The Effect of International Trade on emerging economies: The case of India

Past and current studies indicate that, India is one of the fastest growing and most attractive economies in the world and has emerged as a desirable destination for Foreign Investment. Since 1991 India has been operating under strict policies which restricted the economy from an International trade, this drove more protectionism than open market trade. Indian government since 1991 introduced economic reform measures, to stimulate the economy. These reform measures in fiscal, reduction on the level of tariffs based on a large number of imports, exchange rate, the use of the exchange rate as the instrument for export promotion and trade policies. However, the reforms that were implemented in the Indian were not very different from the reforms undertaken by developing countries, the only alteration would be the swiftness with which they are implemented. India has one of the advantages which is the stability of its political climate. The current government and party that is in power have held the political landscape in place under control and this is providing the investor-friendly environment. India has gained influence within the global economy, this is demonstrated by India position in the international institutions like (G-8, G-20) and the free trade arrears with ASEAN, EU. This is also reflected by the by India's willingness to adopt international best practices in the production of the range of goods and services. India has attracted U$195bn in FDI over the past 5 years. ?India?s GDP for 2013, valued at US$ 1.9 trillion at current prices is the 10th largest in the world". The Indian government has a target of 8 per cent during the current Five Year Plan (2012-2017), for their economic growth, this is based on the demonstrated ability to sustain national economic growth.?This paper will elaborate more on the rationale to explore trade in India. Economic theory and empirical evidence have clearly established the links between Trade, Productivity, and Economic growth. Countries that have large internal markets have also benefited by integrating themselves into the world economy, and thus opening up their economies like South Africa and India as one of the BRICS countries. India is projected to be the fastest-growing economy in the world over the next several decades. Trading with different countries respectively has made India what it is regarded as trading hub of today after China in the BRICS Countries.