Ques- Write a note on the importance of foreign trade in the Indian economy.
Ans- Trade is the voluntary, mutual and legal transaction of goods between two parties. The trade of a country is divided into two parts-
(i) Domestic business,
(ii) Foreign business.
When there is buying and selling of goods and services between different nations, it is called foreign trade. In the general sense, foreign trade refers to the trade between many countries. Foreign trade is also called international trade or external trade. For example- India's trade with America. The importance of foreign trade in the Indian economy can be expressed in the following ways:
1. Promotion of Industrialization-
Through foreign trade, the necessary equipment, raw materials and technical knowledge are easily obtained to upgrade the industries in the country. As a result, industrial development is encouraged in the country.
2. Full utilization of natural resources-
Every country establishes such industries from which it can get maximum profit and then that country sells its produced goods in that market, where it gets the highest price for its goods. When the demand for the goods produced by that country becomes more, then it starts making full use of the available natural resources.
3. Availability of cheap goods-
Due to the presence of foreign trade, cheap and good quality goods are easily obtained from abroad. By using foreign objects in life, the standard of living of the people is improved.
4. Improvement in production and technical efficiency-
The industrialists of the country are always afraid of foreign competition due to foreign trade. Industrialists know that if they cannot produce high quality products at low cost, the demand for the goods produced by them will decrease. For this reason, they keep improving their efficiency and production technology.
5. Geographical division of labour-
When foreign trade is free, every country produces such goods from which it has maximum natural benefit. Thus the activities of foreign trade make possible the geographical division of labour.
6. Receipt of raw material-
Due to foreign trade, raw materials are easily available to different countries, which encourages the industrialization of the country.
7. Receipt of Income-
The government gets income through foreign trade by levying a substantial amount of import and export taxes.
8. Receipt of foreign exchange-
Foreign exchange is obtained through foreign trade.
9. Trend of equality in price level-
Foreign trade is the reason why the prices of goods and services are equal in almost all the countries of the world.
10. Benefits to consumers-
Due to the production under optimum conditions, the cost of production of the commodity is very less, as a result of which the consumers get the best goods at low prices in the country itself. This also improves their standard of living.
11. Control of monopolistic tendency-
Due to foreign competition, monopolistic tendencies in the field of international trade are curbed, in which industrialization of the country is encouraged.
12. Increase in international cooperation and goodwill-
As a result of foreign trade, citizens of different countries come in contact with each other and get acquainted with each other's thoughts and living habits. By coming in contact with each other, cultural cooperation and mutual trust increase.
Conclusion- On the basis of the above description, it can be said that there are many benefits of foreign trade, but at the same time the relationship of friendship with each other is also deepened.
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