FOREIGN TRADE AND ECONOMIC GROWTH

FOREIGN TRADE AND ECONOMIC GROWTH presented by: Rachna mangla B.comIII(C.A.) 20111050033

MEANINGForeign 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 DEVELOPMENTForeign trade is a engine of growth.Foreign trade has the following beneficial effects on development:-Expansion in the size of marketTechnical progressHealthy competitionComparative advantageHelps to check inflationHelps to face natural calamityHelps to exploit natural resourcesCreation of employment opportunitiesPromotes capital formationIncrease in national incomeIncrease in standard of livingPromotes industrializationImportant educational effectsCultural exchangeGood relations among different nations

HARMFUL EFFECTS OF FOREIGN TRADE ON DEVELOPMENTInternational 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 developmentLimited possibility of gain 1) income elasticity 2) policy of protection 3)use of synthetic goods

DumpingBad effects on savingsInternational demonstration effects Deterioration in terms of tradeBad effect on domestic employmentProblem of unfavourable balance of paymentDeficiency of goods in domestic companySet back to domestic industryIncrease in corruptionOver-interdependenceCOMPOSITION INDIAS EXPORT AND IMPORTComposition of exportsAgriculture and allied products15% share in exportsTop items of agriculture exports include:Fish productsRiceOilcakesFruits and vegetablesOres and minerals12.3% share in exports Manufactured goods61.3% share in exportsIncludesEngineering goodsGems and jewelleryChemical and allied productsReady made garmentsMineral, fuels and lubricants18.3% share in exportsThere have been improvement in export of minerals , fuels and lubricant both in terms of value and percentage.Composition of importsPetroleum products 31.7% share in importsCapital goods 20.3 % share in importsPearls and precious stones6.2 % share in importsIron and steel2.4 % share in importsFertilizers2.4 % share in imports

CONCLUSIONAfter 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 Indias 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 Indias dependence on food grains and capital goods has declined.