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    Iii. Foreign Trade

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    Amit Jain
    The document discusses India's foreign trade and balance of payments. It notes that India's foreign trade has increased dramatically over time, with exports growing by over 2400 times and imports by over 39 times between 1950-1951 and 2011-2012. It also summarizes changes in the composition and direction of India's trade, and describes the country's historical trend towards deficits in its balance of trade and payments.

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    Iii. Foreign Trade

    Uploaded by

    Amit Jain
    338 views19 pages
    The document discusses India's foreign trade and balance of payments. It notes that India's foreign trade has increased dramatically over time, with exports growing by over 2400 times and imports by over 39 times between 1950-1951 and 2011-2012. It also summarizes changes in the composition and direction of India's trade, and describes the country's historical trend towards deficits in its balance of trade and payments.

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    B.Com-III.-FOREIGN-TRADE.ppt

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    The document discusses India's foreign trade and balance of payments. It notes that India's foreign trade has increased dramatically over time, with exports growing by over 2400 times and imports by over 39 times between 1950-1951 and 2011-2012. It also summarizes changes in the composition and direction of India's trade, and describes the country's historical trend towards deficits in its balance of trade and payments.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    338 views19 pages

    Iii. Foreign Trade

    Uploaded by

    Amit Jain
    The document discusses India's foreign trade and balance of payments. It notes that India's foreign trade has increased dramatically over time, with exports growing by over 2400 times and imports by over 39 times between 1950-1951 and 2011-2012. It also summarizes changes in the composition and direction of India's trade, and describes the country's historical trend towards deficits in its balance of trade and payments.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 19

    MEANING

    “ International trade is trade between residents of one


    country and residents of other countries of the world.”
    For example, Trade between India and United states is called
    international trade or Foreign Trade.
    Foreign trade helps a country to utilize its natural resources
    and to export its surplus production.
    FOREIGN TRADE OF INDIA
    1. Volume of foreign trade.
    2. Composition of foreign trade.
    3. Direction of foreign trade.
    4. Balance of trade.
    VOLUME OF FOREIGN INDIA’S

    YEAR TRADE
    IMPORTS EXPORTS (RSCRORE)
    TOTAL

    1950-51 650 600 1,250


    1960-61 1,122 642 1,764

    1970-71 1,634 1,535 3,169


    1980-81 12,549 6,711 19,260
    1990-91 43,193 32,558 75,751
    2000-2001 2,30,873 2,03,571 4,34,444
    2007-2008 10,12,312 6,55,864 16,68,176
    2008-2009 13,74,436 8,40,755 22,15,231
    2009-2010 13,63,736 8,45,534 22,09,270
    2010-11 16,83,467 1142649 2426116
    2011-12 23,45,463 1465959 3811422
    It is clear from the above table:
    • Volume of foreign trade in 1950-51 was rs.1,250 crore. In 2011-
    12, it increased to rs. 38,11,422 crore. Volume of foreign trade
    increased by 3049 times.
    • In 1950-51,total imports were rs.650 crore which rose to rs.
    2545463 crore in 2011-12. Thus imports increased by 39.3%
    times.
    • In 1950-51,value of total exports was rs.600 crore. It rose to
    rs.1465959 crore in 2011-12. Thus exports increased by 2443
    times.
    Higher growth rate in exports than imports in recent years
    is a welcome sign in India’s foreign trade.
    COMPOSITION OF FOREIGN TRADE

    (A) Change in composition of exports

    • Decline in percentage share of agriculture products in total


    exports.
    • Increase in percentage share of manufactured goods in
    total exports.
    • Change in composition of agricultural exports.
    • Exports of petroleum products.
    • Increase importance of exports of gems and readymade
    garments.
    CHANGE COMPOSITION OF INDIA’S EXPORTS
    (RS CRORE)

    Commodity 1950-51 2011-12


    Tea 80 4079
    Cotton Clothes 114 21624
    Rice - 24109
    Iron ore 18 22184
    Coffee 10 4535
    Chemicals 5 177872
    Gems and precious stone - 214889

    Total Exports 600 1465959


    (B) Change in composition of imports

    • Decline in the imports of agricultural products.


    • Petroleum products enjoy first place in imports.
    • Increase in the imports of capital goods.
    • Increase in imports of raw materials and intermediate
    goods.
    • Increase in imports of chemical fertilizers.
    CHANGE IN COMPOSITION OF INDIA’S IMPORTS
    (RS CRORE)

    Commodity 1950-51 2011-12


    Iron and steel 20 57552
    Machinery 91 158611
    Transport equipment 41 67474
    Food grains 100 5691
    Chemicals .57 16595
    Fertilizers 12 53311
    Paper, paperboard 10 12305
    Petroleum 87 743075
    Total Imports 650 2345463
    DIRECTION OF FOREIGN TRADE

    Changes in the direction of foreign trade

    • Organisation of economic co-operation and


    development (OECD).
    • Organisation of petroleum exporting countries
    (OPEC).
    • Share of Eastern European countries.
    • Trade with developing countries.
    DIRECTION OF INDIA’S FOREIGN TRADE

    Country % of exports % of imports


    UK 3.5 1.5
    USA 10.9 5.9
    Japan 2.0 2.3
    Russia .5 1.2
    China 6.5 10.7
    EU 20.2 13.3
    OPEC 16.6 32.1
    Developing 42.5 33
    Countries
    BALANCE OF TRADE

    “ Balance of trade of a country is the relation over a period


    between the values of its exports and imports of physical
    goods.”
    Balance of trade may be of three kinds:
    • Surplus or Favourable balance of trade: A country may have
    favourable or surplus balance of trade when the total value
    of the goods exported by its more than the total value of
    goods imported by it. (Exports > imports)
    • Deficit or Unfavourable balance of trade: A country may
    have unfavourable or deficit balance of trade when the total
    value of goods imported by it is more than the total value of
    goods exported by it.
    ( Imports > Exports)
    • Equilibrium in Balance of trade: A country may have
    equilibrium in balance of trade when the total value of the
    goods exported by it is equal to the total value of the goods
    imported by it.
    ( Exports =Imports)
    FEATURES OF INDIA’S FOREIGN TRADE

    • Increasing share of gross national product.


    • Less percentage in world trade.
    • Increase in volume and value of foreign trade.
    • Change in the composition of exports.
    • Change in the composition of imports.
    • Direction of foreign trade.
    • Balance of trade.
    • Foreign trade by government.
    • State control over foreign trade.
    BALANCE OF PAYMENTS
    Balance of payments refers to the recording of all economic
    transactions of a given country with rest of the world.
    Balance of payments is a statement of accounts of these
    receipts and payments. Difference in the value of imports
    and exports of all the three items ,i.e., visible, invisible, and
    capital transfers is taken into account, it is called Balance of
    payments.
    FORMS OF BALANCE OF PAYMENTS
    • Current Account: Balance of payments on current account
    includes the value of imports and exports of both visible and
    invisible items. Current account transactions are called
    account of actual transactions of import and export of goods
    and services.
    • Capital Account: Capital accounts refers to financial
    transactions. It mainly includes foreign investment and
    external loans. All kinds of short term and long term
    international capital transfers, foreign debts, foreign
    investments etc. are also included in capital account.
    • Overall Balance Of Payments: Total of a country’s balance of
    payments on current account and capital account is known
    as overall balance of payments.
    DISEQUILIBRIUM IN BALANCE OF PAYMENTS

    • Favourable Balance of Payments: When receipts are more


    than payments then balance of payments turns favourable.
    This situation increases foreign exchange reserves. It is also
    known as surplus balance of payments.
    • Unfavourable Balance of Payments: Balance of payments is
    unfavourable when its payments are more than its receipts.
    This situation reduces foreign exchange reserves. It is also
    known as deficit balance of payments.
    CAUSES OF UNFAVOURABLE BALANCE OF
    PAYMENTS
    • Import of machinery.
    • More demand of consumption goods.
    • Price disequilibrium.
    • Foreign competition.
    • Less growth in exports.
    • Expenditure on foreign embassies.
    • Gulf war.
    • Import of war equipments.
    MEASURES TO CORRECT DISEQUILIBRIUM IN
    THE BALANCE OF PAYMENTS
    • Promotion of exports.
    • Increase in production.
    • Trade agreements.
    • Attraction to foreign tourists.
    • Devaluation of Indian currency.
    • Deflation.
    • Import substitution.
    • Setting up of special economic zones.
    • Less consumption of crude oil.

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