India's trade-GDP ratio higher than US, China's

Historically, India has been viewed as being far less vulnerable to global financial crises than other large economies because it was much less integrated with the global economy than countries like, say, the US or China. Today, however, at least as far as trade goes, the opposite is true. World Bank data shows that in 2014 India's total trade (exports plus imports) was equivalent to about 50 per cent of its GDP. This was higher than the trade to GDP ratio of the US, Japan or China. During the 1997 Asian financial crisis, which India escaped relatively unscathed, total foreign trade was equivalent to only 22.2 per cent of the country's GDP.

One way to measure the extent to which an economy is globally linked is by comparing its international trade with its GDP. By this yardstick, India's aggregate exports and imports of goods and services was 49.6 per cent of the country's GDP in 2014, compared to China's trade to GDP ratio of 41.5 per cent for the same year.

In 2013, the year till when bank data is available for the US and Japan, international trade was about 30per cent of GDP for US and 35.5 per cent for the Japanese economy. Of course, the US, China and Japan are far larger economies than India at the nominal exchange rate and hence a lower trade ratio doesn't mean their trade volumes are lower than India.

The data shows that among major economies, countries of Western Europe have the highest degree of integration with the global economy. For instance, the ratio was 84.8per cent for Germany, Europe's largest economy. For the UK, Italy, Spain and France, trade was about 60per cent of GDP.

Three decades ago, in 1984, China and India had a similar degree of globalization with the trade to GDP ratio 16.6 per cent for China and 13.8 per cent for India. The Chinese economy experienced exponential growth thereafter and it was reflected in the growth of its international trade as well. The trade to GDP ratio steadily increased to a peak of 64.8 per cent in 2006. Since then it has been decreasing as China's domestic market has expanded with increased per capita incomes.

India, on the other hand, continues to be in a phase where its global trade expands at a faster pace than its economy, resulting in a steadily climbing trade to GDP ratio.