India's trade over time: ancient routes, colonial trade, import substitution and liberalisation

Detail

1. What trade is and why every country needs it

• Trade is the exchange of goods among people, states and countries.
• Local / internal trade: trade inside a country, between cities, villages or states.

• International trade: trade between two countries, by sea, air or land routes.

• Economic barometer (a measuring tool for the health of an economy): Class 10 uses this word for international trade. When trade rises, the economy is usually doing well.

• Why no country can do without trade:
• Resources are space-bound. They are found only in certain places, for example oil in West Asia and iron ore in Odisha and Jharkhand.
• No country has every resource it needs.

• So each country sells its extra goods and buys the goods it lacks.

• Balance of trade (exports minus imports of a country):

• Favourable: exports are worth more than imports.
• Unfavourable (adverse): imports are worth more than exports. India's goods trade has mostly been in this state.

2. Ancient trade routes (c. 6th century BCE onwards)

Feature	Uttarapatha (northern route)	Dakshinapatha (southern route)
Meaning	"Northern path"	"Southern path"
Starting area	Gandhara and Taxila, north-west (Taxila is now in Punjab, Pakistan)	Kaushambi, on the Yamuna near Prayagraj (Uttar Pradesh)
Course	Across the Ganga plain to Pataliputra (Patna, Bihar)	Through Ujjayini (Ujjain, Madhya Pradesh, on the Shipra river)
End point	Tamralipti (Tamluk, West Bengal), a port on the Bay of Bengal	Pratishthana (Paithan, Maharashtra, on the Godavari) in the Deccan
Wider link	Joined Central Asian (Silk Route) networks	Often followed pilgrimage routes
What travelled	Goods, Buddhism and ideas	Goods, pilgrims, traders

• Goods on both routes: pearls, shells, gold, diamonds, cotton, spices and sandalwood.
• West-to-east order on Uttarapatha: Taxila → Ganga plain → Pataliputra → Tamralipti.
• North-to-south order on Dakshinapatha: Kaushambi → Ujjayini → Pratishthana.
• Seafaring tradition: many coastal places end in "pattan" (port), for example Visakhapatnam and Machilipatnam (Andhra Pradesh). The names show that India has used the sea for trade for a very long time.

3. Colonial trade (c. 1757–1947)

• Ports as "suction points":
• The British built ports to pull raw materials (cotton, jute, indigo, tea, minerals) out of their hinterland (the land area behind a port that sends goods to it and buys goods from it).
• The raw materials were shipped to factories in Britain.
• Finished goods came back to be sold in India.

• Result: India became a supplier of raw materials and a market for British goods.

• Role of railways:

• Railways joined local markets to regional, national and world markets.
• Lines ran mostly from the interior to big ports such as Mumbai, Kolkata and Chennai.
• This made it faster to take raw materials out, rather than building industry inside India.

4. After 1947: shortages and import substitution

• The problem in the 1950s–60s:
• India did not grow enough food, so it had to import foodgrain.

• New industries needed capital goods (machines used to make other goods) and machinery, and these were also imported.

• Import substitution (making at home the goods that were earlier imported):

• Aim: save foreign exchange (money in foreign currency, such as dollars, used to pay for imports).

• Method: high import duties, quotas and licences to protect Indian industry.

• The result:

• Imports still stayed above exports.
• So the balance of payments (the record of all money flowing into and out of a country, from trade and from other sources) stayed adverse.

5. Liberalisation since 1991

• Trade liberalisation (removing government controls and barriers on trade) began in 1991. It had four main steps:
• Import liberalisation: more goods were allowed in freely.
• Lower import duties: taxes on imports were cut.
• Delicensing: licences were no longer needed to make or import most goods.

• Patents moved from process to product: earlier only the method of making a product could be patented. Now the product itself can be patented. This brought India in line with WTO rules.

• Results:

• Manufacturing grew.
• Exports went to many more countries (more varied markets).
• Total trade grew about 6,359 times:

Year	Total trade (₹ crore)
1950-51	1,214
2020-21	77,19,796

6. Present-day trade (2024–2026)

• Record exports:
• Total exports (goods and services together) in 2024-25: about US$ 825 billion, up about 6% from US$ 778.1 billion in 2023-24 [2].
• Merchandise exports (exports of goods) in 2024-25: US$ 437.70 billion. Non-petroleum exports in 2024-25: a record US$ 374.32 billion [2].
• Services exports in 2024-25: a record US$ 387.54 billion, up 13.63% [2].

• 2025-26 (estimate): total exports of US$ 860.09 billion, up 4.22% [3].

• India's share of world trade:

• India had about 1.8% of world merchandise exports in 2024 [4]. (NCERT: about 1 per cent of world trade.)
• India ranked 14th in world merchandise exports and 7th in merchandise imports [4].

• Target under Viksit Bharat 2047: about 10% of world merchandise exports by 2047 [4].

• Services are India's main strength:

• Services trade surplus (services exports are larger than services imports) = 4.8% of GDP in FY 2024-25 [4].
• This partly covers the goods trade deficit (goods imports are larger than goods exports) of 7.3% of GDP [4].
• Digitally delivered services (services sold over the internet, such as software and IT support) gave a trade surplus of US$ 202.6 billion in 2025 [4].

• Software leads these services exports.

• Trade-to-GDP ratio (total trade as a share of the whole economy): a peak of 50% in FY 2022-23, then 45% in FY 2024-25 [4].

Prelims Hooks

• Uttarapatha (west to east): Gandhara/Taxila → Ganga plain → Pataliputra → Tamralipti (Bay of Bengal port; now Tamluk, West Bengal).
• Dakshinapatha (north to south): Kaushambi → Ujjayini (Ujjain) → Pratishthana (Paithan, on the Godavari, Maharashtra).
• Trap: Uttarapatha, not Dakshinapatha, joined the Silk Route network of Central Asia. Dakshinapatha often followed pilgrimage routes.
• The suffix "pattan" means port (e.g. Visakhapatnam, Machilipatnam).
• Colonial ports worked as "suction points" that drained raw materials from their hinterlands.
• Import substitution means producing at home what was earlier imported, to save foreign exchange.
• 1991 reforms: the patent regime changed from process patents to product patents.
• Trade growth: ₹1,214 crore (1950-51) → ₹77,19,796 crore (2020-21), about 6,359 times.
• India's share of world merchandise exports was about 1.8% (2024). Its rank was 14th in exports and 7th in imports [4].
• Trap: India has a surplus in services trade but a deficit in goods trade [4].

Mains Points

• Colonial trade left a lasting pattern (GS-I):
• Ports and railways were built to drain raw materials, not to spread industry.
• This left India with a raw-material export economy.

• It also left a port-centred transport network (Mumbai, Kolkata, Chennai) that still shapes where industry is located.

• Import substitution gave mixed results (GS-III):

• It built a heavy-industry base and some self-reliance.

• But protection made industry inefficient, imports still exceeded exports, and the balance of payments stayed adverse. This led to the 1991 crisis and reforms.

• Liberalisation changed what India trades (GS-III):

• Trade has grown thousands of times since 1950-51.
• India's strength has moved to services (services surplus of 4.8% of GDP in FY 2024-25) [4].
• The goods share is still small (about 1.8% in 2024), against a 2047 target of about 10% [4].

• Needed: lower logistics costs, better port and hinterland links, and manufacturing schemes.

• Old routes and new links (GS-I):

• The Uttarapatha and Dakshinapatha linked the north-west, the Ganga plain, the Deccan and the coasts.
• Today's dedicated freight corridors and port-led growth follow the same idea: connect the hinterland to the ports.