Answer the following
1) Explain the concept of foreign trade and its types.
Ans: Foreign Trade is traded between the different countries of the world. It is called International Trade or External Trade.
Types of foreign trade:
Foreign trade is divided into the following three types
Import Trade: Import trade refers to the purchase of goods and services by one country from another country or inflow of goods and services from a foreign country to the home country. For example, India imports petroleum from Iraq, Kuwait, Saudi Arabia, etc
Export Trade: Export trade refers to the sale of goods by one country to another country or outflow of goods from one country to a foreign country. For example, India exports tea, rice, jute to China, Hong Kong, Singapore, etc.
Entrepot Trade: Entrepot trade refers to the purchase of goods and services from one country and then selling them to another country after some processing operations. For example, Japan imports raw material required to make electronic goods like radio, washing machine, television, etc. from England, Germany, France, etc. and sells them to various countries in the world after processing them.
2) Explain any four features of composition of India’s foreign trade.
Ans: Main feature of the composition of India’s foreign trade are as follows:
Change in the composition of exports: The composition of export trade in India has undergone a change. Prior to Independence, India used to export primary products like jute, cotton, tea, oil-seeds, leather, food grains, cashew nuts and mineral products.
Change in the composition of imports: India used to import consumer goods like medicines, cloth, motor vehicles, electrical goods, etc. Apart from petrol and petroleum, India is now importing mainly capital goods like high-tech machinery chemicals, fertilizers, steel, etc.
Oceanic trade: Most of India’s trade is by sea. India has trade relations with its neighbouring countries like Nepal, Afghanistan, Myanmar, Sri Lanka, etc.
Development of new ports: For its foreign trade, India depended mostly on Mumbai, Kolkata and Chennai ports. Therefore these ports were overburdened. Recently, India has developed new ports at Kandla, Cochin, Visakhapatnam, Nhava Sheva etc. to reduce the burden on the existing ports.
3) Explain the trend in India’s imports.
Ans: Trends in Imports:
Petroleum: Petroleum has always remained the most important item of imports in India’s trade in the pre as well as post-reform period. It had a share of 27% of total imports in 1990-92 which currently stands at around 31%.
Gold: After petroleum, the second most imported item is gold. It has been observed that there is a significant drop in gold imports during 2013-14. The gold imports declined from 53.3 billion dollars in 2011-12 to 27.5 billion dollars in 2013-14. This was primarily due to a fall in international gold prices and various policy measures taken by the government to curb gold imports.
Fertilizers: The share of fertilizers in import expenditure declined from 4.1% in 1990-91 to only 1.3% in 2016-17.
Iron and Steel: The share of iron and steel in import expenditure declined from 4.9% to 2.1% in 2016-17.