You are on page 1of 3

1. Explain the concept of Foreign Trade?

Foreign trade refers to trade with foreign countries. It means buying and
selling of goods by one country with other countries. Foreign trade or international
trade means the trade which is spread beyond the boundaries of a country.
It involves exchange of goods and services between the citizens of two or
more countries. For example, India's trade with UK, USA, and Japan is foreign
Foreign trade can be of three kinds:
1. Import Trade:
It implies purchase of goods from a foreign country. Buying of oil by India
from Kuwait is an example of import trade. India imports goods which it does not
produce or which are in short supply. In import trade, goods are brought from
abroad to the home country.
2. Export Trade:
It means sale of goods to a foreign country Selling of tea by India to England
is an example of export trade. In export trade goods are sent from the home
country for sale abroad.
3. Entrepot Trade:
It refers to purchase of goods from abroad for the purpose of sale to some
other country. It involves both import and export of goods. For example, India may
import oil from Iraq and export a part of it to Bhutan. Entrepot trade is also known
as 'Re exports.'
Some of the salient features of foreign trade of India are:
1. Negative or Unfavourable Trade:
India had to import various items like heavy machinery, agricultural
implements, mineral oil and metals on a large scale after Independence for
economic growth. But our exports could not keep pace with our imports which left
us with negative or unfavourable trade.

2. Diversity in Exports:
Previously, India used to export its traditional commodities only which
included tea, jute, cotton textile, leather, etc. But great diversity has been observed
in Indias export commodities during the last few years. India now exports over
7,500 commodities. Since 1991, India has emerged as a major exporter of
computer software and that too to some of the advanced countries like the USA
and Japan.
3. Worldwide Trade:
India had trade links with Britain and a few selected countries only before
Independence. But now India has trade links with almost all the regions of the
world. India exports its goods to as many as 190 countries and imports from 140
4. Change in Imports:
Earlier we used to import food-grains and manufactured goods only. But
now oil is the largest single commodity imported by India. Both the imports as
well as exports of pearls and precious stones have increased considerably during
the last few years. Our other important commodities of import are iron and steel,
fertilizers, edible oils and paper.
5. Maritime Trade:
About 95 per cent of our foreign trade is done through sea routes. Trade
through land routes is possible with neighbouring countries only. But
unfortunately, all our neighbouring countries including China, Nepal, and
Myanmar are cut off from India by lofty mountain ranges which makes trade by
land routes rather difficult. We can have easy access through land routes with
Pakistan only but the trade suffered heavily due to political differences between the
two countries.
6. Trade through a few Selected Ports Only:
We have only 12 major ports along the coast of India which handle about 90
per cent overseas trade of India. Very small amount of foreign trade is handled by
the remaining medium and small ports.
7. Insignificant Place of India in the World Overseas Trade:
Although India has about 16 per cent of the worlds population, her share in
the world overseas trade is less than one per cent. This shows the insignificant
place of India in the worlds overseas trade. This is, however, partly due to very
large internal trade, vast dimensions of the country provide a solid base for inter-
state trade within the country. Europe is divided into a large number of smaller
countries and the international trade is quite high (trade counted twice, first time as
exports and second times as imports).
8. State Trading:
Most of Indias overseas trade is done in public sector by state agencies and
very little trade is done by individuals.