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In view of the economic reforms and liberalisation policies taken up by India in the beginning of the 1990s, trade scenario of the country has changed dramatically. Significant inflows of foreign investment and increased international trade have contributed considerably to the growth of the economy. A gamut of new policies, implemented at the same time and aimed at achieving rapid increase in exports, has led to a gradual conversion of the trade and economy from an inward-looking, protected perspective into an open, globally integrated one. The liberalisation of the economy has made substantial impacts on India's trade volume during the 1990s decade leading to progressive rise in the trade-GDP ratio. The growth has been aided by large scale investments to remove bottlenecks in infrastructure sector involving ports and communications technology, improvement in legal and customs procedures and effective application of right policies.

After a significant annual growth of 20 percent during the period of 1993-94 to 1995-96 on the back of rapid economic reforms, trade performance of the country had deteriorated to 5 percent per annum between the periods of 1996 to 1998 due to economic recession and subsequent financial crisis in South East Asia leading to overall recession of world economy. Concomitant to this, slump of economies of the major trading partners have also adversely affected the overall external trade. However, it regained in 1999-2000 with an annual growth of 13 percent after showing a dismal picture in 1998-99.

India's trade development depends significantly on the global economic and trade growth. Prime destinations for exports include OECD, Asia and OPEC region, where OECD countries particularly USA, European Union and Japan dominate the exports basket of India by consuming around 60 percent of the export volume in 1998-99. In case of the source of imports also, OECD region dominates by catering to more than 50 percent of the import requirement of the country followed by OPEC region, becoming the prime source for POL products.