X - Foreign Trade and Balance of Payments (1757–1947)

Summary

GENERAL

India was unquestionably one of the great trading nations of Asia during the period under review. This was perhaps to be expected from a country nearly the size of a continent and possessing a wide variety of economic resources which enabled her to generate a surplus over current consumption and increase the division of labour. But the statement needs an initial qualification. Although the Indian economy is generally considered today as being typical of that of underdeveloped countries, it is by no means easy to categorize her international trade historically as such. In terms of both the absolute volume of trade and its proportion to total national income as well as the range of commodities entering into trade flows, Indian experience does not always conform to the characteristic pattern of trade exhibited by underdeveloped countries. For one thing the dependence of the latter on foreign trade tends to be high. In some cases it is as high as 30 to 40 per cent of national income. Again, a large number of such countries rely on only one or two commodities to earn the bulk of their receipts from exports. In contrast the commodity composition of India's trade was much wider and included manufactured goods as well as primary commodities in her exports, though the preponderance of the latter during much of the nineteenth and twentieth century was both an object of concern and controversy. Furthermore, the relative share of foreign trade was of less importance quantitatively to India's national income, though India had a very large volume of trade in absolute terms.