Trade-GDP Ratio: Meaning and India’s Ratio

The trade-to-GDP ratio is obtained by dividing trade over a period by GDP of same period. It is expressed as percentage of GDP. It is also used as a measure of openness of an economy and thus is called trade openness ratio.

Trade GDP Ratio – World, India and Other countries

Global trade GDP Ratio was around 20% in 1995 and has increased to over 44% in 2015.  India’s trade-GDP ratio  has increased substantially in last few decades mainly due to increased service exports from India. India’s ratio has been rising sharply, particularly over the decade to 2012, when it doubled to 53 per cent; the recovery from the global financial crisis in 2008 was also swift. As a result, India’s ratio now surpasses China and United States, which is remarkable.

Trade-GDP Ratio as indicator of Globalization

Since degree of trade represents openness of an economy with respect to other economies, trade-GDP Ratio also indicates degree of globalization, which implies that more is this ratio, more globalized an economy is. The trade-GDP Ratio of Singapore is highest in the world and thus, that country can be said to be most globalized country around the world.