Unit-13
Foreign Trade of India- nature and composition
Introduction of foreign trade:
There is no country within the world today which produces all the commodities it needs. Every country, therefore, tries to supply those commodities during which it's comparative advantage. It exchanges a part of those commodities with the commodities produced by other countries relatively more efficiently. The relative difference in factor endowments, technology, tastes etc, among the nations of the planet have greatly widened the idea of international trade.
Role of foreign trade economic development
The role of foreign trade are often judged by the subsequent faces:
• Foreign trade and economic development.
Foreign trade plays vital role within the economic development of any country. Pakistan also exports tons of agricultural product to other countries and imports the capital goods from other countries. Therefore, it's not wrong to mention that economic development of a rustic depends of foreign trade.
• Foreign exchange earning
Foreign trade provides exchange which may be wont to remove the poverty and other productive purposes.
• Market expansion
The demand factor plays vital role in increasing the assembly of any country. The foreign trade expands the market and encourages the producers. In Pakistan home market is extremely limited thanks to poverty. So it's necessary chat we should always sell our product in other countries.
• Increase in investment
Foreign trade encourages the investor to extend the investment to supply more goods. Therefore the rate of investment increases.
• Foreign investment
Besides the local investment, foreign trade provides incentives for the foreign investors to take a position in those countries where there's a shortage of investment.
• Increase in value
Foreign trade increases the size of production and value of the country. To satisfy the foreign demand we increase the assembly on large scale so GNP also increases.
• Decrease in unemployment
With the increase within the demand of products domestic resources are fully utilized and it increases the speed of development within the country and reduces the unemployment within the world.
• Price stability
Foreign trade helps to bring stability in price index . All those goods which are short and costs are increasing are often imported and people goods which are surplus are often exported. There by stopping fluctuation in prices.
• Specialization
There is a difference within the quality and quantity of varied factors of production in several countries. Each country adopts the specialization within the production of these commodities, during which it's comparative advantage. So all trading countries enjoy profit through international trade.
• Remove monopolies
Foreign trade also discourages the monopolies. Where every any monopolist increases the costs , government allows the import of products to scale back the costs within the country.
• Removal of food shortage
India is additionally facing the food shortage problem. To get rid of the food shortage India has imported the wheat repeatedly . So thanks to foreign trade we are solving this problem for several years.
• Agricultural development
Agricultural development is that the back bone in our economy. Foreign trade has played vital role for the event of our agriculture sector. Per annum we export rice, cotton, fruits and vegetables to other countries. The export of products makes our farmer more prosperous. It inspires the spirit of development in them.
• Import of commodity
India and Pakistan imports the varied commodity from other countries, which aren't produced inside the country. Today the shortage of any commodity are often removed through international trade.
• To improve quality of local products
Foreign trade helps to enhance quality of local products and extends market through changes in demand and provide as foreign trade can create competition with the remainder of the planet .
• External economics
External economics also can be achieved through foreign trade. The industries producing foods on large scale in Pakistan and India are enjoying the external economics thanks to international trade.
• Competition with foreign producers
We can compete with the foreign producers in foreign trade so it improves the standard and reduces the value of production. It's also a plus of foreign trade.
• Useful for the planet peace
Today all the countries are tied in trade relations with one another . So foreign trade also contribute to peace and prosperity within the world.
• Import of capital goods and technology
The inflow of capital goods and technology within the less developed countries has increased the speed of economic development, and this is often thanks to foreign trade.
• Import substitution
These countries not only produce import substitute, but also reduce deficit in balance of payment of their countries.
• Better understanding
Foreign trade provides a chance to the people of various countries to satisfy , discuss, and exchange views and concepts associated with their social, economic and political problems.
• Dissemination of data
Foreign trade is additionally liable for dissemination of data and learning from developed countries to under developed countries.
• Interdependence
Foreign trade is liable for creating economic depending and establishing economic interest within the economy of the countries having trade relations.
• Factors productivity
Through foreign trade the productivity of labour and capital and organization increases. Demand make them mobile on national also as international level which helps underdeveloped countries to develop and maintain a high level of growth of developed countries.
BOOKS
1. Indian Economy – Rudra Dutt & Sundarram
