India's Foreign trade - Indian economy -

India’s Foreign trade – Indian economy

                India’s Foreign trade

What is international foreign trade?

Domestic production of certain goods may exceed their domestic consumption. what does a country do with its surplus output

Export and import of goods and services across different countries is called foreign trade

● Benefits of international/foreign trade

1. It facilitates International specialisation

2. Helps in finding market of surplus

3. It facilitates Import of goods and services

4. Helps in earn foreign money

5. It provide quality of life to people

6. Providing investment opportunities

7. Help in growth GDP

● Measures of foreign trade

1. Volume of trade

 volume of India’s foreign trade data given in text book

2. Composition of trade( which items are export and import to another country)

    a. Decline in Percentage share of Agricultural export

    b. Decline in Percentage share of conventional items (just like handicraft)

    c. Increase in Percentage share of manufactured goods

3. Direction of trade

    • Export share

      USA – 15.3%

      UAE – 11.3%

      China – 3.7%

      Others – 69.7%


    • import share

      CHINA – 15.9%

      USA – 5.8%

      SAUDIARABIA – 5.2%

      SWITZERLAND – 4.5%

      OTHERS – 68.6%

● India’s foreign trade at the time of independence

1. Indian economy suffered its colonial exploitation

2. British used Indian natural resources for their domestic industrial output

3. British also explored Indian market

4. Decline of handicraft industry

5. Limited volume of trade

6. Direction of trade at certain limit

7. Composition of trade indicate export of raw material and import of finished goods

● Inward looking trade strategy (import substitution strategy)

1. Import substitution

2. Protection and development of domestic industry through tariff and quotas

3. To check the foreign exchange only for technology

Good effect and bad effect of import substitution

•Good effects

1. High rate of industrial growth and structural transformation

2. Diversification of industrial growth

3. Opportunities of investment

•Bad effects

1. Inefficient public monopolies

2. Lack of competition implied lack of modernization

3. Indiscriminate spread of public sector

4. Politics state industries


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