(a) Briefly explain the growth and structure of India's foreign trade in the post-liberalization period. (20 marks) (b)…

Since 1991, India’s foreign trade has moved from a protected, import-substitution system to an export-oriented, globally integrated one. The causal chain is clear: tariff cuts, de-licensing, trade agreements and institutional support lowered transaction costs, exposed domestic firms to competition, and encouraged firms to scale for global markets. Export promotion councils, EXIM Bank credit and trade agreements reinforced this by reducing market-access and financing constraints. This raised the trade-GDP ratio from about 20% in the early 1990s to around 40% by the 2020s, while making India more vulnerable to global cycles.

Growth and structure Merchandise exports rose from roughly $36 billion in 1990-91 to over $380 billion in 2022-23, and services exports from about $17 billion to over $330 billion. The growth was not uniform. Liberalisation first boosted primary and basic manufactures, but over time the composition shifted: primary products’ share declined, while engineering goods, chemicals and chemical products, petroleum products, textiles and apparel, gems and jewellery, pharmaceuticals and automobiles gained weight. Services became the distinctive structural change. IT and ITeS, travel and transport, and financial services turned India into a major services exporter, reducing the relative dominance of merchandise and improving the quality of export growth. Regionally, trade diversified across ASEAN, the EU, the US and Africa, reflecting supply-chain reorientation and demand for Indian goods and services. The result is a larger, more complex trade structure, but also a persistent merchandise deficit because imports of crude oil, capital goods and electronics remain high.

SEZs The SEZ Act, 2005 created duty-free enclaves with single-window clearance, infrastructure support and fiscal incentives. The mechanism is simple: by reducing customs friction and improving logistics, SEZs lower the cost of exporting and attract FDI. In 2022-23, SEZ exports were about ₹12.62 lakh crore, with merchandise exports around 68% and services around 32%; this was close to one-fifth of India’s total exports and about a quarter of merchandise exports. SEZs have generated direct employment for over a million workers and attracted FDI in electronics, pharmaceuticals, automobiles and IT-enabled services. Yet their contribution is uneven. Many SEZs remain underutilised, and export performance varies by sector. Land acquisition controversies, revenue forgone, weak backward linkages and limited technology spillovers have constrained their impact. Most operational SEZs remain concentrated in Gujarat, Maharashtra, Tamil Nadu and Karnataka, limiting regional diffusion. Compared with China’s SEZs, Indian SEZs have not produced the same scale of global manufacturing integration, partly because of higher logistics costs, labour rigidity and compliance burdens.

FTP 2023 The Foreign Trade Policy 2023 replaces the earlier policy and seeks to make exports more competitive, diversified and future-oriented. It liberalises SCOMET exports by easing licence requirements, while retaining controls on sensitive dual-use items; facilitates e-commerce exports by simplifying procedures for e-commerce operators; and promotes Districts as Export Hubs to localise export potential. It streamlines export obligation norms, reducing compliance costs for duty-free inputs. Structurally, it replaces ad hoc incentive schemes with RoDTEP, focuses on emerging sectors such as green hydrogen, drones and medical devices, and integrates with PLI schemes to build domestic manufacturing capacity for export. The policy’s logic is that easier compliance, sector-specific promotion and manufacturing support will raise export volumes and improve India’s position in global value chains.

In sum, post-liberalisation trade growth has been real but uneven; SEZs have helped but remain limited; and FTP 2023 must deliver implementation, logistics and manufacturing depth if trade-led growth is to be sustained. The verdict is that liberalisation expanded India’s global footprint, but SEZs have not yet become the manufacturing engine expected; FTP 2023 can succeed only if implementation, logistics and manufacturing depth are strengthened.