FOREIGN TRADE AND ECONOMIC GROWTH presented by: Rachna mangla B.comIII(C.A.)

MEANING

Foreign trade refers to buying and selling of goods across the border. Economic growth refers to increase in national income, per capita income, improvement in standards of living of masses. Foreign trade helps to remove certain obstacles in the path of economic growth; like lack of capital goods and modern technology, lack of essential inputs like oil, petrol, gas. Foreign trade is significant for developed and developing countries.

In the words of Prof. Hicks,”foreign trade accelerates the rate of economic development of underdeveloped countries. Forign trade provides better technology, expands the size of market and has made easy availability of foreign goods. As a result income, output, employment of the country increases. The basic factor behind the progress of countries such as Singapore, Arab countries, Brazil, Thailand, Japan, Korea, Taiwan, Hong Kong, etc is foreign trade”.

BENEFICIAL EFFECTS OF FOREIGN TRADE ON DEVELOPMENT

Foreign trade is a engine of growth. Foreign trade has the following beneficial effects on development:- Expansion in the size of market Technical progress Healthy competition Comparative advantage Helps to check inflation Helps to face natural calamity Helps to exploit natural resources

Creation of employment opportunities Promotes capital formation Increase in national income Increase in standard of living Promotes industrialization Important educational effects Cultural exchange Good relations among different nations

HARMFUL EFFECTS OF FOREIGN TRADE ON DEVELOPMENT

International trade may have benefitted the economic development of few countries to some extent but it has proved to be hindrance in case of most of the underdeveloped counties. Its harmful effects are:- Lopsided development Limited possibility of gain 1) income elasticity 2) policy of protection 3)use of synthetic goods

Dumping Bad effects on savings International demonstration effects Deterioration in terms of trade Bad effect on domestic employment Problem of unfavourable balance of payment Deficiency of goods in domestic company Set back to domestic industry Increase in corruption Over-interdependence

COMPOSITION INDIA’S EXPORT AND IMPORT

C OMPOSITION OF EXPORTS Composition of India’s export Agriculture and allied products Ores and minerals Manufactured items Fuel and lubricants

A GRICULTURE AND ALLIED PRODUCTS 15% share in exports Top items of agriculture exports include: Fish products Rice Oilcakes Fruits and vegetables

O RES AND MINERALS 12.3% share in exports Manufactured goods 61.3% share in exports Includes Engineering goods Gems and jewellery Chemical and allied products Ready made garments

M INERAL, FUELS AND LUBRICANTS 18.3% share in exports There have been improvement in export of minerals, fuels and lubricant both in terms of value and percentage.

C OMPOSITION OF IMPORTS Composition of India’s imports Petroleum products Capital goods Pearls and precious stones Iron and steel

Petroleum products 31.7% share in imports Capital goods 20.3 % share in imports Pearls and precious stones 6.2 % share in imports Iron and steel 2.4 % share in imports Fertilizers 2.4 % share in imports

CONCLUSION

After studying both aspects of foreign trade on economic development it can be concluded that foreign trade promotes specialization, ensures optimum utilization of resources, food supply, etc throughout the world. Developed countries are gaining much benefits in comparison to the developing and under developing countries. Benefits of foreign trade for under developed countries can be enhanced if under developed countries engage in foreign trade among themselves.

Composition of India’s foreign trade has undergone a positive change. It is a remarkable achievement that India has transformed itself from a predominately primary goods exporting country into non primary exporting goods country. Under imports also India’s dependence on food grains and capital goods has declined.