Composition of India's Foreign Trade

Introduction: Composition of India's Foreign Trade

Composition of foreign trade refers to quantities of import and export of items of a nation. This helps to determine the economic structure and development of a country. It has been traditionally observed that developing nations export raw materials, agricultural products, and intermediate commodities while developed nations export finished goods, equipment, and machinery. India’s foreign trade policy is aimed at boosting the economic growth of the country.

India is at a critical juncture of progress where it must increase exports to remain stable and grow its economic strength. The country is trying hard in this domain, but it takes time to rise as a power globally. India is concentrating on its core strengths, such as services to rise to a good level in the global ex-im market.

Let us have a detailed look at the composition of India’s foreign trade below.

Composition of India’s Imports

The top eight import items of India during April–February of FY22 were:

  • Petroleum crude & products (25.7 percent of total imports)

  • Electronic goods (11.8 percent)

  • Gold (8.2 percent)

  • Electrical & non-electrical equipment (6.6 per cent)

  • Pearls, semi-precious & precious stones (5 percent)

  • Inorganic & organic chemicals (5 percent)

  • Coal, coke, etc. (4.9 percent)

  • Plastic materials, artificial resins, etc. (3.3 percent)

In FY22, these main eight categories of import items accounted for 70.6 percent of overall imports.

The composition of India’s imports is classified into three categories as follows:

  • Raw materials

  • Capital goods, and

  • Consumer products.

Raw Materials

Petroleum oil, edible oil, lubricants, iron and steel, non-ferrous metals, fertilizers, precious stones, pearls, and other commodities are contained in this category. The percentage of total imports of these commodities increased significantly from 47 percent in 1960–61 to nearly 80 percent in 1980–81.

Currently, there have been disruptions in supply due to Russia’s invasion of Ukraine, which has brought oil prices to record highs. As India imports 80 percent of Russia’s oil, the current circumstance will impact the trade deficit directly.

Petroleum imports of India have increased from \$ 13.1 billion in January to \$ 15.3 billion on February 22, 2022. Due to a rise in international oil prices, higher mobility, and an increase in domestic and foreign oil consumption, petroleum imports skyrocketed significantly from \$ 72.4 billion in FY21 to \$ 141.7 billion in FY22.

Capital Goods

This category contains non-electrical and electrical machinery, locomotives, metals, other transport equipment, etc. These items help in the industrial development of a country.

Capital goods imports constituted 32% of overall imports in 1960–61, amounting to around INR 356 crore which decreased gradually and reached the mark of 21 percent in 1992–93.

Consumer Products

This category is made up of electrical items, medications, food grains, paper, etc. India used to import enormous amounts of food grains until its third five-year plan. Presently, India is self-reliant in food production.

Composition of India’s Exports

The top eight export items in the April–February FY22 period were:

  • Engineering goods (26.9 percent of total exports)

  • Petroleum products (14.8 percent)

  • Gems & Jewelry (9.4 percent)

  • Organic & inorganic chemicals (7.1 percent)

  • Drugs & pharmaceuticals (5.9 percent)

  • Textiles (3.8 percent)

  • Electronic goods (3.7 percent)

  • Cotton yarn/fabrics/made-ups, handloom products, etc. (3.7 percent).

These eight goods made up about 75 percent of overall exports in FY22.

India’s export composition can be divided into two categories:

  • Traditional Product Exports

  • Non-traditional Product Exports

Traditional Products

Traditional items include the export of tea, coffee, jute goods, animal skin, iron ore, cotton, minerals, fish and fish products, etc. These products accounted for nearly 80 percent of our overall exports at the outsets of the planning era. However, non-traditional items’ contribution is increasing more rapidly since then.

Non-Traditional Products

Engineering goods, chemicals, sugar, electrical goods, iron and steel, gems and jewelry, and leather goods, fall under non-traditional items that are exported by India.

Engineering goods and petroleum products are two of the biggest components of India’s total exports.

Exports of engineering goods increased to \$ 101 billion in FY22, which is a 49.8% increase YOY. Also, petroleum exports have gone up from \$ 22.2 billion in FY21 to \$ 55.5 billion in FY22.

Direction of Foreign Trade in India

India is a rising player in the world in terms of foreign trade.

  • India rectified its stance on foreign trade with some new policies in 1991 under the name of “New Economic Reforms.” It focused on liberalization, openness, and export sponsorship. It has helped India see an export revolution in the post reforms period.

  • India’s tariffs are still high in comparison to many other nations. India’s Exim policy is governed by Foreign Trade (Development and Regulation) Act, 1992. However, India is increasingly becoming more liberal in exports and imports.

  • The Matrix: This strategy was developed to recognize market diversification and commodities diversification. It showed the top 15 product groups to the top 15 markets for export. The data showed a decline from 71 percent in 1996–97 to 66 percent in 2000–01.

  • The major items of export, including Gems and Jewelry, cotton, and fabrics remained the same but top destinations changed from the US, the UK, and Japan to the US, Hong Kong, and UAE in 2000–01.

  • The government has changed its focus from benefiting producers to protecting consumers. It is aiming to become a major hub of both exports and imports through its new ex-im policies. An example in this direction was the EXIM policy of India which had many reforms and was enacted for the 2004–09 period.

  • India is now working on a policy to make exports vibrant and the policy aims at the generation of jobs too. India’s aim is to become one of the top exporters by inculcating and producing quality products in which it has good potential to attract overseas consumers. An environment of international competitiveness and quality best practices would play a major role in this direction.

  • India is trying hard for a more moderate global trade management in the services sector. Given the country maintains its superiority in this domain, it can become a hub of service exports within a short span of time.


India’s contribution to the global economy has remained considerably low in comparison to some other countries. India must take intelligent approaches to circumvent this situation and reach a respectable position in the world in terms of foreign trade.

The good point to note is that India has been progressing steadily. It has become self-sufficient in food grain production and it is also taking leading positions in many other sectors. Given that India maintains its stronghold in the services sector and concentrates on achieving success in other sectors, it can definitely reach a top spot in the foreign trade domain globally.


Q1. What is India’s top export item?

Ans. India’s top export item is engineering goods which has a share of 26.9 percent of total exports of the country.

Q2. What is India’s top imported item?

Ans. India’s top import item is Petroleum and crude oil which has a share of 25.7 percent of the total imports of the country.

Q3. What does the composition of the foreign trade show?

Ans. The composition of the foreign trade shows the shares of imported and exported items of a country. It is important because one can understand the economic strength of a country by looking at the export and import figures of the nation for a given period of time.


Simply Easy Learning

Updated on: 13-Oct-2022

17K+ Views

Kickstart Your Career

Get certified by completing the course

Get Started