india exports

Trading goods and services are done by most countries around the world. While some countries export products and services around the globe, others only trade within their region of the world. The country of India has a rich history of world trade. Here are some of the goods and services India exports.

India’s Trade History

India is a large country with many resources that are in demand around the world. The country’s history of trade began in ancient times when goods were shipped across the country via well-maintained roads and river routes. Trade then expanded into Europe via the Mediterranean and the Red Seas.

Spice Routes

India was one of many Asian, African, and European countries that traded spices along the Spice Routes. The routes used for trading spices were also known as the “Maritime Silk Roads,” which is the shipping routes used to send silk to other countries.

The routes linked the far east to the west via Japan, Indonesia, India, the Middle East and finally to Europe via the Mediterranean. In all, they covered a distance of 15,000 kilometers or over 9,300 miles.

In India, the spice trade went through the port of Muziris, which is in Kerala in the southwestern part of the country. Both domestic and foreign merchants sent many spices grown in the area to other countries along the Spice Routes. These spices included:

  • Cardamom
  • Cinnamon
  • Bay Leaf
  • Peppercorns
  • Curry Leaves
  • Turmeric

Spices were essential in the ancient world because they not only were used to cook with, but they were used to preserve foods and for medicinal and personal hygiene applications. Many of these spices are still shipped around the world.

Dutch West India Company

To strike back economically at Spain and Portugal, the Dutch founded the Dutch West India Company, or West India Company in 1621. It was a trading company that monopolized shipping routes to the Americas, Africa, and islands in the Atlantic Ocean.

Among the goods they traded were slaves from Africa, which were taken to ports in the West Indies and South America. While they had many ports around the world, the majority of them were in India. The company also established colonies in

  • West Indies
  • Guyana
  • Aruba
  • Curacao
  • Saint Martin

However, they lost their colonies to the French, and the company eventually folded after France invaded the Netherlands in 1794.

British East India Company

A group of merchants in Great Britain formed the British East India Company to establish trade with India and Southeast Asia. The company was also established by the British government to help break the Dutch monopoly on trade.

The East India Company primarily shipped spices, tea, ivory, and Indian carpets on their cargo ships, but they also began trading slaves to India and Southeast Asia who were primarily from East Africa. Tea from China was another important commodity for the company.

The British government’s tax on tea to the colonies, to bail out the East India company, sparked the American Revolution. When news of the Tea Act spread, civilians in Boston boarded ships owned by the East India Company and dumped their tea into the harbor. This act of rebellion became known as the Boston Tea Party and led to the Revolution.

The company ended up financing its trade illegally with opium, causing the first Opium War with China in 1839. They eventually lost political control to the British Parliament, after losing commercial control, and only then acted as a managing board for the British government in India. The company legally ended in 1873.

Indian Trade Today

Although there is an assumption that India doesn’t trade goods or services within the country or throughout the world, the assumption is false. An estimate made by the Economic Survey found that trade within the country accounted for 54% of their Gross Domestic Product.

Additionally, in 2011, India traded more goods worldwide than China, who is usually the world’s largest importer and exporter of goods. There was an increase of India’s exports in 2017, including an increase of almost 26% in September 2017.

India exports are diverse with refined oil being the top export item. Their top 10 exports account for 59.4% of the country’s total value of shipments. These 10 exports are:

  • Mineral fuels, including refined oil.
  • Gemstones and precious metals.
  • Vehicles
  • Machinery, which includes computers.
  • Pharmaceuticals
  • Organic Chemicals
  • Clothing and accessories, but not those that are knitted or crocheted.
  • Electrical machinery, including equipment.
  • Knitted and crocheted clothing and accessories.
  • Iron and steel.

Along with these goods, India also exports many services. They have a large educated, English-speaking population, which has helped them export IT services, business outsourcing services, and software personnel.

India’s Customers

The United States is one of India’s top trading partners, importing about $46 billion of Indian exports in 2016. Some of the products bought by the US include:

  • Gems and precious metals, including diamonds for $11 billion.
  • Pharmaceuticals – $7.4 billion
  • Mineral Fuels – $2.4 billion
  • Miscellaneous textiles – $2.3 billion
  • Machinery – $2.1 billion
  • Agricultural products (rice, spices, tree nuts, and essential oils) – $2.1 billion

The US also exports to India and sold them $21.7 billion in goods, which gave India a trade surplus of $24.3 billion.

Some of India’s other trading partners include:

  • United Arab Emirates
  • Hong Kong
  • China
  • United Kingdom
  • Singapore
  • Germany

India Destinations

India has 12 major and over 200 smaller shipping ports that handle about 95% of its international trade by volume and 70% of it by monetary value. Some of the ports are in:

  • Mormugoa, Goa, – This port is one of the oldest ports in west India. They export iron ore and import coking coal.
  • Kolkata – The port is 144 years old and is the third largest container port in the country.
  • Krishnapatnam – Improvements are being made to turn this minor port into a major high productivity port for large cargo ships.
  • Panambur, Mangalore – It is an all-weather port that opened in 1975.
  • Chennai – While it is the second largest of the major 12 ports in India, it is the third oldest as well. They operate 24 hours a day.

Indian Trade Deficit

Although India is one of the world’s largest stable democracies, it ranks near the bottom as far as free trade. It scored of 54.5, which gives it a rank of 130th in the world. While they are trying to develop an open market system, their history of self-reliance is holding them back.

Their reforms in the areas of business, the judiciary, national integrity, and fiscal health have helped their score improve by 1.9 points. Even as exports have increased, so has imports, mainly due to increases in crude oil imports.

To determine if a country has trade deficit, you would subtract the monetary amounts of India imports and exports. In 2017, India ran a trade deficit of nearly $14 billion US dollars. They exported $26 billion in goods but imported about $40 billion.

The deficit increased by 21% when compared to 2016. The increase in imports wasn’t necessarily due to ordering more goods, but it can be blamed on the of prices of gold and crude oil, both of which rose in 2017.

However, there were disruptions in India’s supply chain, so more goods had to be imported to keep up with demand. These imports saw increases:

  • Pearls, semi-precious and precious gemstones rose by 94%
  • Chemical imports increased by 20%
  • Consumer electronics went up by 19%

At the same time, there were decreases in the export of ready-to-wear clothing by 10%.

Consequences for Economy

When there is a trade deficit, it affects the economy of that country. For India, the deficit forced down the value of their currency, the rupee. When there are more imports than exports, rupees need to be traded for foreign currency, such as the US dollar.   

However, the deficit can be a two-edged sword for India’s economy. The devaluing of the rupee increases demands for Indian goods because they are cheaper for consumers. When the prices go down, countries usually order more goods so that Indian exports may increase.

When a country’s currency is weak, the price of domestic goods goes up, which causes inflation to rise. Rising inflation makes goods even more expensive, causing the poor to do without items they need. To control inflation, banks usually raise interest rates, which ends up slowing an economy’s growth.

Some economists see the deficit as a good thing because it can lead to an increase of exports, but others see it as bad because of its effect on the India economy. Although India had one of the fastest growing economies in the world in 2016, it suddenly ground to a stop last year.

This occurred when India’s Prime Minister Narendra Modi simultaneously banned two of the most valuable rupee notes, the 500 and 1,000 rupees, to reduce corruption and tax evasion. However, this affected 86% of the country’s cash, causing some panic and an economic slowdown.

Fortunately, the economy seems to be rebounding as the GDP grew by 6.3% during the middle of 2017 and another 7.2% during the last quarter. Economists predict the growth will continue into 2018, but the deficit may need to be reduced by increasing India exports, if possible.