with domestic reforms and international trade agreements setting the ball rolling for India to become a significant global player in the decades that followed the period.

Textile and Garments – The 1980s proved to be a very successful decade for India, as its textile and garment industry turned out to be one of the success stories in the country. For years, India has been a significant cotton-producing nation, but it only began sending more cotton textiles than ever before to other countries in the 1980s-including woven fabrics and knitwear. Textile exports formed one of the earliest sectors where India came to success with international trade. MFA (Multi-Fiber Arrangement) was an international trade agreement that promoted this growth. MFA was a set of rules governing the international trade in textiles and restricted worldwide liberties to make it easy for Indian textiles to enter the United States and Europe. The rising demand for Indian cotton textiles helped that industry mushroom very fast.

Engineering Goods: India’s engineering goods exports were still in their infancy compared to textiles but started seeing modest growth in the 1980s. Its industrial base was gradually building up, and machinery, electrical equipment, and automobile components started gathering to the lists of exports. Encouragement from the government toward indigenous production of machinery and tools to stem import dependence benefited the engineering sector of India.

Thus, industrial equipment, electrical motors, and other things like machine tools entered India’s export basket. The automobile components industry was also beginning to form, especially through the bodies of Maruti Suzuki and Telco (Tata Engineering). Although engineering exports from India were still scarce in both volume and value, in the 1980s it would become the base of one of the largest segments of India’s exports.

Chemicals and Pharmaceuticals: The chemical and pharmaceutical sectors of India sprouted in leaps and bounds, giving the country a launchpad to become a generics leader in the world. Indian pharmaceutical houses such as Dr. Reddy’s, Cipla, and Ranbaxy gained fame through the development of inexpensive yet quality generic drugs. It was a period during which India became the “pharmacy of the world.” Intellectual property laws also became stringent to ensure the production of the generic version of patented drugs. Simultaneously, the chemical industry grew, and fertilizer, pesticide, and specialty chemicals exports gained pace.

India’s Exports in Pre-Economic Reform Period

(Rs. Billion)

Year	Total Exports	Annual Growth Rate(%)
1974-75	33.29	31.92
1975-76	40.36	21.25
1976-77	51.43	27.41
1977-78	54.08	5.16
1978-79	57.26	5.88
1979-80	64.18	12.09
1980-81	67.11	4.55
1981-82	78.06	16.32
1982-83	88.03	12.78
1983-84	97.71	10.99
1984-85	117.44	20.19
1985-86	108.95	-7.23
1986-87	124.52	14.30
1987-88	156.74	25.87
1988-89	202.32	29.08
1989-90	276.58	36.71
1990-91	325.58	17.71

Source – Handbook of statistics on Indian Economy, RBI, and https://www.researchgate.net/publication/345441012_Trends_of_India%27s_Foreign_Trade_in_Pre_and_Post_Reform_Era

There were various policy measures introduced from time to time to enhance the value of exports. In 1970-71, India’s exports stood at a low level of Rs. 15.35 billion which later on became Rs. 325.58 in 1990-91. During the 1950s the export growth rate was 3.6 percent per annum. Due to different export promotion measures adopted in the 1970s, the annual growth rate of export was 4.75% in 1971-72, 22.59% in 1972-73, 27.99% in 1973-74, and 31.92% in 1974-75. It is also observed that this growth rate recorded many variations and in the year 1985-86 it was maintained with negative values i.e. -7.23%. Thereafter it became highest at 36.71% in 1989-90 during the pre-referential period under study. In 1990-91, the annual growth rate of exports was 17.71%. The reasons for the wide fluctuation in the growth rate of exports during pre-reform periods may be

India’s major export items were agriculture and in the international market, the price of primary goods remained low due to the inelastic demand of the developed countries.
Various export promotions measure like tax and other incentives were introduced were not suitable to boost India’s exports.

Trends and Direction of Trade –

Percentage of GDP in Export.

Year	% of GDP
1960	4.46%
1961	4.30%
1962	4.17%
1963	4.28%
1964	3.73%
1965	3.31%
1966	4.14%
1967	4.03%
1968	4.04%
1969	3.71%
1970	3.78%
1971	3.67%
1972	4.03%
1973	4.21%
1974	4.83%
1975	5.65%
1976	6.69%
1977	6.38%
1978	6.31%
1979	6.75%
1980	6.14%
1981	5.94%
1982	5.98%
1983	5.84%
1984	6.28%
1985	5.25%
1986	5.20%
1987	5.60%
1988	6.04%
1989	7.02%
1990	7.05%
1991	8.49%

Source – Macrotrends, https://www.macrotrends.net/global-metrics/countries/IND/india/exports

General Trend: There is a clear escalation in the export-to-GDP ratio from 1960 to 1991. This could be pointing to the increase in international trade in the country’s economy from 1960 through 1991.

Initial Decline (1960-1965). The initial period, 1960-1965, witnessed a slow pace of decline in the percentage of exports as their contribution to GDP. For example, exports comprised 4.46% of GDP in the year 1960 while the share declined to 3.31% in 1965. In fact, several reasons including domestic economic changes or international trading conditions during the period of 1960-1965 can be seen as responsible for that.

Recovery and Growth (1966–1973): Following 1965, there was a recovery and subsequent growth in the share of exports. The share was to rise to 4.21% by 1973, an indication of increased orientation towards international markets. This may, however, be a result of either liberalization of trade enhancements in production capacity or international demand growth.

The steep increase in the late 1970s and early 1980s: On a closer analysis, the period between 1975 and 1985 shows a more marked increase so the exports had grown from 5.65 percent in 1975 to 6.28 percent by 1984. It could be the effect of economic liberalization or new technologies for transport and communication and changes in global market structure and the growth of emerging economies.

Late 1980s to 1991: The peak is experienced in the late 1980s when the percentage of exports to GDP peaks at 7.02% in 1989 and then moves up slightly to 8.49% in 1991. This may reflect a general upward drift of increased globalization; countries are more linked due to international trade agreements, multinational companies, and international supply chains.

Direction of Trade –

The direction of trade refers to the pattern of flow of a country’s trade that identifies with countries with whom it trades. It draws attention to both the destination to which a country’s exports are shipped out and the source from which it derives goods. In the first few decades since India’s independence, specifically in 1950-51, its trade was narrowly canvassed and was mainly concentrated only on just a couple of the world’s regions. During this period, trade relations between India and the USSR (Soviet Union) and other Eastern European countries were almost negligible. These regions did not form any considerable imports or exports for India during that time.

The situation changed completely by 1990-91 when about 25 percent of India’s foreign trade was with the Soviet Union and other Eastern European nations. This trend represented rising economic and political relations between India and the Eastern Bloc during the Cold War. However, above all, this was the moment when the Soviet Union became an important trading partner, where India received critical imports like oil, defense equipment, and industrial technology while delivering raw materials, agricultural products, and manufactured goods. The geopolitical environment of the day, with the Cold War and India’s non-aligned policies, played a pivotal role in the establishment of these trade relations.

By the early 1990s, India also wanted to enhance its economic ties with developed countries such as the United States and Western Europe. The greater liberalization, economic reforms, and globalization helped further accelerate this takeoff in the trade with these regions. Liberalization of the economy, more so after the economic crisis of 1991, indeed allowed for deeper penetration into world markets, stronger ties not only with developed countries but also with international financial institutions. However, during this period, India had very little or no trade at all with most developing countries, especially in Africa, Asia, and Latin America. This, of course, was a very limited trade with the rest of the developing world by India due to earlier emphasis on the domestic industrialization process and a bias towards trading with developed countries or political allies rather than merging greater interests with the rest of the emerging economies.

Conclusion – Export was a very different landscape in India from 1947 to 1990, driven by domestic policies, global economic changes, and geopolitical importance. The first few years of independence found Indian exports consisting mainly of agricultural products, raw materials, and low-level manufactured goods as part of the self-reliance and protectionist policies. As such, export diversification was relatively low and trade depended more on traditional commodities such as textiles, tea, and raw materials.

But from the 1970s and 1980s, Indian trade started shifting. India’s trade with the Soviet Union and Eastern Europe grew significantly and accounted for some 25% of India’s foreign trade by the early 1990s. At the same time, it also increased its trade with the developed world- the US and Western Europe- as political as well as economic conditions in India and abroad started changing. However, trade with other developing countries remained low till the beginning of 1990 when economic reforms opened up entirely new areas for India.

References-