INTERNATIONAL TRADE AND DEBT 49 The government spokesmen claim that the liberalised regime has pushed up rates of growth in the industrial sector since 1980, checked smuggling of consumer durables, and through providing access to international inputs and technology has brought about a rapid growth of exports of manufactures. On the other hand, the critics of the liberalisation strategy argue that this new policy has spawned a host of import-intensive assembly plants producing consumer, durables for the affluent, widened the trade gap and led the Indian economy into debt trap. The object of this short note is to critically examine the recent trends in India's foreign trade and balance of payments positions. What are the factors behind the rapid build up external liabilities? Is it the new trade regime that is responsible for the disequilibrium; or was the second oil shock to blame? What are the reasons for the failure of exports to finance the imports? Was there a reduction in multilateral flow of resources? Or were there other factors responsible for the crisis? INDIA'S FOREIGN TRADE IN THE EIGHTIES To answer the questions above, it is necessary to critically examine the trade performance in the eighties. This is easier said than done, since detailed trade data are not easily available. What complicates the picture more is the gradual decline in the value of the rupee, as the new trade regime tried to enhance the export incentive through gradual and steady devaluation of the rupee, often at rates exceeding the rates of domestic inflation. And then there are the well known discrepancies in the trade data from Director General of Commercial Intelligence and Statistics (DGCIS) and the Reserve Bank of India's (RBI) data on trade as given in the balance of payments statistics. To decipher the picture, we have converted all data in US $ equivalent at the average rates. RBI gives BOP data both in rupees and dollars and DGCIS data has been converted into dollars using the same rate of exchange. The decade of eighties opened with the aftermath of the second oil shocks. This pushed up India's trade deficit from Rs. 1843 crore or $2239 million in 1978-79 to Rs. 5756 crore or $7.3 bn in 1980-81. The value of POL imports surged from $2049 mn. (Rs. 1681 cr.) in 1978-79 to $ 6659 mn(Rs. 5266 cr.) in 1980-81 as reported by DCCIS. At the beginning of the decade, petroleum and chemical fertilisers constituted 53 per cent of India*s imports valued at about $15.8 bn. Though the second oil shock was not as severe as the first, like the 1970s there was no commodity boom to offset its impact. In contrast, the advanced economies went through a recession in the 1980-83 period and the world trade and commodity prices were depressed. India was forced to borrow from IMF under the Extended Fund Facility.