Sunday, 8 February 2015


             Foreign trade is nothing but trade between the different countries of the world. It is also called as International trade, External trade or Inter-Regional trade. It consists of imports, exports and entrepot. The inflow of goods in a country is called import trade whereas outflow of goods from a country is called export trade. Many times goods are imported for the purpose of re-export after some processing operations. This is called entrepot trade. Foreign trade basically takes place for mutual satisfaction of wants and utilities of resources.
          According to Wasserman and Haltman, “International trade consists of transaction between residents of different countries”.

According to Anatol Marad, “International trade is a trade between nations”.

According to Eugeworth, “International trade means trade between nations”.
Types of Foreign Trade:
    Foreign Trade can be divided into following three groups :-
Import Trade : Import trade refers to purchase of goods by one country from another country or inflow of goods and services from foreign country to home country.
Export Trade : Export trade refers to the sale of goods by one country to another country or outflow of goods from home country to foreign country.
Entrepot Trade : Entrepot trade is also known as Re-export. It refers to purchase of goods from one country and then selling them to another country after some processing operations.

main Features of India’s Foreign Trade:
1) Increasing Share of Gross National Income:
                  India’s foreign trade plays an important role in the Gross National Income.
In 1990-91, share of India’s foreign trade (import export) in net national income was 17 per cent which in 2006-07 rose to 25 per cent. In 2006-07 exports and imports as percentage of GDP were 14.0 per cent and 21 per cent respectively.
2)Less Percentage of World Trade:
        Share of India’s foreign trade in world trade has been declining. In 1950-51, India’s share in total import trade of the world was 1.8 per cent and in export trade it was 2 per cent. According to World Trade Statistics, India’s share in world trade has gone-up from 1.4 per cent in 2004 to 1.5 per cent in 2006 and estimated to be 2 per cent in 2009.
3)Oceanic Trade:
             Most of India’s trade is by sea, India has very little trade relations with its neighing countries like Nepal, Afghanistan, Myanmar, Sri Lanka, etc. Thus, 68 per cent of India’s trade is oceanic trade: Share of these neighing countries in our export trade was 21.8 per cent and in import trade 19.1 per cent.

4) Dependence on a Few Ports:
                    For its foreign trade, India depends mostly on Mumbai, Kolkata, and Chennai ports. These ports are therefore, over-crowded. Recently, India has developed Kandla, Cochin, and Visakhapatnam ports to lessen the burden on former ports.
5)Increase in Volume and Value of Trade:
                   Since 1990-91, volume and value of India’s foreign trade has gone up. India now exports and imports goods which are several times more in value and volume. In 1990-91, total value of India’s foreign trade was Rs 75,751 and in 2008-09, it rose to Rs 22, 15,191 crore. Of it, value of exports was Rs 8, 40,755 crore and that of imports was Rs 13, 74,436 crore.
6) Change in the Composition of Exports:
                         Since independence, composition of export trade of India has undergone a change. Prior to independence, India used to export agricultural products and raw materials, like jute, cotton, tea, oil seeds, leather, food grains, cashew nuts, and mineral products. It also exported manufactured goods. But now in its export kitty are included mostly manufactured items like, machines, ready-made garments, gems and jewellery, tea, jute manufactures, Cashew Kernels, electronic goods, especially hardware’s and software’s which occupy prime place in exports.
7) Change in the Composition of Imports:
                       Since Independence, composition of India’s import trade has also witnessed a sea change. Prior to Independence, India used to import mostly consumption goods like medicines, cloth, motor vehicles, electrical goods, iron, steel, etc. Now it has been importing mostly petrol and petroleum products, machines, chemicals-, fertilizers, oil seeds, raw materials, steel, edible oils, etc.
8) Direction of Foreign Trade:
             It refers to the countries with whom a country trades. Main changes in the direction of foreign trade are as under:
       In the year 1990, in exports the maximum share, i.e., 17.9 per cent was that of Eastern Europe, i.e., Romania, East Germany, and U.S.S.R., etc. In import trade, maximum share, i.e., 16.5 per cent was that of OPEC, i.e., Iran, Iraq, Saudi Arabia, Kuwait, etc. In 2008-09, the largest share in India’s foreign trade (both imports and exports) was that of European Union (EU), i.e., Germany, Belgium, France, U.K., etc., and developing countries. Now, U.A.E., China and U.S.A. have occupied important place in India’s foreign trade. The importance of England, Russia, etc., has declined.
9) Mounting Deficit in Balance of Trade:
             Since 1950-51, India’s balance of trade has been continuously adverse except for two years, viz., 1972-73 and 1976-77, besides it has been mounting year after year. In 1950-51 balance of trade was adverse to the tune of Rs 2 crore and by 1990-1991 it rose to Rs 16,933 crore. After the policy of liberalization, the country has witnessed a rapid increase in it. In 1999- 2000 it rose to Rs 77,359crorc and in 2008-09 it amounted to 5, 33,680 crore. Fast rise in the value of imports and slow rise in the value of exports accounted for this tremendous rise in balance of trade deficit.
10) Trend towards Globalization:
              Globalization and diversification mark the latest trend of India’s foreign trade. India’s foreign trade is no longer confined or a few goods or a few countries. Presently, India exports 7,500 items to about 190 countries and in its import- kitty there are 6,000 items from 140 countries. It unveiled the changing pattern of India’s foreign trade.
11) Changing Role of Public Sector:
                     Since 1991 the role of public sector in India’s foreign trade has undergone a change. Prior to it, State Trading Corporation (STC), Minerals and Metals Trading Corporation (MMTC), Handicraft and Handloom Corporation, Steel Authority of India Ltd. (SAIL), Hindustan Machine Tools (HMT), Bharat Heavy Electrical Limited (BHEL), etc., used to play significant role in India’s foreign trade. As a result of implementation of the policy of liberalization, the importance of all these public sector enterprises has diminished.

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