Chapter - IV Trends in India's Terms of Trade: 1985-86 To 2005-06

Chapter IV
Trends in Indias Terms of Trade : 1985-86 to

2005-06
4.1
Introduction:
In chapter 2 we have analyzed the movement in terms of trade of
developing countries as a group as well as by economic groupings over the

period 1985 to 2005. In the present chapter we attempt an assessment of the
movement in the terms of trade of India for the same period.
The assessment is made at the aggregate level of exports and imports in
Section 4.2. In section 4.3 we discuss in detail the movement in the terms of
trade of primary products and manufactured goods. Finally in Section 4.4 we
summarise the main conclusions of this chapter.
4.2.
Trends in Indias Gross Barter, Net Barter and Income Terms of

Trade : 1985-86 to 2005-06
Table 4.1 shows that Indias gross barter terms of trade (G) improved in
the years 1985-86 and 1986-87 but suffered significant deterioration during the
years 1987-88 to 1990-91. The improvement in the gross barter terms of trade
in the years 1985-86 and 1986-87 was the outcome of a larger increase in the
quantum index of imports than the increase in the quantum index of exports.
But this trend got reversed in the years 1987-88 to 1990-91 and the gross barter
Trends in Indias Terms of Trade : 1985-86 to 2005-06
terms of trade registered a declining trend. Thus in the pre-reform period, the
gross barter terms of trade of India declined in four out of the six years.
However the index of this terms of trade remained above the base level in all
the six years.
Table 4.1
Trends in Indias Gross Barter Terms of Trade : 1985-86 to 2005-06
(Base 1978-79=100)
Year
Export
Quantum
Index
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
111.3
121.3
140
152.1
174.9
194.7
208.6
222.9
257.5
298.7
384.3
411.8
386
399.2
461
571
593
722
765
899
1005
Percentage
Change over
preceding
year
9.0
15.4
8.6
15.0
11.3
7.1
6.9
15.5
16.0
28.7
137.3
-57.7
3.4
15.5
23.9
3.9
21.8
6.0
17.5
11.8
Import
Quantum
Index
182.3
212.3
204.8
224.2
227.8
237.7
228
282
329
408.3
511.8
514.8
562.1
644.2
705
698
733
802
970
1113
1649
Percentage
Change over
preceding
year
16.5
-3.5
9.5
1.6
4.3
-4.1
23.7
16.7
24.1
-22.9
62.6
9.8
14.6
9.4
-1.0
5.0
9.4
20.9
14.7
48.2
Gross
Barter
Terms
of
Trade
Index
163.8
175
146.3
147.4
130.2
122.5
109.3
126.5
127.8
139.5
134
124.3
145.6
161.4
152.9
122.2
123.6
111.1
126.8
123.8
164.1
Percentage
Change over
preceding year
6.8
-16.4
0.8
-11.7
-5.9
-10.8
15.7
1.0
9.2
-3.9
-7.2
17.1
10.9
-5.3
-20.1
1.1
-10.1
14.1
-2.4
32.6
Source : Reserve Bank of India, Handbook of Statistics on the Indian Economy (2006-07), p. 233
Indias gross barter terms of trade declined further in the first year of the
economic reform period but picked up consistently in the following three years
to decline again in 1995-96 and 1996-97. In the remaining years the gross
barter terms of trade index fluctuated between 111 and 164. This reveals that
82
the gross barter terms of trade of India remained fluctuating but above the base
level in the post-reform period too.
However, despite fluctuating trends, the gross barter terms of trade
revealed a consistent improvement over the period 1985-86 to 2005-06. This is
borne out by Table 4.2.
Table 4.2
Annual Average Percentage change in Indias Gross Barter Terms of
Trade : 1985-86 to 2005-06
Year
Export
Quantum
Index
1985-86 to 1990-91
149.1
1991-92 to 1996-97
297.3
1997-98 to 2001-02
482.0
2002-03 to 2005-06
847.8
Source : Derived from Table 4.1
Growth
Rate
Import
Quantum
Index
Growth
Rate
11.9
13.6
8.1
14.3
214.9
345.7
668.5
1133.5
5.7
16.7
7.6
23.3
(Percentage)
Gross
Percentage
Barter
Change
Terms of
Trade
Index
147.5
-5.3
126.9
0.7
141.1
0.8
131.5
8.6
It can be seen from Table 4.2 that the annual percentage change in
Indias gross barter terms of trade was negative on an average basis in the six
years of the pre-reform period. This accelerated to 0.6 percent in the first half
of the 1990s, 0.8 percent in the second half and jumped to 8.6 percent during
the period 2002-03 to 2005-06.
The trends in Indias net barter terms of trade since 1985-86 are outlined
in Table 4.3. It shows that Indias net barter terms of trade followed a volatile
trend in the pre-reform period. It suffered deterioration in three years.
Table 4.3
Trends in Indias Net Barter Terms of Trade : 1985-86 to 2005-06
83
(Base 1978-79=100)
Year
Export
Unit
Value
Index
Percentage
Change
over
preceding
year
1985 -86
170.8
1986-87
179.4
1987-88
195.4
1988-89
232.2
1989-90
276.6
1990-91
292.5
1991-92
369.5
1992-93
421.5
1993-94
474.1
1994-95
494.6
1995-96
484.2
1996-97
504.7
1997-98
589.4
1998-99
611.7
1999-2000
604
2000-01
624
2001-02
618
2002-03
620
2003-04
672
2004-05
732
2005-06
798
Source : As for Table 4.1
5.0
8.9
18.8
19.1
5.7
26.3
14.1
12.5
4.3
-2.1
4.2
16.8
3.8
-1.3
3.3
-1.0
0.3
8.4
8.9
9.0
Import
Unit
Value
Index
158.8
139.4
160
185.5
228.4
267.7
309.1
331
327.2
324.6
351
399
404.2
407.8
450
487
493
546
545
663
592
Percentage
Change
over
preceding
year
-12.2
14.8
15.9
23.1
17.2
15.5
7.1
-1.1
-0.8
8.1
13.7
1.3
0.9
10.3
8.2
1.2
10.8
-0.2
21.7
-10.7
Net
Barter
Terms
of
Trade
Index
107.6
128.7
122.1
125.2
121.1
109.3
119.5
127.3
144.9
152.4
137.9
126.2
145.8
150
134.2
128.1
125.4
113.6
123.3
110.4
134.8
Percentage
Change over
preceding
year
19.6
-5.1
2.5
-3.3
-9.7
9.3
6.5
13.8
5.2
-9.5
-8.5
15.5
2.9
-10.5
-4.5
-2.1
-9.4
8.5
-10.5
22.1
The index declined from 128.7 in 1986-87 to 122.1 in 1987-88, 121.1 in

1989-90 and further to 109.3 in 1990-91. The prices of Indian exports and
imports registered a rising trend during this period but the unit value index of
imports rose faster than the unit value of exports excepting the years 1986-87
and 1988-89. In these years the unit value index of exports rose faster than the
unit value index of imports.
The fluctuating trend in the net barter terms of trade of India continued
in the post reform period. From Table 4.3 it is evident that initially the net
barter terms of trade were favourable rising from 119.5 in 1991-92 to 152.4 in
84
1994-95 implying that the purchasing power of exports increased rapidly

during this period. Deterioration in it started in the year 1995-96 and was very
sharp in 1996-97. Thereafter the net barter terms of trade witness recovery in
1997-98. But this recovery was not sustained for long and there was again a set
back in 1999-2000 which got accentuated in the following three years. In 200304 the net barter terms of trade picked up again followed by a substantial fall in
2004-05. In 2005-06 the net barter terms of trade stood at 134.8.
The fluctuating trend in net barter terms of trade of India over the years
1985-86 to 2005-06 is summarized in Table 4.4.
Table 4.4
Annual Average Percentage Change in Indias Net Barter Terms of
Trade : 1985-86 to 2005-06
Year
Export Unit
Value Index
1985-86 to 1990-91
224.5
1991-92 to 1996-97
458.1
1997-98 to 2001-02
609.4
2002-03 to 2005-06
705.5
Growth
Rate
11.5
9.9
4.3
6.7
Import
Unit
Value
190.0
340.3
448.4
586.5
Growth
Rate
11.8
7.1
4.4
5.4
(Percentage)
Net Barter
Grow
Terms of
th
Trade Index
Rate
119.0
0.8
134.7
2.8
136.7
0.2
120.5
2.7
The movement in Indias income terms of trade since 1985-86 is shown

in Table 4.5.
Table 4.5
Trends in Indias Income Terms of Trade : 1985-86 to 2005-06
(Base year 1978-79=100)
Year
Export
Quantum
Index
Percentage
change over
preceding
years
Net
Barter
Terms of
Trade
Index
85
Percentage
change over
preceding
years
Income
Terms of
Trade
Index
Percentage
change over
preceding
years
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
111.3
121.3
140
152.1
174.9
194.7
208.6
222.9
257.5
298.7
384.3
911.8
386
399.2
461
571
593
722
765
899
1005
107.6
128.7
122.1
125.2
121.1
109.3
119.5
127.3
144.9
152.4
137.9
126.2
145.8
150
134.2
128.1
125.4
113.6
123.3
110.4
134.8
9.0
15.4
8.6
15.0
11.3
7.1
6.9
15.5
16.0
28.7
137.3
-57.7
3.4
15.5
23.9
3.9
21.8
6.0
17.5
11.8
119.8
156.1
170.9
190.4
211.8
212.8
249.3
283.8
373.1
455.2
529.9
1150.7
562.8
598.8
618.7
731.5
743.6
820.2
943.2
992.5
1354.7
19.6
-5.1
2.5
-3.3
-9.7
9.3
6.5
13.8
5.2
-9.5
-8.5
15.5
2.9
-10.5
-4.5
-2.1
-9.4
8.5
-10.5
22.1
30.4
9.5
11.4
11.2
0.5
17.1
13.8
31.5
22.0
16.4
117.1
-51.1
6.4
3.3
18.2
1.7
10.3
15.0
5.2
36.5
It shows that the income terms of trade improved consistently over the
pre-reform period though at varying rates. This trend continued even in the post
reform period. As growth rate in export quantum and net barter terms of trade
fluctuated over this period, the performance of income terms of trade was also
influenced by such fluctuations.
The consistent improvement in Indias income terms of trade since
1985-86 is summarized in Table 4.6
Table 4.6
Annual Average Percentage Change in Indias Income
Terms of Trade : 1985-86 to 2005-06
(Percentage)
Year
Export
Quantum
Index
Growth
Rate
1985-86 to 1990-91
1991-92 to 1996-97
1997-98 to 2001-02
2002-03 to 2005-06
149.1
297.3
482.0
847.8
11.9
13.6
-2.2
14.3
Net Barter
Terms of
Trade
Index
119.0
134.7
136.7
120.5
86
Growth
Rate
0.8
2.8
0.2
2.7
Income
Terms of
Trade
Index
177.0
507.0
651.1
1027.7
Growth
Rate
12.6
36.3
-4.3
16.8
After examining the trends in the gross, net and income terms of
trade of India over the period 1985-86 to 2005-06, we present a comparison of
their movements in the same period in Figures 4.1 and 4.2.. The figures show
the gross and net barter terms of trade marginally overlapping each other
during the period 1985-86 to 2005-06. The income terms of trade however,
over the same period increased in a step like fashion.
Fig.4.1
4.1
Fig.
Indias Gross Barter, Net Barter and Income
India's Gross Barter, Net Barter and Income Terms of Trade
Terms of Trade : 1985-86 to 2005-06
1600
1400
Indiex Number
1200
1000
800
600
400
200
Year
G
Source : Tables 4.1, 4.3 and 4.5
87
2005-06
2004 -05
2003 -04
2002 -03
2001 -02
2000 -01
1999 -00
1998-99
1997 -98
1996 -97
1995-96
1994 -95
1993-94
1992 -93
199192
1990-91
1989-90
1988-89
1987-88
1986-87
1985 -86
Fig. 4.2
Fig.
4.2
Annual
Average
Percentage
Change inchange
Indias in
Gross
Barter,
NetBarter,
Barter &
Income
Terms
Annual
Average
Percentage
India's
Gross
Net
Barter
& of
Trade : 1985-86-2005-06
Income
Terms of Trade
1200
Index Number
1000
800
600
400
200
0
1985-86 to 1990-91
1991-92 to 1996-97
1997-98 to 2001-02
2002-03 to 2005-06
Year
G
Source : Tables 4.2, 4.4 and 4.6
4.3.
Trends in Indias Terms of Trade of Major Product Groups:

The above analysis presents an aggregative views of trends in Indias
terms of trade during the period 1985-86 to 2005-06. But Indias trade basket
comprises a wide variety of products. We therefore study the movement in
Indias terms of trade of major group of products in this section.
Food and Food Articles:
The food & food articles include meat and meat preprations, fish & fish
preparations, cereals & cereals preprations, vegetables, fruits & nuts, sugar,
coffee, tea, spices and oilseed cake under exports, and dairy products, cereals &
cereals preprations, fruits & nuts and spices under imports.
88
Table 4.7 shows the movements in gross barter terms of trade of food &
food articles since 1985-86. It shows that the movement was fluctuating in the
pre-reform period i.e. between 1985-86 and 1990-91. This trend continued in
the post-reform period as well. But the most disturbing aspect was the
deterioration in gross barter terms of trade for this group of products below the
base level in the years 1991-92, 1995-96 and 2000-01. This deterioration
resulted because export quantum index in these years rose much higher than
import quantum index.
Table 4.7
Trends in Indias Goss Barter Terms of Trade of Food and Food Articles: 198586 to 2005-06
(Base =1978-79=100)
Year
Export
Quantum
Index
Percentage
Change
over
preceding
year
1985 -86
108
1986-87
105
-2.8
1987-88
111
5.7
1988-89
113
1.8
1989-90
140
23.9
1990-91
138
-1.4
1991-92
158
14.5
1992-93
174
10.1
1993-94
197
13.2
1994-95
195
-1.0
1995-96
327
67.7
1996-97
307
-6.1
1997-98
270
-12.1
1998-99
333
23.3
1999-2000
276
-17.1
2000-01
304
10.1
2001-02
350
15.1
2002-03
451
28.9
2003-04
449
-0.4
2004-05
457
1.8
2005-06
486
6.3
Source : As for Table 4.1, pp. 234-40
Import
Quantum
Index
249
230
267
476
244
297
125
326
226
408
208
334
494
727
629
277
533
594
606
661
734
89
Percentage
Change
over
preceding
year
-7.6
16.1
78.3
-48.7
21.7
-57.9
160.8
-30.7
80.5
-49.0
60.6
47.9
47.2
-13.5
-56.0
92.4
11.4
2.0
9.1
11.0
Gross
Barter
Terms of
Trade
Index
230.6
219.0
240.5
421.2
174.3
215.2
79.1
187.4
114.7
209.2
63.6
108.8
183.0
218.3
227.9
91.1
152.3
131.7
135.0
144.6
151.0
Percentage
Change
over
preceding
year
-5.0
9.8
75.1
-58.6
23.5
-63.2
136.8
-38.8
82.4
-69.6
71.0
68.2
19.3
4.4
-60.0
67.1
-13.5
2.5
7.2
4.4
In terms of annual average percentage change, the gross barter terms of

trade index of food & food articles deteriorated from 250.1 during 1985-861990-91 - 127.1 in 1991-92-1996-97. It picked up to 174.5 during 1997-98
-2000-01. This uptrend, however, could not be maintained in the period 200203 2005-06. The index declined to 140.6 in that period (Table 4.8).
Table 4.8
Annual Average Percentage Change in Indias Gross Barter Terms of
Trade of Food and Food Articles : 1985-86 to 2005-06
Year
Export
Quantum
Index
Growth
Rate
Import
Quantum
Index
Growth
Rate
5.4
16.4
3.9
9.1
293.8
271.2
532.0
648.8
11.9
27.4
23.6
8.4
1985-86 to 1990-91
119.2
1991-92 to 1996-97
226.3
1997-98 to 2001-02
306.6
2002-03 to 2005-06
460.8
Source : Calculated from Table 4.7
Gross
Barter
Terms of
Trade
250.1
127.1
174.5
140.6
(Percentage)
Growth
Rate
9.0
19.8
19.8
0.1
The movements in net barter terms of trade of food & food articles is
shown in Table 4.9.
Table 4.9
Trends in Indias Net Barter Terms of Trade of Food & Food Articles :
1985-86 to 2005-06
Year
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
Export
Unit
Value
Index
159
181
180
192
201
226
292
312
369
414
377
444
514
Percentage
change over
preceding
years
13.8
-0.6
6.7
4.7
12.4
29.2
6.8
18.3
12.2
-8.9
17.8
15.8
Import
Unit Value
Index
143
133
131
127
165
141
310
261
343
446
505
371
391
90
Percentage
change over
preceding
years
-7.0
-1.5
-3.1
29.9
-14.5
119.9
-15.8
31.4
30.0
13.2
-26.5
5.4
(Base year 1978-79=100)

Net Barter
Percentage
Terms of
change over
Trade
preceding
Index
years
111.2
136.1
22.4
137.4
1.0
151.2
10.0
121.8
-19.4
160.3
31.6
94.2
-41.2
119.5
26.9
107.6
-10.0
92.8
-13.7
74.7
-19.6
119.7
60.3
131.5
9.8
1998-99
451
-12.3
1999-2000
498
10.4
2000-01
524
5.2
2001-02
482
-8.0
2002-03
437
-9.3
2003-04
445
1.8
2004-05
483
8.5
2005-06
512
6.0
Source : As for Table 4.1, pp. 234-40
319
338
483
453
441
422
480
502
-18.4
6.0
42.9
-6.2
-2.6
-4.3
13.7
4.6
141.4
147.3
108.5
106.4
99.1
105.5
100.6
102.0
7.5
4.2
-26.4
-1.9
-6.9
6.4
-4.6
1.4
It may be discerned from the table that the years 1991-92, 1995-96 and
2002-03 witnessed a very serious deterioration in net barter terms of trade for
food & food articles. In these years, the improvement in the import unit value
index was much faster than the increase in the export unit value index. In the
rest of the years the terms of trade remained favourable as compared to the base
year. The magnitude of the favourable trend, however, varied from year to
year.
On an average basis, the net barter terms of trade increased at the rate of
9.1 percent per annum in the pre-reform period. This decelerated
Table 4.10
Annual Average Percentage Change in Indias Net Terms of Trade of
Food and Food Articles : 1985-86 to 2005-06
Year
Export
Unit Value
Index
1985-86 to 1990-91
189.8
1991-92 to 1996-97
368.0
1997-98 to 2001-02
493.8
2002-03 to 2005-06
469.3
Source Calculated from Table 4.9
Percentage
change
Over
Preceding
Year
7.4
12.6
2.2
1.8
91
Import
Unit Value
Index
140.0
372.7
396.8
461.3
Percentage
change
over
Preceding
Year
0.8
25.4
5.9
2.8
(Percentage)
Percentage
Net Barter
change
Terms of
Over
Trade
Preceding
Index
Year
136.3
9.1
101.4
0.4
127.0
-1.3
101.8
-0.9
to 0.4 percent in 1991-92 - 1996-97 and turned negative at -1.3 percent in

1997-98 - 2001-02 and decelerated further to -0.9 percent during 2002-03 2005-06 (Table 4.10)
The movement in income terms of trade (I) of food & food articles is
represented by Table 4.11.
Table 4.11
Trends in Indias Income Terms of Trade of Food and Food Articles :
1985-86 to 2005-06
Year
Export
Quantum
Index
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
108
105
111
113
140
138
158
174
197
195
327
307
270
333
276
304
350
451
449
457
486
Percentage
change over
preceding
years
Net Barter
Terms of
Trade
Index
-2.8
5.7
1.8
23.9
-1.4
14.5
10.1
13.2
-1.0
67.7
-6.1
-12.1
23.3
-17.1
10.1
15.1
28.9
-0.4
1.8
6.3
111.2
136.1
137.4
151.2
121.8
160.3
94.2
119.5
107.6
92.8
74.7
119.7
131.5
141.4
147.3
108.5
106.4
99.1
105.5
100.6
102.0
Percentage
change
over
preceding
years
22.2
1.0
10.0
-19.4
31.6
-41.2
26.9
-10.0
-13.7
-19.6
60.3
9.8
7.5
4.2
-26.4
-1.9
-6.9
6.4
-4.6
1.4
(Base 1978-79 = 100)

Percentage
Income
change
Terms
over
of Trade
preceding
Index
years
120.1
142.9
19.0
152.5
6.7
170.8
12.0
170.5
-0.2
221.2
29.7
148.8
-32.7
208.0
39.8
211.9
1.9
181.0
-14.6
244.1
34.9
367.4
50.5
354.9
-3.4
470.8
32.6
406.7
-13.6
329.8
-18.9
372.4
12.9
446.9
20.0
473.5
5.9
459.9
-2.9
495.7
7.8
It shows that Indias income terms of trade were favourable during the
entire period compared to the base year. The magnitude of the favourable trend,
92
however, varied from year to year. The pre-reform years witnessed the most
favourable and consistently improving terms of trade. In the post-reform
period, the income terms of trade index numbers fluctuated between 148.8 and
495.7. The annual average increase in terms of trade was 13.5 percent in the
years 1985-91. It remained stagnant at that level in 1991-97 but decelerated
significantly
Table 4.12
Annual Average Percentage Change in Indias Income Terms of Trade
Food and Food Articles : 1985-86 to 2005-06
(Percentage)
YEAR
Export
Quantum
Index
Growth
Rate
1985-86 to1990-91
119.2
5.4
Net
Barter
Terms of
Trade
Index
293.8
1991-92 to 1996-97
226.3
16.4
1997-98 to 2001-02
306.6
2002-03 to 2005-06
460.8
11.9
Gross
Barter
Terms of
Trade
Index
250.1
271.2
27.4
127.1
19.8
3.9
532
23.6
174.5
19.8
9.1
648.8
8.4
140.6
0.1
Growth
Rate
Growth
Rate
9.0
to the rate of 1.9 percent in 1997-02. It, however, recorded considerable

improvement at 7.7 percent in 2002-06. (Table 4.12)
Beverages & Tobacco:
Table 4.13 gives the trends in the gross barter terms of trade of
beverages & tobacco since 198586. It shows an erratic behaviour of the
terms of trade during the period 1985-86 to 2005-06. The index improved in
the years 1985-86, 1987-88, 1988-89 and 1989-90 in the pre-reform period but
suffered deteriorations in 1986-87 and 1990-91. The export quantum index was
volatile and varied between 56 and 103 in 1985-86 to 1990-91. The import
93
quantum index declined by 20.6 percent in 1986-87 over the previous year but
registered a rising trend in the following three years. It declined again by nearly
36 percent in 1990-91. The table also shows that the growth rate in export
quantum index was higher than the import quantum index only in 1985-86 and
1990-91, in the pre-reform period.
Table 4.13
Trends in Indias Gross Barter Terms of Trade of
Beverages & Tobacco : 1985-86 to 2005-06
(Base year 1978-79=100)
Year
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
Export
Quantum
Index
91
98
75
56
72
103
96
116
126
69
112
172
221
132
208
176
159
191
180
209
233
Percentage
Change over
preceding
year
7.7
-23.5
-25.3
28.6
43.1
-6.8
20.8
8.6
-45.2
62.3
53.6
28.5
-40.3
57.6
-15.4
-9.7
20.1
-5.8
16.1
11.5
Import
Quantum
Index
296
235
271
342
500
321
189
188
243
467
830
601
382
946
780
1065
1114
1770
2350
4088
5019
Percentage
Change
over
preceding
year
-20.6
15.3
26.2
46.2
-35.8
-41.1
-0.5
29.3
92.2
77.7
-27.6
-36.4
147.6
-17.5
36.5
4.6
58.9
32.8
74.0
22.8
Gross
Barter
Terms
of
Trade
325.3
239.8
361.3
610.7
694.4
311.7
196.9
162.1
192.9
676.8
741.1
349.4
172.9
716.7
375.0
605.1
700.6
926.7
1305.6
1956.0
2154.1
Percentage
Change
over
preceding
year
-26.3
50.7
69.0
13.7
-55.1
-36.8
-17.7
19.0
250.9
9.5
-52.8
-50.5
314.6
-47.7
61.4
15.8
32.3
40.9
49.8
10.1
The gross terms of trade for beverages & tobacco deteriorated by about
37 percent in 1991-92 and 18 percent in 1992-93. Thereafter it picked up in the
94
following three years and declined again in 1996-97 and 1997-98. In the year
1998-99, there was a dramatic increase in the terms of trade which could not be
maintained in the following years. The terms of trade turned negative in terms
of rate of growth in 1999-2000. Thereafter the index number maintained a
rising trend though at varying rates.
Over the period 1985-86 to 2005-06, the growth rate in gross barter
terms of trade of beverages & tobacco accelerated during 1985-2002 but
decelerated in 2002-06 (Table 4.14). The export quantum index
Table 4.14
Annual Average Percentage Change in Indias Average Gross Barter
Terms of Trade of Beverages & Tobacco 1985-86 to2005-06
YEAR
Export
Quantum
Index
Growth
Rate
Import
Quantum
Index
Growth
Rate
1985-86to1990-91
82.5
6.1
327.5
6.3
15.6
4.1
10.5
419.7
857.4
3306.8
21.7
27.0
47.1
1991-92t0 1996-97
115.2
1997-98 to2001-02
179.2
2002-03 to2005-06
203.3
Source Calculated from Table 4.13
(Percentage)
Gross
Barter
Growth
Terms of
Rate
Trade
423.9
10.4
386.5
28.7
514.1
58.7
1585.6
33.3
and import quantum index increased over the period of study. But the growth in
import quantum index was steady and more than the growth in export quantum
index.
The net barter terms of trade (N) for beverages & tobacco as shown in
Table 4.15 remained unfavourable and below the base level throughout the
period under study. This was the outcome of a significant variations in the rate
95
of growth of import and export prices. Import prices during this period
generally rose at a faster rate than the export prices.
Table 4.15
Trends in Indias Net Barter Terms of Trade of
Beverages & Tobacco : 1985-86 to 2005-06
(Base year = 1978-79=100)
Year
Export
Unit
Value
Index
1985 -86
160
1986-87
163
1987-88
156
1988-89
195
1989-90
220
1990-91
228
1991-92
350
1992-93
371
1993-94
338
1994-95
372
1995-96
372
1996-97
398
1997-98
428
1998-99
528
1999-2000
437
2000-01
467
2001-02
479
2002-03
507
2003-04
574
2004-05
569
2005-06
551
Percentage
Change
over
preceding
year
1.9
-4.3
25.0
12.8
3.6
53.5
6.0
-8.9
10.1
0.0
7.0
7.5
23.4
-17.2
6.9
2.6
5.8
13.2
-0.9
-3.2
Import
Unit
Value
Index
185
193
314
399
407
536
620
878
1002
885
939
1131
1433
1121
1025
1007
977
866
1095
1205
1207
Percentage
Change
over
preceding
year
4.3
62.7
27.1
2.0
31.7
15.7
41.6
14.1
-11.7
6.1
20.4
26.7
-21.8
-8.6
-1.8
-3.0
-11.4
26.4
10.0
0.2
Net
Barter
Terms
of
Trade
86.5
84.5
49.7
48.9
54.1
42.5
56.5
42.3
33.7
42.0
39.6
35.2
29.9
47.1
42.6
46.4
49.0
58.5
52.4
47.2
45.7
Percentage
Change
over
preceding
year
-2.3
-41.2
-1.6
10.6
-21.3
32.7
-25.1
-20.2
24.6
-5.8
-11.2
-15.1
57.7
-9.5
8.8
5.7
19.4
-10.5
-9.9
-3.3
The unfavourable developments in Indias net barter terms of trade of

beverages & tobacco over the period 1985-86 to 2005 is also revealed by the
Table 4.16.
Table 4.16
96
Annual Average Percentage Change in Net Barter Terms of Trade of

Beverages and Tobacco : 1985-86 to2005-06
(Percentage)
Year
Export
Unit
value
index
Growth
Rate
Import
Unit
value
index
Growth
Rate
1985-86 to1990-91
1991-92 to 1996-97
1997-98 to2001-02
2002-03 to2005-06
187.0
366.8
467.8
550.3
7.8
11.3
4.6
3.8
339.0
909.2
1112.6
1093.3
25.6
14.4
-1.7
6.3
Net
Barter
Terms
of
Trade
Index
61.0
41.5
43.0
51.0
Growth
Rate
-11.2
-0.8
9.5
-1.1
Table 4.17 shows the movement in Indias income terms of trade for
beverages & tobacco since 1985-86. It shows that except for two years 2002-03
and 2005-06, the income terms of trade remained unfavourable and below the
base level during the period under study. During the pre-reform period, the net
terms of trade as well as the export quantum index failed to reveal any trend.
The volatile trend continued during the post-reform period and it went
further below the base year value till 2001-02. Since then it moved around the
base year value. The net barter terms of trade also moved around the base year
value while export quantum index followed a volatile trend. Therefore, lower
value of net terms of trade of beverages & tobacco adversely affected the
movement of income terms of trade during post-reform period.
Table 4.17
Trends in Indias Income Terms of Trade of
Beverages and Tobacco : 1985-86 to 2005-06
(Base year 1978-79=100)
Year
Export
Quantum
Index
Percentage
Change over
preceding
year
Net
Barter
Terms
of
97
Percentage
Change over
preceding
year
Income
Terms
of
Trade
Percentage
Change
over
preceding
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
91
98
75
56
72
103
96
116
126
69
112
172
221
132
208
176
159
191
180
209
233
7.7
-23.5
-25.3
28.6
43.1
-6.8
20.8
8.6
-45.2
62.3
53.6
28.5
-40.3
57.6
-15.4
-9.7
20.1
-5.8
16.1
11.5
Trade
86.5
84.5
49.7
48.9
54.1
42.5
56.5
42.3
33.7
42.0
39.6
35.2
29.9
47.1
42.6
46.4
49.0
58.5
52.4
47.2
45.7
-2.3
-41.2
-1.6
10.6
-21.3
32.7
-25.1
-20.2
24.6
-5.8
-11.2
-15.1
57.7
-9.5
8.8
5.7
19.4
-10.5
-9.9
-3.3
Index
78.7
82.77
37.26
27.37
38.92
43.81
54.19
49.02
42.5
29
44.37
60.53
66.01
62.17
88.68
81.62
77.95
111.8
94.36
98.69
106.4
year
5.2
-55.0
-26.5
42.2
12.6
23.7
-9.6
-13.3
-31.8
53.0
36.4
9.1
-5.8
42.6
-8.0
-4.5
43.4
-15.6
4.6
7.8
The poor performance of terms of trade of beverages & tobacco is

summarized in Table 4.18.
Table 4.18
Annual Average Percentage Change in Income Terms of Trade of
Beverages and Tobacco: 1985-86 to2005-06
(Percentage)
Year
Export
Quantum
Index
Growth
Rate
1985-86 to1990-91
1991-92 to1996-97
1997-98 to 2001-02
2002-03 to2005-06
82.5
115.2
179.2
203.3
6.1
15.6
4.1
10.5
98
Net
Barter
Terms of
Trade
Index
61.0
41.5
43.0
51.0
Growth
Rate
-11.2
-0.8
9.5
-1.1
Income
Terms
of
Trade
Index
51.5
46.6
75.3
102.8
Growth
Rate
0.0
0.1
0.1
0.1
Comparing the movements in gross, net and income terms of trade of

beverages & tobacco over the period 1985-86 to 2005-06 in Fig. 4.3 and 4.4.
We see no definite trends in movement of gross barter terms of trade over the
period of study, though it remained above the net and income terms of trade.
The figure 4.4 represents the annual average rates of growth in gross net
barter and income terms of trade over the period 1985-2006. It shows that the
gross barter terms of trade of beverages and tobacco worsened during 1985-86
to 1990-91 but remained above income and net terms of trade.
Fig. 4.3
India's Gross, Net Barter and Income Terms of Trade of Beverages
and Tobacco : 1985-86 to 2005-06
2500
Index Number
2000
1500
1000
500
Year
G
Source: Table 4.13, 4.15 and 4.17
99
2005-06
2004 -05
2003 -04
2002 -03
2001 -02
2000 -01
1999-00
1998-99
1997 -98
1996 -97
1995-96
1994 -95
1993-94
1992 -93
1991-92
1990-91
1989-90
1988-89
1987-88
1986-87
1985 -86
Index Number
Fig. 4.4
Annual Average Percentage in Indias Gross, Net Barter and Income Terms of trade of
Beverages and Tobacco : 1985-86 to 2005-06
200
180
160
140
120
100
80
60
40
20
0
1985-86 to 1990-91
1991-92 to 1996-97
1997-98 to 2001-02
2002-03 to 2005-06
Year
G
Source: Based on Table Fig. 4.14, 4.16 and 4.18
Mineral Fuels, Lubricants etc. (MFL)

Mineral fuels, lubricants, etc. comprise of petroleum products and coal
in group of exports and petroleum crude and petroleum products for imports.
Table 4.19 represents the movement in gross barter terms of trade of
MFL since 1985-86. It shows deterioration in pre-reform as well as
Table 4.19
Trends in India's Gross Barter Terms of Trade of Minerals, Fuels ,
Lubricants : 1985-86 to 2005-06
(Base 1978-79=100)
Year
Export
Quantum
Index
1985 -86
1986-87
1987-88
1988-89
1989-90
1475
1403
2142
1516
1062
Percentage
Change
over
Preceding
year
-4.9
52.7
-29.2
-29.9
Import
Quantum
Index
105
109
126
148
168
100
Percentage
Change
over
preceding
year
3.8
15.6
17.5
13.5
Gross
Barter
Terms
of
Trade
Index
7.1
7.8
5.9
9.8
15.8
Percentage
Change
over
preceding
year
8.4
-24.3
66.0
62.0
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004 -05
2005-06
1988
2139
1391
1327
1337
1250
1055
915
386
239
4277
5670
7520
7629
10920
13982
87.2
7.6
-35.0
-4.6
0.8
-6.5
-15.6
-13.3
-57.8
-38.1
1689.5
32.6
32.6
1.4
43.1
1181.9
182
208
252
270
284
337
372
411
457
464
442
481
504
552
614
689
8.3
14.3
21.2
7.1
5.2
18.7
10.4
10.5
11.2
1.5
-4.7
8.8
4.8
9.5
11.2
12.2
9.2
9.7
18.1
20.3
21.2
27.0
35.3
44.9
118.4
194.1
10.3
8.5
6.7
7.2
5.6
4.9
-42.1
6.2
86.3
12.3
4.4
26.9
30.8
27.4
163.6
64.0
-94.7
-17.9
-21.0
8.0
-22.3
12.5
post-reform periods excepting the years 1998-99 and 1999-2000. The export
quantum index had a fluctuating trend and the growth rate was largely
negative.
While the import quantum index constantly increased over the years
1985-86 to 2005-06. The large difference between export quantum and import
quantum indices resulted in adverse movement in gross barter terms of trade
over the period under study.
The annual average rates of growth of gross barter terms of trade for
MFL increased from 14.1 percent in 1985-86 - 1990-91 to 28.5 percent
Table 4.20
Trade of Minerals Fuels, Lubricants : 1985-86 to 2005-06
(Percentage)
Year
Export
Quantum
Index
Growth
Rate
101
Import
Quantum
Index
Growth
Rate
Gross
Barter
Terms
of Trade
Index
Growth
Rate
1985-86to1990-91
1991-92 to 1996-97
1997-98 to2001-02
2002-03 to 2005-06
1597.7
1416.5
2297.4
41512.7
15.2
-8.9
322.6
314.7
139.7
287.2
451.0
589.7
11.7
12.8
5.5
9.4
9.3
21.9
75.3
5.0
14.1
27.8
28.5
-31.6
in1997-98- 2001-02, but turned negative to -31.6 percent in 2002-03 200506. (Table 4.20)
Table 4.21 depicts the movement in net barter terms of trade of MFL
over the years 1985-86 to 2005-06. It shows that the net barter terms of trade
for MFL was largely unfavourable in pre-reform period. It, however, largely
turned favourable in the post-reform period. The export unit value index
increased from 153 in 1986-87 to 354 in 1980-90 but declined to 246 in 199091. The import unit value index during this period also increased from 165 in
1986-87 to 383 in 1990-91.
Table 4.21
Trends in Indias Net Barter Terms of Trade of Minerals, Fuels and
Lubricants: 1985-86 to 2005-06
(Base year 1978-79=100)
Year
Export
Unit
Value
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
229
153
158
176
354
246
251
563
603
620
Percentage
Change
over
preceding
year
-33.2
3.3
11.4
101.1
-30.5
2.0
124.3
7.1
2.8
Import
Unit Value
Index
295
165
201
193
244
383
407
441
435
447
102
Percentage
Change
over
preceding
year
-44.1
21.8
-4.0
26.4
57.0
6.3
8.4
-1.4
2.8
Net
Barter
Terms
of
Trade
Index
77.6
92.7
78.6
91.2
145.1
64.2
61.7
127.7
138.6
138.7
Percentage
Change
over
preceding
year
19.5
-15.2
16.0
59.1
-55.7
-4.0
107.0
8.6
0.1
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
730
896
826
794
853
1063
946
897
1158
1513
1935
17.7
22.7
-7.8
-3.9
7.4
24.6
-11.0
-5.2
29.1
30.7
27.9
511
649
540
439
795
1077
928
1122
1122
1512
2110
14.3
27.0
-16.8
-18.7
81.1
35.5
-13.8
20.9
0000
-86.5
39.6
142.9
138.1
153.0
180.9
107.3
98.7
101.9
79.9
10.1
100.1
91.7
3.0
-3.4
10.8
18.2
-40.7
-8.0
3.3
-21.6
-87.1
869.7
-8.4
In the post-reform period, the index of net barter terms of trade for MFL
increased from 61.7 in 1991-92 to 180.9 in 1998-99. Thereafter it largely
fluctuated and deteriorated below the base level in the years 2000-2001, 200203 and 2005-06. The export unit value and import unit value indices rose from
251 and 407 respectively in 1991-92 to 853 and 795 respectively in 1999-2000.
The export unit value index declined from 1063 in 2000-01 to 897 in
2003-04 and increased to 1935 in 2005-06. The import unit value index
increased from 928 in 2001-02 to 1512 in 2004-05. The export unit value index
was generally greater than import unit value index in both values and growth
terms during the post-reform period.
Table 4.22 shows the annual average percentage change in net barter
terms of trade of MFL in accelerated from 91.6 in 1985-91 to 135.0 in 19972001, while below the base year in 2002-06.
Table 4.22
Annual Average Percentage Change in Indias Net Barter Terms of Trade
of Minerals Fuels, Lubricants : 1985-86 to 2005-06
(Percentage)
Year
Export
Unit Value
Growth
Rate
103
Import
Unit Value
Growth
Rate
Net Barter
Terms of
Growth
Rate
Index
1985-86to1990-91
1991-92 to 1996-97
1997-98 to 2001-02
2002-03 to 2005-06
219.3
610.5
848.8
1216.3
Index
10.4
29.5
6.5
13.0
246.8
418.5
710.1
2934.0
11.4
9.6
12.8
145.5
Trade
Index
91.6
124.6
127.7
85.3
4.7
18.6
0.4
126.1
The trends in income terms of trade of MFL since 1985-86 are outlined
in Table 4.23. It shows that the index of income terms of trade was erratic over
pre-reform period and varied between 1529.3 to 3618.2 in 1985-86 to 1990-91.
Table 4.23
Trends in India' Income Terms of Trade of Minerals,
Fuels and Lubricants : 1985-86 to 2005-06
(Base year 1978-79=100)
Year
Export
Quantum
Index
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
1475
1403
2142
1516
1062
1988
2139
1391
1327
1337
1250
1055
915
386
239
4277
5670
7520
7629
10920
139982
Percentage
Change
over
preceding
year
-4.9
52.7
-29.2
-29.9
87.2
7.6
-35.0
-4.6
0.8
-6.5
-15.6
-13.3
-57.8
-38.1
1689.5
32.6
32.6
1.4
43.1
1181.9
Net
Barter
Terms
of
Trade
Index
105
109
126
148
168
182
208
252
270
284
337
372
411
457
464
442
481
504
552
614
689
104
Percentage
Change
over
preceding
year
Income
Terms
of
Trade
Index
Percentage
Change
over
preceding
year
3.8
15.6
17.5
13.5
8.3
14.3
21.2
7.1
5.2
18.7
10.4
10.5
11.2
1.5
-4.7
8.8
4.8
9.5
11.2
12.2
1548.8
1529.3
2698.9
2243.7
1784.2
3618.2
4449.1
3505.3
3582.9
3797.1
4212.5
3924.6
3760.7
1764.0
1109.0
18904.3
27272.7
37900.8
42112.1
67048.8
67048.8
-1.3
76.5
-16.9
-20.5
102.8
23.0
-21.2
2.2
6.0
10.9
-6.8
-4.2
-53.1
-37.1
1604.7
44.3
39.0
11.1
59.2
0.0
Both the export quantum and net barter terms of trade indices were volatile in
these years which led to the fluctuations of income terms of trade.
The
volatile trend in income terms of trade of MFL continued over post-reform

period and the same was followed by export quantum index and net barter
terms of trade index.
Table 4.22 shows the annual average rates of growth in income terms of
trade of MFL during 1985-86 to 2005-06. It shows the rising trend except for
the period 1991-92 to 1996-97 when there was a small deceleration in the
growth rate.
Table 4.24
Annual Average Percentage change in Indias Income Terms of Trade of
Minerals, Fuels, Lubricants : 1985-86 to2005-06
(Percentage)
Year
Export
Quantum
Index
1985-86 to 1990-91
1991-92 to 1996-97
1997-98 to 2000-01
2001-02 to 2005-06
1597.7
1416.5
1454.3
34344.2
Growth
Rate
Net Barter
Terms of
Trade
Index
Growth
Rate
15.2
-8.9
395.1
258.3
91.6
124.6
135.0
76.8
4.7
18.6
-4.9
151.2
Income
Terms
of
Trade
Index
1388.3
1671.9
1643.9
30375.7
Growth
Rate
3.9
3.4
357.2
463.4
A comparative picture of the movements in gross, net and income terms

of trade of MFL is presented in Figures 4.5 and 4.6. Both the figures reveal that
the levels of income terms of trade were higher than that of gross and net barter
terms of trade during the period under review.
105
Fig. 4.5
India's Gross, Net Barter and Income Terms of Trade of Mineral,
Fules & Lubricants : 1985-86 to 2005-06
140000
Index Number
120000
100000
80000
60000
40000
20000
2005-06
2004 -05
2003 -04
2002 -03
2001 -02
2000 -01
1999-00
1998-99
1997 -98
1996 -97
1995-96
1994 -95
1993-94
1992 -93
1991-92
1990-91
1989-90
1988-89
1987-88
1986-87
1985 -86
Year
G
Fig. 4.6
Annual Average Percentage Change in Indias Gross, Net Barter and Income
Terms of trade of Mineral, Fuels and Lubricants : 1985-86 to 2005-06
35000
Index Number
30000
25000
20000
15000
10000
5000
2002-03
to 200506
1997-98
to 200102
1991-92
to 199697
1985-86
to 199091
Year
G
Source : Table 4.20, 4.22 and 4.24
Crude Materials, Inedible Except Fuels : (CMIEF)

Crude materials, inedible except fuels (CMIEF) include items for
exports such as raw cotton, textile fibers & waste exel, cotton, mineral (excl.
coal, petroleum, crude fertilizers, surplus & precious stones), iron ore &
106
concentrates of base metals and crude animals & vegetable material. This
sector includes imports of oilseeds & oleaginous fruits, crude rubber including
synthetic & reclaimed, pulp and waste papers, textile fibers & waste, crude
fertilizers, sulphur, minerals excluding coal
petroleum crude fertilizers,
sulphur & precious stones ores & concentrates of base metals and non-ferous
base metals waste & scrap.
The index of gross barter terms of trade CMIEF registered a
Table 4.25
Trends in Indias Gross Barter Terms of Trade of Crude Material
Inedible except Fuels : 1985-86 to 2005-06
Year
Export
Quantum
Index
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
119
146
121
138
165
236
158
134
214
163
193
245
234
160
171
229
236
311
252
368
456
Percentage
Change
over
preceding
year
22.7
-17.1
14.0
19.6
43.0
-33.1
-15.2
59.7
-23.8
18.4
26.9
-4.5
-31.6
6.9
33.9
3.1
31.8
-19.0
46.0
23.9
Import
Quantum
Index
146
156
167
201
187
228
156
161
203
270
274
274
284
310
417
383
519
489
575
900
649
107
(Base year 1978-79=100)

Percentage
Gross
Percentage
Change
Barter
Change
over
Terms of
over
preceding
Trade
preceding
year
Index
year
122.7
6.8
106.8
-12.9
7.1
138.0
29.2
20.4
145.7
5.5
-7.0
113.3
-22.2
21.9
96.6
-14.8
-31.6
98.7
2.2
3.2
120.1
21.7
26.1
94.9
-21.0
33.0
165.6
74.6
1.5
142.0
-14.3
0.0
111.8
-21.2
3.6
121.4
8.5
9.2
193.8
59.6
34.5
243.9
25.9
-8.2
167.2
-31.4
35.5
219.9
31.5
-5.8
157.2
-28.5
17.6
228.2
45.1
56.5
244.6
7.2
-27.9
142.3
-41.8
fluctuating trend in the pre-reform period but remained above the base year
excepting the year 1986-87, in which it went down below the base level. The
index remained below the base level in 1991-92 since then it fluctuated
between the level of 94.9 in 1993-94 and 244.6 in 2004-05. (Table 4.25)
On an annual average basis, the gross barter terms of trade for CMIEF
registered a negative growth rate during the pre-reform period.
Table 4.26
Trade of Crude Materials Inedible except Fuels : 1985-86 to2005-06
(Percentage)
YEAR
Export
Quantum
Index
Growth
Rate
Import
Quantum
Index
Growth
Rate
1985-86to1990-91
184.5
5.5
223
5.4
Gross
Barter
Terms of
Trade
Index
122.2
1991-92 to 1996-97
184.5
5.5
223.0
5.4
122.2
1997-98 to 2001-02
2002-03 to 2005-06
206
346.8
1.5
20.7
382.6
653.3
14.9
10.1
189.2
193.1
Growth
Rate
7.0
7.0
18.8
-4.5
This growth rate picked up to 7.0 percent in the first half of the 90s and further
to 18.8 percent in the second half. But the growth momentum could not be
sustained and it turned negative in 2002-03 to 2005-06.
Like gross barter terms of trade, the net barter terms of trade index of
CMIEF also registered an erratic trend over the period 1985-86
Table 4.27
Trends in Indias Net Barter Terms of Trade of Crude Material Inedible
except Fuels : 1985-86 to 2005-06
(Base year 1978-79=100)
Year
Export
Percentage
Import
108
Percentage
Net
Percentage
Unit
Value
Index
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
183
162
195
229
293
261
388
418
369
452
520
565
550
690
678
642
647
718
1110
1390
1407
Change
over
preceding
year
-11.5
20.4
17.4
27.9
-10.9
48.7
7.7
-11.7
22.5
15.0
8.7
-2.7
25.5
-1.7
-5.3
0.8
11.0
54.6
25.2
1.2
Unit
Value
Index
176
177
186
228
302
308
405
571
402
478
570
532
560
552
522
588
548
551
561
497
870
Change
over
preceding
year
0.6
5.1
22.6
32.5
2.0
31.5
41.0
-29.6
18.9
19.2
-6.7
5.3
-1.4
-5.4
12.6
-6.8
0.5
1.8
-11.4
75.1
Barter
Terms
of Trade
Index
104.0
91.5
104.8
100.4
97.0
84.7
95.8
73.2
91.8
94.6
91.2
106.2
98.2
125.0
129.9
109.2
118.1
130.3
197.9
279.7
161.7
Change
over
preceding
year
-12.0
14.5
-4.2
-3.4
-12.7
13.1
-23.6
25.4
3.0
-3.5
16.4
-7.5
27.3
3.9
-15.9
8.1
10.4
51.8
41.4
-42.2
to 2005-06. It deteriorated from 104.0 in 1985-86 to 91.5 in 1986-87 and

improved at the rate of 14.5 percent in 1987-88. Thereafter it deteriorated and
remained below the base level till 1995-96. It improved significantly in 199697 and remained above the base level till 2005-06 except for the year 1997-98.
The export unit value and import unit value indices also behaved
erratically during this period.
The annual average growth rate in Indias barter terms of trade for
CMIEF, as shown in Table 4.25 also confirm the fluctuating trend during 198586 to 2005-06.
Table 4.28
109
Annual Average Percentage Change in Indias Net Barter Term of Trade

of Crude Materials Inedible except Fuels : 1985-86 to 2005-06
(Percentage)
YEAR
Export
Unit
value
index
Growth
Rate
Import
Unit value
index.
Growth
Rate
1985-86to1990-91
1991-92 to1996-97
1997-98 to2001-02
2002-03 to 2005-06
220.5
452.0
641.4
1156.3
8.7
15.1
3.3
23.0
229.5
493.0
554.0
619.8
12.5
12.4
0.8
16.5
Net
Barter
Terms
of
Trade
Index
97.1
92.1
116.1
192.4
Growth
Rate
-3.5
5.1
3.2
15.3
The income terms of trade index of CMIEF since 1985-86 is shown in

Table 4.25. It shows that the terms of trade registered an uptrend in pre-reform
period and increased from 123.7 in 1985-86 to 200.0 in 1990-91. In terms of
percentage change varied between 8.0 percent (1986-87) and 24.9 percent
(1990-91). The fluctuations in income terms of trade of CMIEF continued
during the post-reform period as well. It varied between 98.0 in 1992-93 to
1029.2 in 2004-05. The variations in the annual growth rate ranged between
11.7 percent and 106.4 percent.
Table 4.29
Trends in Indias Net Barter Terms of Trade of Crude Material Inedible
except Fuels : 1985-86 to 2005-06
(Base year 1978-79=100)
Year
Export
Quantum
Index
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
119
146
121
138
165
236
158
Percentage
Change
over
preceding
year
Net
Barter
Terms
of
Trade
Percentage
Change
over
preceding
year
22.7
-17.1
14.0
19.6
43.0
-33.1
104.0
91.5
104.8
100.4
97.0
84.7
95.8
-12.0
14.5
-4.2
-3.4
-12.7
13.1
110
Net
Barter
Percentage
Terms Change over
of
preceding
Trade
year
Index
123.7
133.6
8.0
126.9
-5.1
138.6
9.3
160.1
15.5
200.0
24.9
151.4
-24.3
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
134
214
163
193
245
234
160
171
229
236
311
252
368
456
-15.2
59.7
-23.8
18.4
26.9
-4.5
-31.6
6.9
33.9
3.1
31.8
-19.0
46.0
23.9
73.2
91.8
94.6
91.2
106.2
98.2
125.0
129.9
109.2
118.1
130.3
197.9
279.7
161.7
-23.6
25.4
3.0
-3.5
16.4
-7.5
27.3
3.9
-15.9
8.1
10.4
51.8
41.4
-42.2
98.1
196.4
154.1
176.1
260.2
229.8
200.0
222.1
250.0
278.6
405.3
498.6
1029.2
737.5
-35.2
100.2
-21.5
14.2
47.8
-11.7
-13.0
11.1
12.6
11.4
45.4
23.0
106.4
-28.3
The growth rate in income terms of trade of CMIEF was also erratic on
an average basis. It increased at the rate of 4.1 percent per annum in the prereform period. It increased further to 15.6 percent per annum in the first decade
of the 90s but dropped to 13.5 per annum in
Table 4.30
Annual Average Percentage in Indias Income Term of Trade of Crude
Materials Inedible except Fuels : 1985-86 to 2005-06
(Percentage)
ls 1985-86 to200506Year
Export
Quantum
Index
Growth
Rate
Net Barter
Terms of
Trade
Growth
Rate
1985-86 to1990-91
1991-92 to1996-97
1997-98 to 2001-02
2002-03 to2005-06
161.2
184.5
206.0
346.8
16.4
5.5
1.5
20.7
95.7
92.1
116.1
192.4
-3.5
5.1
3.2
15.3
Income
Terms
of
Trade
Index
151.8
172.7
236.1
667.6
Growth
Rate
4.1
15.6
13.5
33.7
the second half. It accelerated to 33.7 percent per annum in the period 2002-03
to 2005-06 (Table 4.30).
111
Comparing the movements of gross net and income terms of trade of

CMIEF over the period 1985-86 to 2005-06 we find that these three measures
of terms of trade were highly volatile over this period. The income terms of
trade, however remained above N and G, although the growth was erratic over
the period of 1985-86 to 2005-06, but they follow the same trend.
The figures 4.8 shows average G, N and I gives more clear picture of the
movements. The I of CMIEF steadily improved from improved during 1985-86
to 2001-02 but, unprecedented improvement seen since 1997-98 to 2001-02
though G and N improved over the period of study. The G was above N in
1985-86 to 2001-02 and both reached at same point in 2002-03 to 2005-06.
Fig. 4.7
India's Gross, Net Barter and Income Terms of Trade of
Crude Material Inedible except Fuels : 1985-86 to 2005-06
1200
Index Number
1000
800
600
400
200
Year
G
112
2005-06
2003 -04
2001 -02
1999-00
1997 -98
1995-96
1993-94
1991-92
1989-90
1987-88
1985 -86
Fig. 4.8
Annual Average Percentate in Indias Gross, Net Barter and Income Terms of trade of
Crude Materials Inedible excpet Fules : 1985-86 to 2005-06
700
600
Index Number
500
400
300
200
100
0
1985-86 to 1990-91
1991-92 to 1996-97
1997-98 to 2001-02
2002-03 to 2005-06
Year
G
Manufactured Goods Chiefly Classified by Material (MGCCM)

Manufactured goods chiefly classified by material comprises of leather
and leather manufactures excluding footwear, textile yearn, cotton fabrics
woven, Textile fibres other than cotton, made up articles of textile materials,
floor coverings, non metallic mineral manufactures, iron and steel non ferrous
metals and manufactures of metals in the category of export. The imports
included paper, paper board & articles thereof, textile yarn, non-metallic
mineral manufactures, iron & steel, copper, nickel, aluminum, lead, tin and
manufactures of metals.
The trends in the gross barter terms of trade of MGCCM are outlined in
Table 4.31. It shows that the gross barter terms of trade remained favuourable
113
and above the base level during the period 1985-86 to 1990-91. But the growth
rates turned out to be negative. The export quantum index increased from 88 in
1985-86 to 138 in 1990-91. During the same period of import quantum index
registered a fluctuating trend and rose exceptionally high to the level of 249 in
1986-87. Further the import quantum index remained above the quantum index
in pre-reform period.
During the post-reform period the gross barter terms of trade to were
against India in eight out of fifteen years. The table also shows that the growth
in quantum index of imports lagged behind the growth in quantum index in
exports in general.
Table 4.31
Trends in Indias Gross Barter Terms of Trade of Manufactured Goods
Chiefly Classified by Material : 1985-86 to 2005-06
(Base =1978-79=100)
Year
Export
Quantum
Index
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
88
101
120
136
136
138
155
204
229
269
304
343
303
269
Percentage
Change
over
preceding
year
14.8
18.8
13.3
0.0
1.5
12.3
31.6
12.3
17.5
13.0
12.8
-11.7
-11.2
Import
Quantum
Index
195
249
207
223
223
187
186
172
235
218
227
282
327
371
114
Percentage
Change
over
preceding
year
27.7
-16.9
7.7
0.0
-16.1
-0.5
-7.5
36.6
-7.2
4.1
24.2
16.0
13.5
Gross
Barter
Terms
of
Trade
Index
221.6
246.5
172.5
164.0
164.0
135.5
120.0
84.3
102.6
81.0
74.7
82.2
107.9
137.9
Percentage
Change
over
preceding
year
11.3
-30.0
-4.9
0.0
-17.4
-11.4
-29.7
21.7
-21.0
-7.9
10.1
31.3
27.8
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
313
484
504
575
609
617
709
16.4
54.6
4.1
14.1
5.9
1.3
14.9
463
366
420
535
597
709
730
24.8
-21.0
14.8
27.4
11.6
18.8
3.0
147.9
75.6
83.3
93.0
98.0
114.9
103.0
7.3
-48.9
10.2
11.7
5.4
17.2
-10.4
Table 4.32 shows that the annual average percentage change in terms of
trade of manufactured goods. It remained negative in the first half of the 90s
but increased at the rate of 5.5 percent per annum during 1997-98 to 2001-02. It
improved further to 6.00 percent in the following five years.
Table 4.32
Annual Average Percentage change in Indias Gross Barter Terms of
Trade of Manufactured Goods
Chiefly Classified by Material : 1985-86 to 2005-06
(Percentage)
YEAR
Export
Quantum
Index
Growth
Rate
Import
Quantum
Index
Growth
Rate
1985-86 to1990-91
1991-92 to 1996-97
1997-98 to 2001-02
2002-03 to 2005-06
119.8
250.7
374.6
627.5
9.7
16.6
10.4
9.1
214.0
220.0
389.4
642.8
0.5
8.3
9.6
15.2
Gross
Barter
Terms of
Trade
Index
184.0
90.8
110.5
102.2
Growth
Rate
-8.2
-6.4
5.5
6.0
Source : Calculated from Table
The movement in net barter terms of trade of manufactured goods

chiefly classified by materials since 1985-86 is shown in Table 4.33. It shows
that the terms of trade remained favourable in the pre-reforms period. The
favourable developments, however, were not consistent over the whole period.
It increased in 1986-87 over the preceding year but registered a declining trend
thereafter. The growth in unit value index of exports lagged behind the growth
115
in unit value index of imports throughout this period excepting the year 198687.
Table 4.33
Trends in Indias Net Barter Terms of Trade of Manufactured Goods
chiefly classified by Materials : 1985-86 to 2005-06
(Base 1978-79=100)
Year
Export
Unit
Value
Index
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
182
193
221
275
346
378
458
457
537
538
586
554
707
848
919
700
661
731
759
919
886
Percentage
Change
over
preceding
year
6.0
14.5
24.4
25.8
9.2
21.2
-0.2
17.5
0.2
8.9
-5.5
27.6
19.9
8.4
-23.8
-5.6
10.6
3.8
21.1
-3.6
Import
Unit
Value
Index
131
118
157
209
273
311
337
484
432
472
626
612
595
596
588
727
660
644
682
775
875
Percentage
Change
over
preceding
year
-9.9
33.1
33.1
30.6
13.9
8.4
43.6
-10.7
9.3
32.6
-2.2
-2.8
0.2
-1.3
23.6
-9.2
-2.4
5.9
13.6
12.9
Net
Barter
Terms
of
Trade
Index
138.9
163.6
140.8
131.6
126.7
121.5
135.9
94.4
124.3
114.0
93.6
90.5
118.8
142.3
156.3
96.3
100.2
113.5
111.3
118.6
101.3
Percentage
Change
over
preceding
year
17.7
-13.9
-6.5
-3.7
-4.1
11.8
-30.5
31.6
-8.3
-17.9
-3.3
31.3
19.7
9.8
-38.4
4.0
13.3
-2.0
6.6
-14.6
The net barter terms of trade for manufactured goods registered a

downward trend in initial years of economic reform. It deteriorated from 135.9
116
in 1991-92 to 90.5 in 1996-97. However, it increased to 118.8 in 1997-98 and

further to 156.3 in 1998-99. It worsened by 60.0 points in 2000-01, and was
below the base level. Thereafter it remained between 100.2 in 2001-02 and
118.6 in 2004-05.
The export unit value index increased from 458 in 1991-92 to 886 in
2005-06. The import unit value index increased from 337 in 1991-92 to 626 in
1995-96, and remained volatile in the rest of the years. The growth rates in
export and import unit value indices fluctuated in the reform period. This
fluctuations resulted in an eratic trend in growth rate of terms of trade on an
annual percentage basis (Table 4.34)
Table 4.34
Trends in Annual Average Percentage in Indias Net Barter Terms of
Trade of Manufactured Goods
Chiefly Classified by Materials: 1985-86 to 2005-06
(Percentage)
YEAR
Export
Unit
value
index
Growth
Rate
Import
Unit
value
Index
Growth
Rate
1985-86 to1990-91
1991-92 to 1996-97
1997-98 to 2001-02
2002-03 to 2005-06
265.8
521.7
767
823.8
16.0
7.0
5.3
8.0
199.8
493.8
633.2
744.0
20.2
13.5
2.1
7.5
Net
Barter
Terms of
Trade
Index
137.2
108.8
122.8
111.2
Growth
Rate
-2.1
-2.8
5.3
0.8
The movement in income terms of trade of manufactured goods is

represented in table 4.28. It can be seen from the table that the income terms of
trade increased from 122.3 in 1985-86 to 178.9 in 1988-89 and than declined in
the years 1989-90 and 1990-91 reaching the level of 167.7 in 1990-91. The
117
export volume index consistently increased from 88 in 1985-86 to 138 in 199091, while net barter terms of trade registered largely a declining trend in this
period.
Table 4.35
Trends in Indias Income Terms of Trade of Manufactured Goods chiefly
classified by Materials : 1985-86 to 2005-06
(Base 1978-79=100)
Year
Export
Quantum
Index
1985 -86
88
1986-87
101
1987-88
120
1988-89
136
1989-90
136
1990-91
138
1991-92
155
1992-93
204
1993-94
229
1994-95
269
1995-96
304
1996-97
343
1997-98
303
1998-99
269
1999-2000
313
2000-01
484
2001-02
504
2002-03
575
2003-04
609
2004-05
617
2005-06
709
Percentage
Change
over
preceding
year
14.8
18.8
13.3
0.0
1.5
12.3
31.6
12.3
17.5
13.0
12.8
-11.7
-11.2
16.4
54.6
4.1
14.1
5.9
1.3
14.9
Net
Barter
Terms
of
Trade
Index
138.9
163.6
140.8
131.6
126.7
121.5
135.9
94.4
124.3
114.0
93.6
90.5
118.8
142.3
156.3
96.3
100.2
113.5
111.3
118.6
101.3
Percentage
Change
over
preceding
year
Income
Terms
of
Trade
Index
17.7
-13.9
-6.5
-3.7
-4.1
11.8
-30.5
31.6
-8.3
-17.9
-3.3
31.3
19.7
9.8
-38.4
4.0
13.3
-2.0
6.6
-14.6
122.3
165.2
168.9
178.9
172.4
167.7
210.7
192.6
284.7
306.6
284.6
310.5
360.0
382.7
489.2
466.0
504.8
652.7
677.8
731.6
717.9
Percentage
Change over
preceding
year
35.1
2.3
5.9
-3.7
-2.7
25.6
-8.6
47.8
7.7
-7.2
9.1
16.0
6.3
27.8
-4.7
8.3
29.3
3.8
8.0
-1.9
During the post-reform period, the income terms of trade of

manufactured goods registered a rising trend and this favourable development
was largely consistent.
118
However, in terms of annual average percentage change, the income

terms of trade for manufactured goods increased at the rate of 7.4 percent per
annum in 1985-91, and at 12.41 percent during 1991-97. Thereafter it improved
at a decelerated pace in the remaining two sub-periods (Table 4.29)
Table 4.36
Annual Average Percentage Change in Indias Income Terms of Trade of
Manufactured Goods Chiefly
Classified by Materials : 1985-86 to2005-06
(Percentage)
Year
1985-86 to1990-91
1991-92 to1996-97
1997-98 to 2001-02
2002-03 to 2005-06
Export
Growth
Net
Quantum
Rate
Barter
Index
Terms
of
Trade
119.8
9.7
137.2
250.67
16.58
108.79
374.6
10.4
122.8
627.5
9.1
111.2
Growth Income Growth

Rate
Terms
Rate
of
Trade
-2.1
-2.76
5.3
0.8
162.6
264.94
440.6
695.0
7.4
12.41
10.7
9.8
A comparison of the movements in gross, net barter and income terms

of trade of manufactured goods in Fig. 4.9 shows that the gross and net barter
terms of trade indices moved around 200 in 1985-86 to 2005-06, while the
movement in income terms of trade was at a higher pace.
The same trend is revealed when we compare the growth rates in gross,
net barter and income terms of trade during the period 1985-86 on an annual
average basis (Fig. 4.10)
119
2005-06
2004 -05
2003 -04
2002 -03
2001 -02
2000 -01
1999-00
1998-99
1997 -98
1996 -97
1995-96
1994 -95
1993-94
1992 -93
1991-92
1990-91
1989-90
1988-89
1987-88
1986-87
800
700
600
500
400
300
200
100
0
1985 -86
Index Number
Fig. 4.9
India's Gross, Net Barter and Income Terms of Trade of Manufactured
Goods Chiefly classified by Material : 1985-86 to 2005-06
Year
G
Fig. 4.10
Annual Average Percentage Change in Indias Gross, Net Barter and Income Terms of
trade of Manufactured Goods chiefly Classified by the Material : 1985-86 to 2005-06
700
600
Indiex Number
500
400
300
200
100
0
1985-86 to 1990-91
1991-92 to 1996-97
1997-98 to 2001-02
Year
G
120
2002-03 to 2005-06
Machinery & Transport Equipment (MTE)

Machinery & transport equipment generally refer to the engineering
good and largely consist of item for exports such as non-electrical machinery,
telecommunications, sound recording / reproducing apparatus and equipments,
electrical machinery and transport equipment. The commodities imported
under MTE include power generating machinery and equipment, machinery
specialized for particular industries, metal working machinery, general
industrial machinery and equipment, office machines and automatic data
processing equipment, electrical machinery and transport equipments.
The gross barter terms of trade (G) of MTE is represented in table 4.37.
The gross barter terms of trade of CMIEF fluctuated in the pre-reform period
varying between 141.6 in 1990-91 248.2 points in 1986-87. Both the export
quantum and import quantum indices rose during this period. But the growth
rate in export quantum index exceeded the growth rate in import quantum
index in general.
The gross barter terms of trade of MTE increased from 118.7 points in
1991-92 to 258.3 in 2005-06 with fluctuations in between Table 4.37 shows
that the annual average percentage change in gross barter terms of trade for
MTE during the period 1985-86 to 2005-06 varied significantly.
Table 4.37
Trends in Indias Gross Barter Terms of Trade of
Machinery & Transport Equipment : 1985-86 to 2005-06
(Base =1978-79=100)
Year
Export
Percentage
Import
121
Percentage
Gross
Percentage
Quantum
Index
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
128
139
202
229
298
311
358
288
311
488
843
761
679
567
654
960
970
1102
1294
1707
2003
Change
over
preceding
year
8.6
45.3
13.4
30.1
4.4
15.1
-19.6
8.0
56.9
72.7
-9.7
-10.8
-16.5
15.3
46.8
1.0
13.6
17.4
31.9
17.3
Change
over
preceding
year
Quantum
Index
278
345
349
356
486
441
425
572
715
1645
1395
1205
948
963
1039
1076
1276
1654
1950
2211
5174
Barter
Terms of
Trade Index
Change over
preceding
year
217.2
248.2
172.8
155.5
163.1
141.8
118.7
198.6
229.9
337.1
165.5
158.3
139.6
169.8
158.9
112.1
131.5
150.1
150.7
129.5
258.3
14.3
-30.4
-10.0
4.9
-13.1
-16.3
67.3
15.8
46.6
-50.9
-4.3
-11.8
21.6
-6.5
-29.4
17.4
14.1
0.4
-14.0
99.4
24.1
1.2
2.0
36.5
-9.3
-3.6
34.6
25.0
130.1
-15.2
-13.6
-21.3
1.6
7.9
3.6
18.6
29.6
17.9
13.4
134.0
Table 4.38
Trade of Machinery and Transport Equipments : 1985-86 to 2005-06
(Percentage)
Year
Export
Quantum
Index
Growth
Rate
Import
Quantum
Index
Growth
Rate
1985-86to 1990-91
1991-92 to 1996-97
1997-98 to 2001-02
2002-03 to 2005-06
217.8
508.2
766
1526.5
20.4
20.6
7.2
20.1
375.8
992.8
1060.4
2747.3
10.9
26.2
2.1
48.7
Gross
Barter
Terms of
Trade
Index
183.1
201.4
142.4
172.2
Growth
Rate
-6.9
9.7
-1.7
25.0
The movement in net barter terms of trade of MTE over the period
1985-86 to 2005-06 is shown in Table 4.39. It shows that the index declined
from 112.6 in 1985-86 to 86.7 in 1987-88, but improved to 122.4 in 1989-90. It
further deteriorated by 15.5 points in 1990-91 but
122
Table 4.39
Trends in Indias Net Barter Terms of Trade
of Machinery and Transport Equipments : 1985-86 to2005-06
(Base =1978-79=100)
Year
Export
Unit
Value
Index
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
134
149
130
162
175
201
293
309
337
310
241
327
394
450
431
425
464
493
559
544
642
Percentage
Change
over
preceding
year
11.2
-12.8
24.6
8.0
14.9
45.8
5.5
9.1
-8.0
-22.3
35.7
20.5
14.2
-4.2
-1.4
9.2
6.3
13.4
-2.7
18.0
Import
Unit
Value
Index
119
148
150
155
143
188
194
181
213
113
191
226
293
333
276
289
272
288
319
378
242
Percentage
Change
over
preceding
year
24.4
1.4
3.3
-7.7
31.5
3.2
-6.7
17.7
-46.9
69.0
18.3
29.6
13.7
-17.1
4.7
-5.9
5.9
10.8
18.5
-36.0
Net
Barter
Terms
of
Trade
Index
112.6
100.7
86.7
104.5
122.4
106.9
151.0
170.7
158.2
274.3
126.2
144.7
134.5
135.1
156.2
147.1
170.6
171.2
175.2
143.9
265.3
Percentage
Change over
preceding
year
-10.6
-13.9
20.6
17.1
-12.6
41.3
13.0
-7.3
73.4
-54.0
14.7
-7.1
0.5
15.6
-5.8
16.0
0.3
2.4
-17.9
84.3
remained above the base level at 106.9. The growth rate in export unit value
and import unit value indices fluctuated over this period but growth in export
unit value index largely exceeded the growth in index.
The table also shows the eratic trends in the net barter terms of trade
movement of MTE in the first decade of economic reforms. It varied from
134.1 in 1991-92 to 170.7in 1999-2000. The export unit value and import unit
value indices also fluctuated in this period. Though the export unit value index
was greater than import unit value, index their
123
Table 4.40
of Machinery & Transport Equipments : 1985-86 to 2005-06
YEAR
Growth
Rate
1985-86 to 1990-91
Export
Unit
value
index
158.5
1991-92 to 1996-97
1997-98 to 2001-02
(Percentage)
Growth
Rate
Growth
Rate
Net Barter
Terms of Trade
Index
9.2
Import
Unit
value
index
150.5
10.6
105.6
0.1
302.8
11.0
186.3
9.1
170.9
13.5
432.8
7.7
292.6
5.0
148.7
3.8
2002-03 to 2005-06
559.5
8.7
306.8
-0.2
188.9
17.3
growth rate was volatile. Therefore, erratic trend in growth rate of net barter
terms of trade (Table 4.40)
The trends in income terms of trade of MTE is shown in Table 4.41. It
shows an upward movement in income terms of trade in the pre-reform period.
It increased from 144.1 in 1985-86 to 364.7 in 1989-90. The export quantum
index increased from 128 in 1985-86 to 311 in 1990-91 while the net barter
terms of trade remained fluctuating in this period. Thus, the export quantum
index exerted an upward pressure on the movement of income terms of trade of
MTE during the pre-reform period.
A rising trend in income terms of trade of MTE continued during 199192 to 1994-95, when the index increased from 434.9 to 1388.7 during this
period.
Table 4.41
Trends in Indias Income Terms of Trade
of Machinery & Transport Equipment : 1985-86 to2005-06
(Base =1978-79=100)
Year
Export
Quantum
Index
Percentage
Change
over
Net
Barter
Terms of
124
Percentage
Change
over
Income
Terms
of
Percentage
Change over
preceding
preceding
year
1985 -86
128
1986-87
139
1987-88
202
1988-89
229
1989-90
298
1990-91
311
1991-92
358
1992-93
288
1993-94
311
1994-95
488
1995-96
843
1996-97
761
1997-98
679
1998-99
567
1999-2000
654
2000-01
960
2001-02
970
2002-03
1102
2003-04
1294
2004-05
1707
2005-06
2003
8.6
45.3
13.4
30.1
4.4
15.1
-19.6
8.0
56.9
72.7
-9.7
-10.8
-16.5
15.3
46.8
1.0
13.6
17.4
31.9
17.3
Trade
Index
112.6
100.7
86.7
104.5
122.4
106.9
151.0
170.7
158.2
274.3
126.2
144.7
134.5
135.1
156.2
147.1
170.6
171.2
175.2
143.9
265.3
preceding
year
-10.6
-13.9
20.6
17.1
-12.6
41.3
13.0
-7.3
73.4
-54.0
14.7
-7.1
0.5
15.6
-5.8
16.0
0.3
2.4
-17.9
84.3
Trade
Index
144.1
139.9
175.1
239.3
364.7
332.5
540.7
491.7
492.1
1338.8
1063.7
1101.1
913.1
766.2
1021.3
1411.8
1654.7
1886.4
2267.5
2456.6
5313.7
year
-2.9
25.1
36.7
52.4
-8.8
62.6
-9.1
0.1
172.1
-20.5
3.5
-17.1
-16.1
33.3
38.2
17.2
14.0
20.2
8.3
116.3
The income terms of trade of MTE fluctuated during 1995-96 to 19992000, and varied between 766.2 to 1101. The income terms of trade increased
from 1021.2 in 1999-2000 to 5314.0 points in 2005-06 or a consistent basis.
The export quantum of machinery and transport equipment was also volatile
during first decade of economic reform and same was followed by net barter
terms of trade in this period. However, the fluctuations in net barter terms of
trade continued till 2005-06 while export quantum index rose from 960 in
2000-01 to 2003 in 2005-06, resulting in an unprecedented increase in income
terms of trade of MTE.
The movement in income terms of trade of MTE during the period
1985-86 to 2005-06 on an annual average basis is summarized in Table 4.42.
125
Table 4.42
of Machinery & Transport Equipments : 1985-86 to2005-06
Year
Export
Quantum
Index
Growth
Rate
1985-86 to 1990-91
217.8
1991-92 to 1996-97
1997-98 to 2001-02
(Percentage)
Net Barter
Growth
Terms of Trade
Rate
Index
Growth
Rate
20.4
Net
Barter
Terms of
Trade
Index
105.6
0.1
232.0
22.1
508.2
20.6
170.9
13.5
847.6
42.9
766.0
7.2
148.7
3.8
1153.3
0.5
20.1
188.9
17.3
2980.7
39.7
2002-03 to 2005-06
1526.5
Fig. 4.11 represents the movements of gross net and income terms of
trade of trade of MTE over the period of study. It reveals that the gross and net
terms of trade remained parallel to axis, over the period under review while
income terms of trade was nearly parallel to X axis from 1985-86 to 1993-94
only. Thereafter it was volatile till 1998-99. After that it improved significantly
the same story is narrated by fig. 4.12.
126
Fig. 4.11
India's Gross, Net Barter and Income Terms of Trade of Machinery &
Transport Equipment :1985-86 to 2005-06
6000
Index Number
5000
4000
3000
2000
1000
2005-06
2004 -05
2003 -04
2002 -03
2001 -02
2000 -01
1999-00
1998-99
1997 -98
1996 -97
1995-96
1994 -95
1993-94
1992 -93
1991-92
1990-91
1989-90
1988-89
1987-88
1986-87
1985 -86
Year
G
Fig. 4.12
Annual Average Percentage Change in Indias Gross, Net Barter and Income Terms of
trade of Machinery & Transport Equipment : 1985-86 to 2005-06
3500
Index Number
3000
2500
2000
1500
1000
500
0
1985-86 to 1990-91
1991-92 to 1996-97
1997-98 to 2002-03
2002-03 to 2005-06
Year
Chemicals and Allied Products (CAP)

The table 4.43 shows that the gross barter terms of trade of (CAP)
worsened and remained below the base level excepting the years 1985-86 in
127
and 1986-87. The growth in export quantum index largely exceeded the growth
in import quantum index over the period under review.
Table 4.43
Trends in Indias Gross Barter Terms of Trade of Chemicals and Allied
Products : 1985-86 to 2005-06
Year
Export
Quantum
Index
Percentage
Change over
preceding
year
1985 -86
162
1986-87
199
1987-88
233
1988-89
364
1989-90
508
1990-91
681
1991-92
927
1992-93
573
1993-94
741
1994-95
975
1995-96
1204
1996-97
1464
1997-98
1767
1998-99
1608
1999-2000
2003
2000-01
2608
2001-02
2934
2002-03
3798
2003-04
4052
2004-05
5442
2005-06
6788
Source : As for table 4.1
Import
Quantum
Index
219
226
170
201
118
240
268
292
335
390
390
408
509
536
604
446
477
470
789
838
951
22.8
17.1
56.2
39.6
34.1
36.1
-38.2
29.3
31.6
23.5
21.6
20.7
-9.0
24.6
30.2
12.5
29.4
6.7
34.3
24.7
(Base =1978-79=100)
Gross
Percentage
Percentage
Barter
Change
Change over
Terms of
over
preceding
Trade
preceding
year
Index
year
135.2
3.2
113.6
-16.0
-24.8
73.0
-35.8
18.2
55.2
-24.3
-41.3
23.2
-57.9
103.4
35.2
51.7
11.7
28.9
-18.0
9.0
51.0
76.3
14.7
45.2
-11.3
16.4
40.0
-11.5
0.0
32.4
-19.0
4.6
27.9
-14.0
24.8
28.8
3.4
5.3
33.3
15.7
12.7
30.2
-9.5
-26.2
17.1
-43.3
7.0
16.3
-4.9
-1.5
12.4
-23.9
67.9
19.5
57.3
6.2
15.4
-20.9
13.5
14.0
-9.0
The deterioration is also confirmed by the data given in Table 4.44.

Table 4.44
Trade of Chemical and Allied Products : 1985-86 to 2005-06
(Percentage)
YEAR
Export
Quantum
Index
Growth
Rate
Import
Quantum
Index
Growth
Rate
Gross
Barter
Terms
of
Trade
Index
1985-86 to 1990-91
357.8
34.0
195.7
11.7
72.6
128
Growth
Rate
-16.5
1991-92 to 1996-97
980.7
1997-98 to 2001-02
2184.0
2002-03 to 205-06
5020
17.3
347.2
9.4
37.6
0.4
15.8
23.8
514.4
762
4.7
21.5
25.1
15.3
-7.7
0.9
The net barter terms of trade of CAP as shown in Table 4.36 remained
adverse in 12 out of 21 years under review. The unfavourable developments
were, however, not equally spread over the whole period as shown in Table
4.46,
Table 4.45
Trends in Indias Net Barter Terms of Trade of Chemical and Allied
Products : 1985-86 to 2005-06
(Base =1978-79=100)
Year
Export
Unit
Value
Index
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
157
158
205
217
260
232
262
410
428
457
469
476
468
530
520
534
503
492
548
518
506
Percentage
Change
over
preceding
year
0.6
29.7
5.9
19.8
-10.8
12.9
56.5
4.4
6.8
2.6
1.5
-1.7
13.2
-1.9
2.7
-5.8
-2.2
11.4
-5.5
-2.3
Import
Unit
Value
Index
157
140
165
225
515
280
341
369
337
406
579
524
484
498
501
560
628
703
521
661
769
129
Percentage
Change
over
preceding
year
-10.8
17.9
36.4
128.9
-45.6
21.8
8.2
-8.7
20.5
42.6
-9.5
-7.6
2.9
0.6
11.8
12.1
11.9
-25.9
26.9
16.3
Net
Barter
Terms
of
Trade
Index
100
112.9
124.2
96.4
50.5
82.9
76.8
111.1
127.0
112.6
81.0
90.8
96.7
106.4
103.8
95.4
80.1
70.0
105.2
78.4
65.8
Percentage
Change over
preceding
year
12.9
10.1
-22.4
-47.7
64.1
-7.3
44.6
14.3
-11.4
-28.0
12.1
6.4
10.1
-2.5
-8.1
-16.0
-12.6
50.3
-25.5
-16.0
the gross barter terms of trade increased at the rate of 3.4 percent in 1985-91
and accelerated further to 4.1 percent in 1991-97. This trend was reversed in
the following sub-periods.
Table 4.46
of Chemical and Allied Products : 1985-86 to2005-06
(Percentage)
Net
Barter
Growth
Terms
Rate
of Trade
94.5
3.4
YEAR
Export Unit
value index
Growth
Rate
Import
Unit value
index.
Growth
Rate
1985-86 to1990-91
204.8
9.1
247.0
25.3
1991-92 to 1996-97
417
14.1
426.0
12.5
99.9
4.1
1.3
0.4
534.2
663.5
4.0
7.3
96.5
79.8
-2.0
-1.0
1997-98 to 2001-02
511
2002-03 to 2005-06
516
The income terms of trade of CAP, on the other hand, registered a rising
trend over the period 1985-86 to 2005-06 table 4.47. This was largely due to
the increase in the quantum index of export of this group of products which
registered a persistently rising trend. In terms of annual average percentage
change, the rate varied but remained positive throughout the period under
review (Table 4.47).
Table 4.47
Trends in Indias Gross Barter terms of Trade Chemicals and
Allied Products : 1985-86 to 2005-06
(Base year=1978-79=100)
Year
Export
Quantum
Index
Percentage
Change
over
preceding
year
Net
Barter
Terms
of
Trade
130
Percentage
Change
over
preceding
year
Income
Terms
of Trade
Index
Percentage
Change over
preceding
year
1985 -86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
162
199
233
364
508
681
927
573
741
975
1204
1464
1767
1608
2003
2608
2934
3798
4052
5442
6788
Index
100
112.9
124.2
96.4
50.5
82.9
76.8
111.1
127.0
112.6
81.0
90.8
96.7
106.4
103.8
95.4
80.1
70.0
105.2
78.4
65.8
22.8
17.1
56.2
39.6
34.1
36.1
-38.2
29.3
31.6
23.5
21.6
20.7
-9.0
24.6
30.2
12.5
29.4
6.7
34.3
24.7
12.9
10.1
-22.4
-47.7
64.1
-7.3
44.6
14.3
-11.4
-28.0
12.1
6.4
10.1
-2.5
-8.1
-16.0
-12.6
50.3
-25.5
-16.0
162
224.6
289.5
351.1
256.5
564.3
712.2
636.7
941.1
1097.5
975.3
1329.9
1708.6
1711.3
2079.0
2486.9
2350.0
2658.1
4262.0
4264.7
4466.5
38.6
28.9
21.3
-26.9
120.0
26.2
-10.6
47.8
16.6
-11.1
36.4
28.5
0.2
21.5
19.6
-5.5
13.1
60.3
0.1
4.7
Table 4.48
Annual Average Percentage Change in Indias Income Terms of Trade of
Chemical and Allied Products : 1985-86 to2005-06
Year
Export
Quantum
Index
Growth
Rate
1985-86 to1990-91
1991-92 to1996-97
1997-98 to 2001-02
2002-03 to2005-06
357.8
980.7
2184.0
5020.0
34.0
17.3
15.8
23.8
Net
Barter
Terms of
Trade
Index
94.5
99.9
96.5
79.8
Growth
Rate
3.4
4.1
-2.0
-1.0
(Percentage)
Income
Growth
Terms of
Rate
Trade
Index
308.0
948.8
2067.2
3912.8
36.4
17.5
12.8
19.6
A comparison of the movements of the gross, net and income terms of

trade in Figures 4.13 and 4.14 .also shows the divergent trends in the
movements of income terms of trade on the one hand and the gross and net
131
barter terms of trade on the other. The gross and net barter terms of trade
moved parallel to each other.
Fig. 4.13
India's Gross, Net Barter and Income Terms of Trade ofChemical &
Allied Products : 1985-86 to 2005-06
Index Number
5000
4500
4000
3500
3000
2500
2000
1500
1000
Year
G
Fig. 4.14
Annual Average Percentage in Indias Gross, Net Barter and Income Terms of trade of
Chemical & Allied Products : 1985-86 to 2005-06
4000
3500
Index Number
3000
2500
2000
1500
1000
500
Year
G
132
2002-03
to 200506
1997-98
to 200102
1991-92
to 199697
1985-86
to 199091
2005-06
2004 -05
2003 -04
2002 -03
2001 -02
2000 -01
1999-00
1998-99
1997 -98
1996 -97
1995-96
1994 -95
1993-94
1992 -93
1991-92
1990-91
1989-90
1988-89
1987-88
1986-87
1985 -86
500
0
4.4
Concluding Remarks:
Indias terms of trade showed varying trends during the period of study.
The gross barter terms of trade which measures the volume index of imports as
a ratio of volume index of exports deteriorated in the pre-reform years. The net
terms of trade which measures the unit value index of exports as a proportion
of unit value index of imports fluctuated widely over the period under study but
remained above the base level or favourable. Income terms of trade reflecting
capacity to import improved consistently this increase was the outcome of
improvement in export quantum index largely within this broad trend, the trend
in terms of trade varied widely across the various group of commodities.
133

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Chapter - IV Trends in India's Terms of Trade: 1985-86 To 2005-06

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Chapter IV

Trends in Indias Terms of Trade : 1985-86 to

developing countries as a group as well as by economic groupings over the

Trends in Indias Gross Barter, Net Barter and Income Terms of

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Trends in Indias Terms of Trade : 1985-86 to 2005-06

The index declined from 128.7 in 1986-87 to 122.1 in 1987-88, 121.1 in

Trends in Indias Terms of Trade : 1985-86 to 2005-06

1994-95 implying that the purchasing power of exports increased rapidly

The movement in Indias income terms of trade since 1985-86 is shown

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Source : Derived from Table 4.5

Source : Tables 4.1, 4.3 and 4.5

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Source : Tables 4.2, 4.4 and 4.6

Trends in Indias Terms of Trade of Major Product Groups:

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Trends in Indias Terms of Trade : 1985-86 to 2005-06

In terms of annual average percentage change, the gross barter terms of

(Base year 1978-79=100)

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Trends in Indias Terms of Trade : 1985-86 to 2005-06

to 0.4 percent in 1991-92 - 1996-97 and turned negative at -1.3 percent in

(Base 1978-79 = 100)

Source : As for Table 4.1

Trends in Indias Terms of Trade : 1985-86 to 2005-06

to the rate of 1.9 percent in 1997-02. It, however, recorded considerable

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Source : As for Table 4.1

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Trends in Indias Terms of Trade : 1985-86 to 2005-06

The unfavourable developments in Indias net barter terms of trade of

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Annual Average Percentage Change in Net Barter Terms of Trade of

Source : Calculated from Table 4.15

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Source : As for Table 4.1

The poor performance of terms of trade of beverages & tobacco is

Source : Calculated from Table 4.17

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Comparing the movements in gross, net and income terms of trade of

Source: Table 4.13, 4.15 and 4.17

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Source: Based on Table Fig. 4.14, 4.16 and 4.18

Mineral Fuels, Lubricants etc. (MFL)

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Source : As for Table 4.1

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Source : Calculated from Table 4.19

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Source : As for Table 4.1

Trends in Indias Terms of Trade : 1985-86 to 2005-06

Source : Derived from Table 4.21

Source : As for Table 4.1

Trends in Indias Terms of Trade : 1985-86 to 2005-06

volatile trend in income terms of trade of MFL continued over post-reform