If there's one thing that the last five years have taught us, it is that international relations in the global economy are going to be hard to forecast. The shock of the pandemic may be receding, but first the tariff wars, and then the US/Israel-Iran conflict have once again shown that 'world order' is a tenuous term, and economic ties will remain unpredictable. This becomes particularly important when it comes to India's trade with the world.
The big change in India's trade with the world came in the 1990s, following economic liberalisation and the opening up of India's economy. We see that in the data too; imports relative to India's GDP tripled in size in the three decades after 1991.
But the last twenty years have looked quite different.
As someone who looks much more at socio-economic data than economic or financial data, I'll admit that these numbers from my colleague Abhishek Waghmare's work for us on trade came as something of a surprise to me. Relative to its GDP, both India's exports and imports have not changed much in the aggregate over the last two decades; if anything, exports relative to GDP have fallen.
As Abhishek writes, India's trade relative to economic size has moved in a pattern similar to China's. However, some countries are far more tied into international markets. Trade plays a much bigger role in Vietnam's economy, for instance, with both its imports and its exports at between 80 and 90% relative to its GDP.
I don't have a normative take here - it's not just that the current moment is unpredictable, but it's also that economic history is littered with many pathways to both success and failure. Countries have used both imports and exports as a pathway to economic growth, while others have succeeded by being protectionist during key periods, and then leapfrogging off those gains.
It will certainly be an interesting graph to return to in a few years; India's imports are driven by petroleum crude oil imports, and its exports by software services, both sectors that are, to put it mildly, undergoing something of an upheaval, for very different reasons. The last twenty years may have seen little change in India's trade, but I wouldn't bet on the next few looking the same.
