Revision: Foreign Trade of India Eco HSC Commerce (English Medium) 12th Standard Board Exam Maharashtra State Board

According to Wasserman and Hultman, “International Trade consists of transaction between residents of different countries.”

1. According to Kindleberger, "The balance of payments of a country is a systematic record of all economic transactions between its residents and residents of foreign countries."
2. According to Sodersten, "The Balance of Payments is merely a way of listing receipts and payments in international transactions for a country."
3. According to James O. Ingram, "The Balance of Payments is a summary record of all economic transactions between residents of one country and the rest of the world during a given period of time."
4. According to Walter Krause, “The balance of payments of a country is a systematic record of all economic transactions completed between its residents and the rest of the world during a given period of time usually a concept of year."
5. The government of every country keeps account of its economic transactions with other countries of the world. The record of economic transactions among different countries is known as balance of payments.

• Internal trade happens within a country’s borders.
• It includes two main types: wholesale and retail trade.
• Wholesalers purchase in bulk and sell to retailers, who in turn sell to consumers.
• The channel of distribution connects producers with consumers.
• Internal trade supports economic growth and development.

• Foreign trade = trade between residents of different countries; also called international or external trade.
• India's foreign trade under colonial rule was shaped by British economic interests.
• India exported primary products (jute, cotton, silk, indigo) and imported finished goods.
• Despite an export surplus, India faced domestic scarcity and a net drain of wealth.
• The Suez Canal played a key role by reducing transport costs and increasing British market access to India.

Foreign trade has three types.​

• Import trade: Buying goods from other countries into the home country.
• Export trade: Selling home‑country goods to other countries.
• Entrepot trade: Importing from one country, processing, then re‑exporting to another country.

Foreign trade helps an economy grow by expanding markets and output.​

• It earns foreign exchange to pay for imports and technology and encourages higher investment for export production.​
• It promotes specialisation and efficient resource use, stabilises prices through imports/exports, and offers more choices and better quality goods, raising living standards and international goodwill.​

India’s foreign trade has grown sharply and shifted from primary goods to manufactured, high‑value items over the last 70 years.​

• Share in GNI rose from about 17.5% (1990‑91) to nearly 49% (2016‑17), with much higher volume and value of trade.​
• Exports moved from jute, cotton, tea and other primary goods to garments, gems‑jewellery and electronic/engineering products.​
• Imports shifted from mainly consumer goods to petroleum plus capital goods like machinery, chemicals, fertilisers and steel.​
• Around two‑thirds of India’s trade is oceanic, and new ports like Kandla, Cochin, Visakhapatnam and Nhava Sheva were developed to ease older ports such as Mumbai, Kolkata and Chennai.​

In India’s imports for 2015‑16 and 2016‑17, petroleum, oil and lubricants had the highest share, followed by electronic goods.

• Other important imports were pearls and precious stones, edible oils, fertilizers and foodgrains, but each with a much smaller percentage share than petroleum and electronics.

India’s exports in 2015‑16 and 2016‑17 were led by engineering goods, petroleum products and readymade garments.

• Other notable exports were cotton yarn, leather manufactures and iron ore, but each with a smaller share than engineering and petroleum products.

Direction of India’s foreign trade means where it imports from and where it exports to.

• Before Independence, Britain was the main trading partner; later, India built strong trade relations with the USA, Germany, Japan and the UK.
• In 2016‑17, most imports and exports were with developing nations, followed by OECD and OPEC countries.

India’s foreign trade has expanded sharply since liberalisation, with big shifts in what India exports and imports and where it trades.

• On the export side, engineering goods, petroleum products, chemicals, gems and jewellery, and textiles/garments have become major earners, with engineering goods alone contributing about one‑fourth of exports by 2017‑18.
• On the import side, petroleum remains the largest item, followed by gold, while the import shares of fertilisers and iron and steel have declined significantly over time.

• BoP is a systematic record of all economic transactions between a country's residents and the rest of the world over one year.
• It covers visible items (goods), invisible items (services and transfers), and capital transactions.
• The two main accounts are the Current Account and the Capital Account.
• BoP follows the double-entry bookkeeping system, so Total Credits = Total Debits.
• A Current Account Deficit is generally financed through capital inflows or borrowing from abroad and may increase a country's external debt burden if it persists.