Chapter - 10
Foreign Trade in India
Sr. No. | Name of Chapter |
Q. 1. Choose the correct option :
1) Types of foreign trade
a) Import trade
b) Export trade
c) Entrepot trade
d) Internal trade
Options : 1) a and b
2) a, b and c
3) a, b, c and d
4) None of these
2) Export trends of India’s foreign trade includes
a) Engineering goods
b) Gems and Jewellery
c) Textiles and ready-made garments
d) Gold
Options : 1) a and c
2) a, b and c
3) b, c and d
4) None of these
3) Role of foreign trade is
a) To earn foreign exchange
b) To encourage investment
c) Lead to division of labour
d) Bring change in composition of exports
Options : 1) a and b
2) a, b and c
3) b and d
4) None of these
Q. 2. Identify and explain the concepts from the given illustrations :
1) India purchased petroleum from Iran.
Ans: Identified concepts: Import Trade
Explanation of concepts: Purchase of goods and services by one country from another country is called import trade,
2) Maharashtra purchased wheat from Punjab.
Ans: Identified concepts: Internal/ Home trade
Explanation of concepts: Internal Trade is the purchase and sales of goods and service within the geographical boundaries of a nation.
3) England imported cotton from India, made readymade garments from it and sold them to Malaysia.
Ans: Identified concepts: Entrepot trade
Explanation of concepts: The process of processing goods imported from one country and exporting them to another country is called entrepot trade.
4) Japan sells smart phones to Myanmar.
Ans: Identified concepts: Export Trade.
Explanation of concepts: The sale of goods and by one country to another country is called export trade.
Q. 3. Distinguish between the following :
1) Internal trade and International trade.
Ans:
|
|
Internal Trade |
External Trade |
|
Meaning |
The sales and
purchase of goods and services within the geographical boundaries of a
nation is called internal trade. |
The sales and
purchase of goods and services outside the geographical boundaries of
a nation is called international trade. |
|
Use of Currency |
Domestic currency is used
for buying and selling goods and services in internal trade. |
Foreign currency is used
for buying and selling goods and services in international trade. |
|
Countries involved |
Only one country is
involved. |
Minimum Two countries are involved. |
|
Risk |
Less Degree of risk involved |
High Degree of risk involved
such as transit risk of fluctuation of currency and demand etc. |
|
Govt.
Restriction |
International
trade is not restricted except in a few goods |
International
trade is strictly monitored by the Govt. and prior approval is required before
international transitions, |
2) Trends in imports and Trends in exports of foreign trade.
3) Balance of payments and Balance of trade.
Q. 4.Answer the following :
1) Explain the concept of foreign trade and its types.
Ans:
Meaning of Foreign Trade :
Foreign Trade is trade between the different countries of the world. It is called as International Trade or External Trade.
Definition :
According to Wasserman and Hultman, “International Trade consists of transaction between residents of different countries”.
Types of foreign trade :
Foreign trade is divided into the following three types.
1) Import Trade, 2) Export Trade, 3) Entrepot Trade
1) Import Trade : Import trade refers to purchase of goods and services by one country from another country or inflow of goods and services from foreign country to home country. For example, India imports petroleum from Iraq, Kuwait, Saudi Arabia, etc.
2) Export Trade : Export trade refers to the sale of goods by one country to another country or outflow of goods from one country to foreign country. For example, India exports tea, rice, jute to China, Hong Kong, Singapore etc.
3) Entrepot Trade : Entrepot trade refers to 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.
Ans:
Composition and Direction of India’s foreign trade :
Over the last 70 years, India’s foreign trade has undergone a complete change in terms of composition and direction.
Main feature of composition of India’s foreign trade are as follows :
1) Increasing share of Gross National Income : In 1990-91, share of India’s foreign trade (import-export) in gross national income was 17.55%. It increased to 25% during 2006-07 and to 48.8% during 2016-17
2) Increase in volume and value of trade : Since 1990-91, the 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.
3) Change in the composition of exports : Since Independence, the composition of export trade of India has undergone a change. Prior to Independence, India used to export primary products like jute, cotton, tea, oil-seeds, leather, foodgrains, cashew nuts and mineral products. With the passage of time, manufactured items like readymade garments, gems and jewellery, electronic goods, especially computer hardware and software occupy a prime place in India’s exports.
4) Change in the composition of imports :
Prior to independence, India used to import consumer goods like medicines, cloth, motor vehicles, electrical goods etc. A part from petrol and petroleum, India is now importing mainly capital goods like high-tech machinery chemicals, fertilizers, steel etc.
5) 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. The share of India’s oceanic trade is around 68%.
6) 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, Vishakhapatnam, Nhava Sheva etc. to reduce the burden on the exsiting ports
3) Explain the trend in India's imports.
Ans:
Trends in Imports :
1) 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% in total imports in 1990-92 which currently stands at around 31%.
2) 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 fall in international gold prices and various policy measures taken by the government to curb gold imports.
3) Fertilizers : The share of fertilizers in import expenditure declined from 4.1% in 1990-91 to only 1.3% in 2016-17.
4) Iron and Steel : The share of iron and steel in import expenditure declined from 4.9% to 2.1% in 2016-17.
Q. 5. State with reasons whether you agree or disagree with the following statements :
1) During British rule, indigenous handicrafts suffered a severe blow.
2) Trade is an engine of growth for an economy.
3) Foreign trade leads to division of labour and specialization at world level.
Q. 6. Observe the following table and answer the questions given below it.
• Direction of India’s imports
Questions :
1) Which organisation has the least share in the direction of India's imports in 2015-16?
2) Which organisation has maximum share in India's direction of imports in 1990-91?
3) Expand the abbreviations of OECD and OPEC
4) State your opinion regarding the direction of India's imports.
5) How much is the percentage of increase in the imports of developing nations in 2015-16 as compared to 1990-91?
Q. 7. Answer in detail :
1) Explain the meaning and role of foreign trade.
Ans:
Meaning of Foreign Trade :
Foreign Trade is trade between the different countries of the world. It is called as International Trade or External Trade.
Definition :
According to Wasserman and Hultman, “International Trade consists of transaction between residents of different countries
Role of Foreign Trade :
Trade is an engine of growth of an economy, because it plays an important role for economic development. In developed countries it represents a significant share of Gross Domestic Product.
Role of foreign trade can be justitied on the basis of the following points :
1) To earn foreign exchange : Foreign trade provides foreign exchange which can be used for very productive purposes. Foreign trade is a remarkable factor in expanding the market and encouraging the production of goods.
2) Encourages Investment : Foreign trade creates an opportunity for the producers to reach beyond the domestic markets. It encourages them to produce more goods for export. This leads to an increase in total investment in an economy.
3) Division of labour and specialization : Foreign trade leads to division of labour and specialization at world level. Some countries have abundant natural resources, they should export raw material and import finished goods from countries which are advanced in skilled manpower. Thus, foreign trade gives benefits to all countries thereby leading to division of labour and specialization.
4) Optimum allocation and utilization of resources : Due to specialization, resources are channelized for the production of only those goods which would give highest returns. Thus, there is rational allocation and specialization of resources at the international level due to foreign trade.
5) Stability in price level : Foreign trade helps to keep the demand and supply position stable which in turn stabilizes the price level in the economy.
6) Availability of multiple choices : Foreign trade provides multiple choices of imported commodities. As foreign trade is highly competitive it also ensures a good quality and standard products. This raises the standard of living of people.
7) Brings reputation and helps earn goodwill : Exporting country can earn reputation and goodwill in the international market. For example, countries like Japan, Germany, Switzerland etc. have earned a lot of goodwill and reputation in foreign market for their qualitative production of electronic goods.
2) Explain the recent trends in India’s exports.
Ans:
Recent Trends in Exports :
1) Engineering goods : According to Engineering Goods Export Promotion Council (EGEPC) Report, the share of engineering goods was 25% in India’s total exports in 2017-18. Within this category some of the prominent exported items are transport equipment including automobiles and auto components, machinery and instruments. During the period 2010-11 to 2014-15, exports of transport equipment have grown from 16 billion dollars to to 24.8 billion dollars.
2) Petroleum products : India’s petroleum capacity increased significantly since 2001-02, due to which India turned as a net exporter of petroleum refinery products. Petroleum product had a share of 4.3% in India’s total exports in 2000-01, which rose steadily to 20.1% in 2013-14.
3) Chemicals and chemical products : An important export item that has performed reasonably well over the last few years is chemicals and chemical products. The share of this item was 10.4% in 2014-15.
4) Gems and Jewellery : Gems and jewellery is one of the major contributors to export earnings in India, having a share of 13.3% in India’s merchandise export in 2014-15.
5) Textiles and readymade garments : Textiles and garment exports together accounted for 11.3% of India’s exports in 2014-15. In fact, India is one of the leading exporting countries of textiles and readymade garments in the world.
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