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8.2 - Changing Patterns of the Composition of India’s Import

Interactive Audio Lesson

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Introduction to India's Import Growth

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Teacher
Teacher

Let's start with the growth of India's international trade from 1950-51 to 2020-21. Can anyone guess how much India's trade was worth in 1950-51?

Student 1
Student 1

Wasn't it around Rs. 1,200 crore?

Teacher
Teacher

Exactly! And now it's over Rs. 77 lakh crore! That's an incredible growth. This growth shows the momentum of India's manufacturing sectors and our diversified markets.

Student 2
Student 2

What factors contributed to this rise?

Teacher
Teacher

Great question! The liberal policies of the government and increased demand in manufacturing sectors played significant roles.

Trade Deficit and Composition

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Teacher
Teacher

Can anyone explain what a trade deficit means?

Student 3
Student 3

Is it when imports exceed exports?

Teacher
Teacher

Exactly! In 2021-22, India's imports were significantly higher than exports. Can anyone tell me why this is happening?

Student 4
Student 4

Maybe because we import a lot of petroleum and machinery?

Teacher
Teacher

Spot on! Petroleum imports are a huge part of our economy, comprising over 31% of our imports.

Changing Composition of Imports

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Teacher
Teacher

Let's focus on what has changed in the composition of our imports. What do you think has been the trend?

Student 1
Student 1

I think we are buying less agriculture but more petroleum and manufactured goods?

Teacher
Teacher

Exactly! Agriculture and allied products have seen a decline, while crude oil and manufactured goods have increased.

Student 2
Student 2

So, why are we importing edible oil if we grow it here?

Teacher
Teacher

Another great question! Even though India is agriculturally rich, rising demand often exceeds local supply.

Introduction & Overview

Read a summary of the section's main ideas. Choose from Basic, Medium, or Detailed.

Quick Overview

India's import composition has evolved significantly, with changes in the types of goods imported and a growing trade deficit.

Standard

Over the years, India has experienced substantial growth in international trade, with the volume of imports continuously exceeding that of exports. Key reasons include manufacturing momentum, government policies, and market diversification. Notable trends include the rise in petroleum imports despite a decline in traditional agricultural exports, reflecting India's shifting economic landscape.

Detailed

Changing Patterns of the Composition of India’s Imports

India's international trade has shown remarkable changes, particularly in the nature and volume of its imports. From a modest Rs. 1,214 crore in 1950-51, India’s trade surged to Rs. 77,19,796 crore in 2020-21—illustrating immense growth over the decades. This transformation is attributed to factors such as the development of the manufacturing sector, liberal government policies, and the diversification of markets.

Key Points

  • Trade Deficit: India's imports consistently exceed exports, with a significant gap noted over the years. For instance, in 2021-22, the trade balance showed steep imports worth Rs. 45,727,775 crore compared to Rs. 31,47,021 crore exports.
  • Changing Composition: The composition of imports has witnessed shifts over time. The share of food and agricultural products has diminished while imports of mineral fuels, particularly petroleum, have surged to account for over 31% of imports in 2021-22. This indicates a shift towards industrial needs and energy requirements.
  • Decline of Traditional Commodities: Traditional items such as cashew nuts have seen a decline in exports, contrasting with the growth of other commodities like floricultural products and sugar.
  • Economic and Policy Reasons: The increase in imports of certain goods, like edible oils and capital goods, highlights the ongoing demand from the manufacturing and agricultural sectors despite India's self-sufficiency in primary agriculture.

This overview highlights the crucial changes in India's imports, reflecting the broader economic trends and implications for future policies.

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Audio Book

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Historical Context of Imports

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India faced serious food shortage during 1950s and 1960s. The major item of import at that time was foodgrain, capital goods, machinery and equipment.

Detailed Explanation

During the 1950s and 1960s, India struggled with food shortages, which led to a significant reliance on imports. The main imports included food grains to feed the population and capital goods required for industrial development. This dependency on imports reflects the challenges the country faced in achieving self-sufficiency in those early years.

Examples & Analogies

Imagine a household that is struggling to meet its basic needs due to a lack of resources. They might have to rely on outside help—like borrowing food or buying essentials from neighbors—just like India relied on imported food during its early years after independence.

Initial Import Composition

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The balance of payment was adverse as imports were more than exports in spite of all the efforts of import substitution.

Detailed Explanation

In the initial stages, India's import expenditure exceeded its earnings from exports, leading to unfavorable balance of payments. Despite efforts to substitute imports with domestic products—like producing local goods instead of relying on foreign ones—India continued to struggle with maintaining its import-export balance.

Examples & Analogies

Think of a student who spends more than they earn from their part-time job while trying to buy all their needs instead of learning to make things themselves, leading to financial imbalance. This scenario mirrors India's early import challenges.

Transition After 1970s

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After 1970s, foodgrain import was discontinued due to the success of Green Revolution, but the energy crisis of 1973 pushed petroleum prices up.

Detailed Explanation

The Green Revolution, which introduced high-yielding varieties of seeds and improved agricultural practices, helped India become self-sufficient in food grains. This significantly reduced the need for food imports. However, the energy crisis in 1973 caused a surge in oil prices globally, forcing India to begin importing petroleum to meet its energy needs.

Examples & Analogies

Imagine a farm that starts to produce enough food after years of hard work, but then suddenly faces a drought affecting its water supply. The farm’s new challenge is finding affordable water sources, similar to how India shifted from food to energy imports in response to global conditions.

Current Composition of Imports

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Manufacturing sector alone accounted for 67.8 per cent of India’s total value of export in 2021-22. Major items of India’s import include pearls, precious and semi-precious stones, gold and silver, non-metal ferrous metals.

Detailed Explanation

As of 2021-22, the manufacturing sector has become crucial for India, contributing significantly to exports. Concurrently, imports have shifted to include a variety of materials such as gemstones, metals, and petroleum. This shift reflects India's growing industrial base and increasing demand for raw materials essential for production.

Examples & Analogies

Consider a jewelry business that exports a lot of finished products but needs to import precious metals and stones to create those products. This scenario illustrates India's current trade dynamics, where imports directly support its manufacturing and export industries.

Shifts in Import Composition

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It is noticed that the import of capital goods maintained a steady decline. Import of food and allied products declined.

Detailed Explanation

Over time, the data indicates a steady decline in the import of capital goods, suggesting that India is increasingly producing these goods domestically. Similarly, a decline in food imports reflects the country's improved agricultural productivity. This illustrates the country's transition towards a manufacturing-driven economy.

Examples & Analogies

Imagine a craftsman who starts making all of their tools instead of buying them. As their skills improve, they not only reduce costs but also find better ways to create what they need, similar to India's reduction in capital goods imports as its manufacturing capabilities grew.

Definitions & Key Concepts

Learn essential terms and foundational ideas that form the basis of the topic.

Key Concepts

  • Growth of Trade: India’s trade has increased significantly, reflecting economic development.

  • Trade Deficit: The phenomenon where imports outpace exports.

  • Composition of Imports: Changes in the types of goods imported over time, crucial for understanding economic trends.

Examples & Real-Life Applications

See how the concepts apply in real-world scenarios to understand their practical implications.

Examples

  • Increased imports of mineral fuels, especially petroleum, have contributed significantly to India's overall import volume.

  • The decline of traditional agricultural exports like spices in favor of more technological goods illustrates changing market demands.

Memory Aids

Use mnemonics, acronyms, or visual cues to help remember key information more easily.

🎵 Rhymes Time

  • Imports soar, exports fall, trade deficits heed the call.

📖 Fascinating Stories

  • Once there was a large marketplace in India where vendors thrived on what they sold, but alas! The consumers kept buying so much that no one could keep up with the demand, causing a massive trade deficit!

🧠 Other Memory Gems

  • P-E-C: Petroleum, Engineering goods, Chemicals - three major imports.

🎯 Super Acronyms

D-I-V

  • Declining Imports of traditional goods
  • Increasing Imports of modern essentials
  • Vast trading balance.

Flash Cards

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Glossary of Terms

Review the Definitions for terms.

  • Term: Trade Deficit

    Definition:

    A situation where a country's imports exceed its exports.

  • Term: Manufactured Goods

    Definition:

    Products that have been processed and are ready for consumption or use.

  • Term: Liberal Policies

    Definition:

    Government strategies that promote free trade and deregulation.

  • Term: Petroleum

    Definition:

    A natural resource that is refined into fuel and other products, often a significant import for India.