When industrial development is stimulated by tariff protection, such a shift in the composition of the import trade becomes more pronounced. These tendencies were broadly reflected in the composition of the inter-war trade. As regards exports, broadly somewhat less than half consisted of raw-materials and the rest belonged in about equal portions to the food and the manufactures group. There were, however, appreciable annual changes in the shares of three groups of exports.
In the raw-materials group, raw-cotton was the largest item and this fluctuated widely though raw-jute and seeds also underwent considerable changes. Leather and dressed hides and skins were two other important items. Exports of raw and manufactured silks, cotton twist and yarn, and Indigo, however, suffered a decline owing to the intensity of foreign competition, the rise of substitutes and the defective quality of Indian goods.
The inter-war period saw a steady change in the direction of trade also. Among other countries, Japan steadily increased its share even during the depression. Germany made an equal gain while U. Java lost heavily in sugar. This led to a diversion of imports from the U. Before the Depression, India was able to meet its fixed obligations to England out of its trade surplus with Europe, the Far East and America.
As soon as the multilateral trading system disintegrated, many countries were unable to pay for their large import surpluses from India.
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They therefore, tried either to increase their sales to India or turned to other alternative sources of supply in countries which were anxious to buy their goods. India was, therefore, unable to pay for her imports from the U. Unlike imports, exports during the inter-war years went increasingly to the Commonwealth countries and within the Commonwealth to the U.
Even before the Depression, exports had tended to concentrate on the Commonwealth.
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Exports attained high levels in the middle twenties, their value being Rs. But during — , the quantum index of exports heavily declined so that their value came down to Rs. The recovery to Rs. The size of the export surplus, therefore, kept varying but broadly from onwards, it started declining till it touched the rock bottom of a bare Rs.
While India continued to have an overall favourable balance, its regional distribution underwent a great-change.
On the other hand, her favourable balance with countries other than U. The Depression, however, brought about a sea-change. Our regional balance with the continental countries declined from an average of Rs. This was a matter of great significance to India because she was a debtor country with huge foreign obligations to discharge.
India could not repudiate these obligations for they were the symbol of her slavery to England. They had to be met and so our exports had to exceed imports. India adopted the only course open to her, namely, the large scale exports of distress gold in order to fulfill her obligations. According to B. Shenoy, during the seven years preceding April, , India exported gold to the tune of Rs. The immediate effect of the war was to bring about a decline in the volume of the trade.
On account of the preoccupation of the exporting countries with the war effort, restriction of shipping space, increasing incidence of freight and war —risk insurance, and the cutting—off of the large supplies of imported goods from some of the enemy countries, the machinery of import controls, the volume of imports was reduced to the minimum.
The quantum of exports also declined due to the loss of the continental markets and an acute shortage of shipping space which hampered exports even to the U.
Later, the loss of Burma and the Far Eastern markets and the imposition of export restrictions in India accounted for the decline. It is worth while nothing that during the whole period of the war, excepting , the quantum of imports fell much more rapidly that the quantum of exports. It, in effect, meant that India was forced to maintain the war effort at the cost of great suffering to the Indian people.
The total value of merchandise trade rose from Rs. This increase, in the face of a decline in quantum, was brought about by a steep rise in prices both of imports and exports. No less significant were the changes involved in the composition of trade. On the export side, the proportion of manufactured articles rose but that of raw-materials declined.
On the other hand, the proportion of raw-materials in our imports increased while that of manufactured articles declined. Commodity wise, exports of tea and jute manufactures continued to increase throughout the period. The War, however, gave a great boost to the export of cotton cloth and Yarn on account of the withdrawal of British and Japanese supplies from Middle East countries and Africa.
Exports of Indian piece goods doubled between and and quadrupled by when India emerged as one of the leading exporters of cotton cloth and Yarn in the world. As a result of protection, there was a consistent decline in the imports of cotton yarn and manufactures, sugar, cement, matches and other consumer goods. On the other hand, imports of oil, especially mineral oil, chemicals, dyes and colour, long staple cotton continued to increase throughout the war period.
Jain has interpreted these trends as an indication of the extent of industrialisation during the war. This interpretation, however, is unwarranted.
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The increase in the percentage share of raw materials was caused by the large increase in the imports of Petroleum not for industrial requirements but for war- purposes. Similarly, most of the increased exports of manufactures consisted of cotton and Jute goods—; products of old and well established industries. Therefore, as Dr. The war as well brought about a change in the direction of trade.
Several countries fell, one after another, under German occupation and were thus lost as markets to India. Added to this was the acute shipping shortage and the insecurity of many of the sea-lanes which brought about a relative decline in long distance traffic and a corresponding improvement in our trade relation with nearby countries like Egypt, Iran, Saudi Arabia, Iraq, Kenya, Australia and Sri Lanka etc.
Their share in our import trade improved from The share of the U. A significant development during the war was that the terms of trade after an initial improvement in , showed a continuous deterioration in the next three years on account of the greater rise in the prices of imports. War only made it more so.
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And so were the Allied countries. Their exports to India declined. On the other hand, the Allied powers needed almost everything that India could produce and export to help their war effort. Be it noted that this surplus in trade was earned at a huge cost in terms of human privation and suffering. The heavy cut down of imports led to acute shortages of several essential goods. Prices sky-rocked causing untold hardship and misery to the people. In one respect, however, the emergence of a huge sterling balance signified one important effect.
The pressure of unilateral transfer of funds on our export trade, which had been causing anxiety as a dislocating factor in the economic situation during the inter-war period, entirely disappeared. This was certainly conducive to better economic readjustment, particularly in periods of economic distress.
One was that trade on govt. The second was the institution of elaborate trade controls. Exports restrictions were devised with a view to preventing supplies of certain exports reaching the enemy by indirect channels and also to conserve the supplies of a number of essential articles either for internal consumption or for the use of the Allied countries. Export controls comprised prohibition of all exports to enemy countries; prohibition of certain exports to non-enemy countries; permission for the export of certain articles to non-enemy countries only under licence and lastly, permission for the export of certain articles without licence, or under open general licence only to specified countries.https://prosconsscarchi.tk
Essay on Foreign Trade in India
An important development in the application of export control was the institution of a scheme for the control of foreign exchange proceeds of exports to the hard currency countries. Unlike the export-control, import control in India was instituted several months after the out-break of the war when imports of certain commodities were licensed to conserve foreign exchange. The main purpose of import control was to conserve available supplies of foreign exchange, and to ensure the economic use of shipping space and the optimum utilisation of the productive capacity of friendly nations for essential war purposes.
Foreign trade was no longer a conduit pipe for ciphoning of surplus from India to Britain; rather, it served as a pipeline for the inflow of capital resources from abroad and reflected the impact of development plans on the economic structure of the country. That is why it shows important changes in regard to its volume, value, composition direction and balance. The first significant change was with regard to the volume of trade.
The quantum index of imports rose from in to in while that of exports increased from to during the same period. This increase in the volume of trade was a reflection of the tempo of economic and industrial development in the country. Apart from volume the value of trade also increased. This increase, though impressive in absolute terms, was, relatively speaking, insignificant.
Even non-communist developing countries showed much better performance.
In , imports, expressed as a percent of Gross National product, stood at This means that even the Gross National Product grew at a faster rate than trade. As was to be expected, the plans led to the stepping up of the total foreign trade of the country, imports increasing substantially but both imports and exports undergoing important changes in composition.
As can be seen from the table above, the import pattern during the first fifteen years of planed development changed rapidly in favour of capital goods. The share of raw-materials and consumer goods, on the other hand, declined. This changing pattern was an index of the growing industrialisation of the country. The share of capital goods increased from The decline in the import of raw-materials was largely accounted for by the decline in the import of raw-jute and, to some extent, also of raw cotton where the country made determined efforts to increase production in order to rid itself of dependence on Pakistan.
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This may be seen from the fact that imports of raw jute as a percentage of total agricultural imports, fell from The only disquieting feature of our import trade was the continuance of food-grain import which was the consequence of the failure of agricultural production to keep pace with growing demand.