Policy Brief Series Issue 1, Aug 2011
India’s Trade Recovery after the Global Financial Crisis: Good Luck or Good Policies? Sasidaran Gopalan and Ramkishen S. Rajan1
Key Points • The Indian economy has been growing rapidly over the last decade along with surging external trade. • While the global recovery has been uneven and tepid, India’s exports have recovered from the global slowdown and the government has set an ambitious export target of US$400 billion by 2014. • Policy makers in India are actively trying to enhance the country’s export competitiveness through a judicious use of bilateral free trade agreements and tapping the dynamism of India’s services sector. • However, far greater efforts are needed to minimise the transaction costs and procedural complexities, a point not lost on the government which created a task force in October 2009 to identify ways to reduce export transaction costs.
Introduction The Indian economy has been growing very rapidly over the last decade, expanding at an annual average of 7.2 per cent between 2000 and 2009. Over this period, the economy has also become much more outward-oriented, both in terms of cross-border capital flows as well as international trade flows. The merchandise trade-to-GDP ratio doubled from about 21 per cent in 2000 to 42 per cent in 2008. By way of comparison, the same ratio was just 13 per cent in the pre-reform period in 1990 (Figure 1). Indeed, India has experienced an international trade renaissance in the last few years. India's merchandise exports (including re-exports) more than doubled from about US$95 billion in fiscal year April 2005-March 2006 to
Ramkishen Rajan is currently a Visiting Professor at the Lee Kuan Yew School of Public Policy, National University of Singapore and Professor of International Economic Policy and Public Policy, George Mason University, USA. E-mail: rrajan1@gmu.edu. Sasidaran Gopalan is a Research Scholar at the School of Public Policy, George Mason University, USA. E-mail: sasi.daran@gmail.com. All errors are our own. 1