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Question
Write a short note on change in volume and direction of India's foreign trade after Independence.
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Solution
India’s foreign trade was largely determined by the strategic needs of the British colonial powers prior to its independence in 1947 Like other colonies, India too was a supplier of raw materials and agricultural commodities to Britain and other industrial countries and it used to import the manufactured goods from Britain.
The dependence of colonial India on Britain for manufactured goods hindered the process of industrialization and obliterated the indigenous handicraft and cottage industries.
As a part of the British strategy, India had to export more than its imports prior to World War II, so as to meet the unilateral transfer of payments to Britain by way of the salaries and pensions of the British officers, both military and civil, dividends on British capital invested in India, and interest on sterling loans.
This helped India to achieve a favourable trade balance. In April 1946, India was able to build a huge sterling balance of Rs. 17.33 billion, even after paying of the sterling debt. However, the share of raw materials in India’s exports declined from 45 per cent in 1938-39 to 31 per cent in 1947-48 whereas the share of manufactured goods increased from 30 per cent in 1938-39 to 49 per cent in 1947-48.
It was only after independence that India’s trade patterns began to change in view of its developmental needs. India, as a newly independent country, had to import equipment and machinery that could not be manufactured domestically, in order to create new production capacity and build infrastructure, known as developmental imports.
It also had to import intermediate goods and raw material so as to make full use of its production capacity, known as maintenance imports.
Moreover, as a newly developing country, it had to import consumer goods such as food grains that were in short supply domestically, in order to curb inflationary pressures. Such heavy dependence on imports adversely influences a country’s balance of trade. It necessitates the need to expand exports to finance its imports.
India’s foreign trade was largely determined by the strategic needs of the British colonial powers prior to its independence in 1947 Like other colonies, India too was a supplier of raw materials and agricultural commodities to Britain and other industrial countries and it used to import the manufactured goods from Britain.
The dependence of colonial India on Britain for manufactured goods hindered the process of industrialization and obliterated the indigenous handicraft and cottage industries.
As a part of the British strategy, India had to export more than its imports prior to World War II, so as to meet the unilateral transfer of payments to Britain by way of the salaries and pensions of the British officers, both military and civil, dividends on British capital invested in India, and interest on sterling loans.
This helped India to achieve a favourable trade balance. In April 1946, India was able to build a huge sterling balance of Rs. 17.33 billion, even after paying of the sterling debt. However, the share of raw materials in India’s exports declined from 45 per cent in 1938-39 to 31 per cent in 1947-48 whereas the share of manufactured goods increased from 30 per cent in 1938-39 to 49 per cent in 1947-48.
It was only after independence that India’s trade patterns began to change in view of its developmental needs. India, as a newly independent country, had to import equipment and machinery that could not be manufactured domestically, in order to create new production capacity and build infrastructure, known as developmental imports.
It also had to import intermediate goods and raw material so as to make full use of its production capacity, known as maintenance imports.
Moreover, as a newly developing country, it had to import consumer goods such as food grains that were in short supply domestically, in order to curb inflationary pressures. Such heavy dependence on imports adversely influences a country’s balance of trade. It necessitates the need to expand exports to finance its imports.
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