The report examines the complex relationship between India’s foreign trade, GDP growth, and employment generation. It highlights the critical role foreign trade plays in driving economic growth and creating jobs, stressing the importance of strategic policies to maximize these benefits. In the fiscal year 2021-22, foreign trade accounted for about 45.7% of India’s GDP, with exports making up 21.5% and imports 24.2%. The study finds that a 10% increase in exports can boost GDP by approximately 1.3%, and each additional million dollars in exports generates around 80 jobs, although the employment impact has decreased due to the rising capital intensity of exports. Imports are not seen as harmful to growth or jobs since many imported components are used in re-exports, supporting the export sector.
The report advocates a dual approach: encouraging export-led growth in labor-intensive industries while promoting import substitution through domestic production in strategic areas. It highlights key sectors such as agricultural products, processed foods, textiles, mobile phones, auto components, software, and tourism. To strengthen these sectors, it calls for policies that improve cost competitiveness, foster technological upgrades, and develop necessary infrastructure.
In conclusion, the study stresses the need for a balanced foreign trade policy that simultaneously promotes exports and import substitution to stimulate GDP growth and create sustainable employment across multiple sectors.
Key Words: Foreign Trade, GDP Growth, Employment Generation, Export Promotion, Import Substitution, Labor-Intensive Sectors, Technological Upgradation, Infrastructure Development.
GDP Growth and Employment Implications of India’s Foreign Trade
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