Foreign Trade | Famous Books for UPSC Exam (Summary & Tests) PDF Download

 What is Foreign Trade?

Foreign trade is the ancient and most prominent form of international division of labor, encompassing the buying and selling of goods and services beyond a nation's borders. Also referred to as international trade or external trade, it involves transactions that enable the exchange of manufactured commodities and services to meet the demands of consumers. For instance, a country rich in iron and steel but deficient in aluminum would import aluminum from countries with a surplus of the metal. Similarly, countries with excess production of certain goods find it beneficial to export them to others in need.

Characteristics of Foreign Trade

Foreign trade encompasses both exports and imports. Exports are products or services transferred or sold from one country to another, while imports are products or services received from abroad. These transactions are accounted for in a nation's current account within the balance of payments. The diverse range of products available in the international market includes food, clothing, spare parts, oil, jewelry, stocks, currencies, and even water. Additionally, services like tourism, banking, consultancy, and transportation also form a significant part of foreign trade. The modern global trade system is influenced by advanced technology, globalization, industrialization, outsourcing, and multinational enterprises.

Foreign Trade in India: A Historical Perspective

India has a rich history of engaging in foreign trade since ancient times. Even in the pre-Christian era, India participated in trade with other countries, as evidenced by historical texts like the Periplus of the Erythraean Sea. This maritime trade route facilitated exchanges with various nations, including Europe. Spices, such as pepper, ginger, cinnamon, cardamom, nutmeg, mace, and cloves, were among India's most sought-after exports.

Post-independence, India followed a closed economic policy until 1991 when significant liberalization measures were introduced. Since then, foreign trade in India has witnessed remarkable growth. Today, India exports over 7500 commodities to around 190 countries and imports approximately 6000 commodities from about 140 nations. The scope of trade has expanded to include not only goods but also services.

India's Foreign Trade Policy

In line with several initiatives like "Make in India," "Digital India," "Skill India," "Startup India," and "Ease of Doing Business," India launched its Foreign Trade Policy (2015-20) on April 1, 2015. The policy aimed to boost exports of goods and services, generate employment, and enhance value addition within the country. It outlined strategies for market and product development, infrastructure expansion, and overall trade ecosystem improvement. By navigating the challenges of international trading infrastructure, India strives to make trade a significant contributor to its economic growth and development.

Conclusion

International trade remains a cornerstone of a country's economy, driving its Gross Domestic Product (GDP) and promoting widespread economic development. The advancements in technology, communication, and infrastructure have opened up vast opportunities for nations to engage in global trade. Through foreign trade, countries can access diverse markets and avail commodities and services at competitive prices, leading to heightened competitiveness and consumer benefits.