International trade and balance of trade
International trade is the buying and selling of goods and services between countries. It happens because no country has everything it needs. Exports are goods sold abroad; imports are goods bought from abroad. Balance of trade = value of exports − value of imports. If imports are more, it is a trade deficit; if exports are more, a surplus. India usually has a trade deficit, mainly because of costly crude oil imports. Since economic reforms in 1991 India's total trade has grown very fast; services like software are now a big part of exports.
Changing composition of India's exports and imports
Exports
In the early years India exported mostly farm goods and raw materials like tea, jute and cotton. Their share has fallen a lot. Now the main exports are manufactured goods (engineering goods, chemicals and medicines, textiles and garments, gems and jewellery) and petroleum products made in Indian refineries. Ores and minerals have a small share.
Imports
In the 1950s–60s India imported foodgrains, machinery and fertilisers. After the Green Revolution food imports fell. Now crude petroleum and fuel are the biggest import, followed by electronic goods and machinery, gold, pearls and precious stones, chemicals, fertilisers and edible oils.
Direction of India's trade
Direction of trade means the countries and regions India trades with. Earlier, most trade was with the United Kingdom and Western Europe. Now Asia (including West Asia) is the largest partner region, followed by Europe and North America; trade with Africa and Latin America is growing. Top single partners include the USA, China, the UAE, Saudi Arabia, Singapore and others. India imports much crude oil from West Asia and sells engineering goods, medicines and textiles to the USA and Europe.
Sea ports as gateways and their hinterlands
About 95% of India's trade by volume moves through sea ports, so they are the gateways of trade. A port's hinterland is the land area behind it that it serves: goods from there reach the port by road, rail and pipeline, and imports go back into it.
Major ports (west coast)
- Deendayal (Kandla), Gujarat: tidal port built after 1947 to replace Karachi; serves the north-west, handles crude oil and fertilisers.
- Mumbai: natural harbour, biggest traditional port.
- Jawaharlal Nehru Port (Nhava Sheva): built to reduce load on Mumbai; biggest container port.
- Marmagao (Goa): iron-ore export.
- New Mangalore: iron ore from Kudremukh.
- Kochi: natural harbour near a lagoon.
Major ports (east coast)
- V.O. Chidambaranar (Tuticorin), Tamil Nadu.
- Chennai: one of the oldest, artificial harbour.
- Kamarajar (Ennore): built to ease pressure on Chennai.
- Visakhapatnam: deepest land-locked harbour; iron ore and oil.
- Paradip, Odisha: iron ore.
- Syama Prasad Mookerjee (Kolkata) with Haldia: a riverine port on the Hooghly with a huge hinterland in the Ganga plain; Haldia was built to reduce silting problems.
Airports
Airports carry high-value, light and perishable goods (like medicines, flowers, electronics, fruits) and passengers across long distances in very little time. They cost more per tonne. The Airports Authority of India manages most airports; major international airports include Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Ahmedabad and Thiruvananthapuram. Air cargo is growing fast with online trade.
Key formulas and definitions
- Balance of trade = exports − imports
- Imports > exports → trade deficit; exports > imports → surplus
- Composition = what is traded; direction = with whom
- Hinterland = land area served by a port
- ≈ 95% of India's trade by volume moves by sea
- Biggest import: crude petroleum; big exports: engineering goods, petroleum products, medicines, gems
Worked examples
1. India's exports are ₹40 lakh crore and imports ₹55 lakh crore (example values). Find the balance of trade.
40 − 55 = −15 lakh crore: a trade deficit.
2. If exports grow to ₹50 lakh crore and imports stay at ₹55 lakh crore, what happens to the deficit?
50 − 55 = −5 lakh crore. The deficit falls from 15 to 5.
3. Why was Kandla (Deendayal) port built after 1947?
Karachi port went to Pakistan, so the north-west of India needed a new port to serve its hinterland.
4. Why was Haldia built near Kolkata?
The Hooghly river brings a lot of silt, so big ships struggle to reach Kolkata. Haldia, closer to the sea, eases this problem.
5. Why do Indian exports of farm goods have a smaller share now?
Manufacturing and services grew much faster, and more farm produce is used at home by a larger population.
6. Why are flowers and medicines sent by air?
They are light, valuable and can spoil or be needed urgently, so speed matters more than cost.
Common mistakes
- Mixing up composition and direction. Composition is WHAT, direction is WITH WHOM.
- Thinking a port's hinterland is the sea area in front of it. It is the land behind it.
- Saying India has a trade surplus. It usually has a deficit, mainly due to oil imports.
- Calling Kolkata a coastal port. It is a riverine port on the Hooghly.