India was largely insulated from the world trading system for more than four decades
after independence in 1947. Pursuit of an inward-oriented development strategy, rationalized
both by a wary, almost hostile, attitude towards foreign trade, technology and investment, and by
pessimism about export markets, inevitably led to India becoming marginalized in world trade.
During the period of rapid growth in world exports at nearly 8% per year on an average during
1951-73 before the first oil shock, India’s exports grew at a much slower rate of 2.66% per year
and the ratio of exports to GDP declined from 7% in 1951-1952 to around 4% in the early
seventies (Srinivasan and Tendulkar, (2001), Ch. 2). Again when private capital flows to
developing countries grew phenomenally since the mid-eighties, India was not one of the favored
destinations for private foreign investors. After the collapse of the Bretton Woods system of
fixed exchange rates in 1971, Indian exchange rate policies achieved significant depreciation of
the rupee for sometime against major currencies as the latter floated against each other. The
depreciation, coupled with deliberate export promotion (or at least reduction of bias against
exports), led to Indian exports to grow faster on an average than world exports (in volume) since
1973. Still in value terms, India's share in world merchandise exports, which stood at 2.1% in
1951, declined to 0.4% in 1980 and recovered since only to 0.7% in 2000 (WTO, 2001a, Table
1.5).