<<–2/”>a >p style=”font-weight: 400;”>Planning and Foreign Trade
Foreign Trade is the important factor in Economic Development in any nation. Foreign trade in India comprises of all imports and exports to and from India. The Ministry of Commerce and Industry at the level of Central Government has responsibility to manage such operations. The domestic production reveals on exports and imports of the country. The production consecutively depends on endowment of factor availability. This leads to relative advantage of the financial system. Currently, International trade is a crucial part of development strategy and it can be an effective mechanism of financial Growth, job opportunities and POVERTY reduction in an economy. According to Traditional Pattern of development, Resources are transferred from the agricultural to the manufacturing sector and then into Services.
Historical review: Foreign trade in India began in the period of the latter half of the 19th century. The period 1900-1914 saw development in India’s foreign trade. The augment in the production of crops as oilseeds, Cotton, jute and tea was mainly due to a thriving export trade. In the First World War, India’s foreign trade decelerated. After post-war period, India’s exports increased because demand for raw materials was increased in all over world and there were elimination of war time restrictions. The imports also increased to satisfy the restricted demand. Records indicated that India’s foreign trade was rigorously affected by the Great Depression of 1930s because of decrement in commodity prices, decline in consumer’s purchasing power and unfair trade policies adopted by the colonial government. During the Second World War, India accomplished huge export surplus and accumulated substantial amount of real balances. There was a huge pressure of restricted demand in India during the Second World War. The import requirements were outsized and export surpluses were lesser at the end of the war. Before independence, India’s foreign trade was associated with a colonial and agricultural economy. Exports consisted primarily of raw materials and Plantation Crops, while imports composed of Light consumer merchandise and other manufactures. The structure of India’s foreign trade reflected the organized utilization of the country by the foreign leaders. The raw materials were exported from India and finished products imported from the U.K. The production of final products was discouraged. For instance, cotton textiles, which were India’s exports, accounted for the largest share of its imports during the British period. This resulted in the decline of Indian industries. Since last six decades, India’s foreign trade has changed in terms of composition of commodities. The exports included array of conventional and non-traditional products while imports mostly consist of Capital Goods, petroleum products, raw materials, intermediates and chemicals to meet the ever increasing industrial demands. The export trade during 1950-1960 was noticeable by two main trends. First, among commodities which were directly based on agricultural production such as tea, cotton textiles, jute manufactures, hides and skins, spices and tobacco exports did not increase on the whole, and secondly, there was a significant boost in the exports of raw manufactures such as iron Ore. In the period of 1950 to 1951, main products dominated the Indian export sector. These included cashew kernels, black pepper, tea, coal, mica, manganese ore, raw and tanned hides and skins, vegetable oils, raw cotton, and raw wool. These products comprised of 34 per cent of the total exports. In the period of 1950s there were Balance of Payments crunch. The export proceeds were not enough to fulfil the emerging import demand. The turn down in agriculture production and growing pace of development activity added pressure. The external factors such as the closure of Suez Canal created tension on the domestic financial system. The critical problem at that moment was that of Foreign Exchange scarcity. The Second Five Year Plan with its emphasis on the development of industry, mining and transport had a large foreign exchange factor. This tension on the balance of payments required the stiffening of import strategy at a later stage.
Table: Measures initiated in India to Influence Foreign Trade during 1949-1950 to 1979-1980Source: Inputs from various issues of Economic Survey, Ministry of Finance, Government of India, New Delhi.
In the age of globalisation, India is new entrant to expand international trend. In 1991, the government initiated some changes in its strategy on trade, foreign Investment, Tariffs and Taxes under the name of “New Economic Reforms“. Indian government mainly concentrated on reforms on Liberalization-2/”>Liberalization, openness and export sponsorship activity. It is witnessed that foreign Trade of India has considerably revolutionized export in the Post reforms period. Trade Volume increased and the composition of exports has undergone several noteworthy changes. In Post – reform Period, the major provider to export’s growth has been the manufacturing sector.
Though India has steadily opened up its wealth, its tariffs are high as compared with other countries, and its conjecture norms are still restricted. Foreign trade in India in legal term is the Foreign Trade (Development and Regulation) Act, 1992. The Act provide with the development and regulation of foreign trade by assisting imports into, and supplementing exports from India. To fulfil the requirements of the Act, the government may make necessities for assisting and controlling foreign trade, may forbid, confine and regulate exports and imports, in all or particular cases as well as subject them to exclusion. Government is endorsed to devise and declare an export and import policy and also amend the same from time to time, by notification in the Official Gazette, and is also authoritative to appoint a ‘Director General of Foreign Trade’ for the purpose of the Act, including formulation and accomplishment of the export-import policy.
The 15X15 Matrix Strategies was introduced in 1995 and major aim of this policy was to recognize market diversification and commodity diversification. When reviewed the success of this, it represented that the share of the total top 15 product groups exported to the top 15 market destinations declined from 71% in 1996-97 to 66% in 2000-01 in respect of the total export of these 15 product groups for all destinations taken together. It clearly showed the market diversification for these product groups. The major items of India’s exports controlled in the Matrix continue to remain the same during 2000 – 01 such as Gems and Jewellery, RMG Cotton including accessories and Cotton Yarn, Fabrics and Made Ups. The top three destinations changed from US, UK and Japan to US, Hong Kong and UAE. Another strategy was Focus LAC which was introduced in 1997 in order to enhance exports of chosen products such as Textiles including RMG, Engineering goods and Chemical products to Latin American Region. The highest growth rate of exports to this region was accomplished during period of 2000-01 when the value of exports was high of US$ 982 million. Though the current trade between LAC and India is still low, there is possibility to increase two-way trade between India and the LAC region. It is observed from the export strategies of previous time is that the composition, competitiveness and complexion of world products trade are changing rapidly and there is a need to review the market constantly for any medium term export strategy to achieve a higher share of global exports on a sustainable basis. The main concentration of previous foreign trade strategies was on the existing export products of India.
Nonetheless, presently, the government has made policy on trade and investment policy that has established an obvious change from protecting ‘producers’ to benefiting ‘consumers’. It is reflected in its foreign trade strategy of India for 2004/09 which indicated that “for India to become a major player in world trade we have also to make possible those imports which are required to stimulate our economy”. With numerous economic alterations, globalisation of the Indian economy has been the foremost factor to formulate the trade policies. The announcement of a new Foreign Trade Policy of India for a five year period of 2004-09, substituting until now taxonomy of EXIM Policy by Foreign Trade Policy is major step in the development of foreign trade policy. This policy made the overall development of India’s foreign trade and offers guidelines for the development of this sector. Main purpose of the Exim Policy is to hasten the economy from low level of economic activities to high level of economic activities by making it a globally oriented energetic economy and to derive maximum benefits from expanding global market opportunities, to encourage continued economic growth by providing access to essential raw materials, intermediates, components, consumables and capital goods required for augmenting production, to boost the techno local strength and efficiency of Indian Agriculture, industry and services, thereby, improving their competitiveness, to generate new EMPLOYMENT and opportunities and encourage the attainment of internationally accepted standards of quality. Finally, this policy provides quality consumer products at reasonable prices. A vibrant export-led growth strategy of doubling India’s share in global commodities trade with an attention on the sectors having prospects for export development and potential for employment generation, represent the main factor of the policy. These activities augment India’s international competitiveness and assist in increasing the suitability of Indian exports. The trade policy recognizes major strategies, outlines export incentives, and also focus on issues relating to institutional support including SIMPLIFICATION of procedures relating to export activities. India is now violently pushing for a more moderate global trade management, especially in services. It has understood a Leadership role among developing nations in global trade debates, and played a decisive part in the Doha negotiations. With economic reforms, globalisation of the Indian economy has been the major factor in devising the foreign trade policy of India.
The objective of the Foreign Trade Policy is to twofold India Percentage share of global merchandise trade and to act as an effectual instrument of economic growth by giving a thrust to employment generation, especially in semi-urban and rural areas. The growth performance of exports has been a result of watchful effort of the Government to lessen transaction costs and assist trade. The guidelines of the Foreign Trade Policy (2004-09) for a five year period clearly articulate objectives, strategies and policy initiatives that has been involved in putting exports on a higher growth line.
Reviewing data of exports by Principal Commodities for the period April – October 2006-07, the export growth was largely driven by petroleum products, engineering. Export of other products like Agriculture and Allied Products, Ores and Minerals, Leather and Leather Manufactures, Gems and Jewellery, Chemicals and related Products, Engineering Goods and other commodities are shown below:
There are numerous challenges and issues in foreign trade. These include burden of Export Promotion schemes, danger of circular trading, and risk of importing outdated machinery. Sometimes policy fails to take a holistic view of trade issues. Other issue is relative importance of the home market, the nature or the degree of State intervention and recessionary conditions in the global market. India’s exports have suffered due to structural constraints operating both on the demand and supply side. On the demand side exports have continued to undergone the problems of adverse world trading Environment, protectionist sentiments in the developed countries in the guise of technical standards, environmental and social concerns and tariff differentials in imports by the developed countries. At the supply end, the factors that have constrained exports from India include Infrastructure-2/”>INFRASTRUCTURE constraints, high transaction costs, inflexibilities in labour laws, quality problems, constraints in attracting FDI in the export sector, etc
It is summarized that foreign trade has significant function in the fiscal development of any nation. India has made strong foreign trade policies and reformed these from time to time with the process of globalisation and liberalization. Since 1991, India’s foreign trade considerably transformed. India’s major exports include manufacturing and engineering goods. India has good trading relations with all developed countries in the world. More than fifty percent of India’s total export trade is with Asia and ASEAN region and about sixty percent of India’s total imports is with the same countries. India’s wealth previously was agricultural economy. India’s major requirement use to be food grains and other goods in import with fast industrialization, the composition of India’s imports goods changed and needed chemicals, Fertilizers and machinery which were required to meet the developmental requirements of country. In the composition of export; country sells agricultural products such as tea, spices, and other raw materials. However, with the industrialization of the financial system, compositions of exports changed. Currently, India exports products such as machinery chemicals and marine products. This may enhance the fiscal condition of India.
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Foreign trade policy is the set of rules and regulations that a country uses to govern its international trade. These policies can be used to protect domestic industries, promote exports, or regulate the flow of goods and services across borders.
International trade agreements are agreements between two or more countries that set the rules for trade between them. These agreements can cover a wide range of issues, such as tariffs, quotas, and Intellectual Property Rights.
Trade promotion is the activities that a government or private organization undertakes to encourage exports. These activities can include providing financial assistance, Marketing support, and training for exporters.
Export development is the process of increasing the value of a country’s exports. This can be done by increasing the number of products that a country exports, increasing the value of each product that is exported, or both.
Import management is the process of controlling the flow of goods into a country. This can be done through tariffs, quotas, or other measures.
Trade facilitation is the process of making it easier and cheaper to trade goods and services across borders. This can be done by simplifying customs procedures, harmonizing standards, and improving infrastructure.
Trade negotiations are the process of reaching agreements between countries on trade issues. These negotiations can be bilateral, regional, or multilateral.
Trade dispute settlement is the process of resolving disputes between countries over trade issues. This can be done through the World Trade Organization (WTO) or through other mechanisms.
Trade in Services is the exchange of services between countries. Services include things like tourism, Banking, and telecommunications.
Trade in goods is the exchange of goods between countries. Goods include things like cars, clothes, and food.
Trade in agriculture is the exchange of agricultural products between countries. Agricultural products include things like wheat, rice, and meat.
Trade in textiles and clothing is the exchange of textiles and clothing between countries. Textiles are fabrics that are used to make clothing. Clothing is the apparel that people wear.
Trade in machinery and equipment is the exchange of machinery and equipment between countries. Machinery is equipment that is used to produce goods. Equipment is tools and other items that are used to do work.
Trade in chemicals and pharmaceuticals is the exchange of chemicals and pharmaceuticals between countries. Chemicals are substances that are used to make other products. Pharmaceuticals are drugs that are used to treat or prevent diseases.
Trade in automotive products is the exchange of automotive products between countries. Automotive products include cars, trucks, and buses.
Trade in electronics and information technology products is the exchange of electronics and information technology products between countries. Electronics are devices that use electricity to operate. Information technology products are devices that are used to store, process, and transmit information.
Trade in tourism is the exchange of tourism services between countries. Tourism services include things like travel, accommodation, and entertainment.
Trade in Education is the exchange of education services between countries. Education services include things like teaching, research, and training.
Trade in Health care is the exchange of health care services between countries. Health care services include things like diagnosis, treatment, and prevention of diseases.
Trade in financial services is the exchange of financial services between countries. Financial services include things like banking, insurance, and investment.
Trade in transportation services is the exchange of transportation services between countries. Transportation services include things like air travel, shipping, and rail transport.
Trade in telecommunications services is the exchange of telecommunications services between countries. Telecommunications services include things like telephone, Internet, and television.
Trade in environmental services is the exchange of environmental services between countries. Environmental services include things like Waste Management, water treatment, and Air Pollution control.
Trade in intellectual property rights is the exchange of intellectual property rights between countries. Intellectual property rights are rights that protect creative works, inventions, and other forms of intellectual property.
Trade in investment is the exchange of investment between countries. Investment includes things like Foreign Direct Investment (FDI) and portfolio investment.
Trade in competition policy is the exchange of competition policy between countries. Competition policy is the set of rules and regulations that a country uses to promote competition in its markets.
Trade in government procurement is the exchange of government procurement between countries. Government procurement is the process by which governments purchase goods and services.
Trade in standards and technical barriers to trade is the exchange of standards and technical barriers to trade between countries. Standards are technical specifications that are used to ensure the quality of goods and services. Technical barriers to trade are measures that governments use to regulate the flow of goods and services across borders.
Trade in sanitary and phytosanitary measures is the exchange of sanitary and phytosanitary measures between countries. Sanitary measures are measures that governments use to protect human health. Phytosanitary measures are measures that governments use to protect plant health.
Trade in rules of origin is the exchange of rules of origin between countries. Rules of origin are rules that determine the country of origin of a good.
What is planning?
Planning is the process of thinking about and organizing the activities required to achieve a desired goal. It involves setting goals, developing strategies, and allocating resources.
What is foreign trade?
Foreign trade is the exchange of goods and services between countries. It can take many forms, including exports, imports, and foreign direct investment.
What are the benefits of planning?
Planning can help you to achieve your goals by providing a roadmap to follow. It can also help you to identify and manage risks, and to make better decisions.
What are the benefits of foreign trade?
Foreign trade can help you to increase your sales, to access new markets, and to reduce your costs. It can also help you to learn about new technologies and to improve your products and services.
What are the challenges of planning?
Planning can be challenging because it requires you to think about the future and to make assumptions about what will happen. It can also be difficult to implement plans, especially if they are complex or if there are unexpected changes.
What are the challenges of foreign trade?
Foreign trade can be challenging because it involves dealing with different cultures and regulations. It can also be difficult to manage risks, such as changes in exchange rates or political instability.
What are some common mistakes people make when planning?
Some common mistakes people make when planning include:
- Not setting clear goals
- Not developing realistic strategies
- Not allocating enough resources
- Not monitoring progress and making adjustments as needed
What are some common mistakes people make when engaging in foreign trade?
Some common mistakes people make when engaging in foreign trade include:
- Not doing enough research on potential markets
- Not understanding the risks involved
- Not having a clear plan for how to enter the market
- Not having a strong marketing strategy
What are some tips for successful planning?
Some tips for successful planning include:
- Set clear goals
- Develop realistic strategies
- Allocate enough resources
- Monitor progress and make adjustments as needed
What are some tips for successful foreign trade?
Some tips for successful foreign trade include:
- Do your research
- Understand the risks involved
- Have a clear plan for how to enter the market
- Have a strong marketing strategy
- Be patient and persistent
Question 1
Which of the following is not a type of economic planning?
(A) Market economy
(B) Command economy
(C) Mixed Economy
(D) Planned economy
Answer
(A)
A market economy is an economic system in which the prices for goods and services are determined by supply and demand. A command economy is an economic system in which the government controls all aspects of the economy, including production, distribution, and prices. A mixed economy is an economic system that combines Elements of both market and command economies. A planned economy is an economic system in which the government plans and controls all aspects of the economy.
Question 2
Which of the following is not a factor of production?
(A) Land
(B) Labor
(C) Capital
(D) Entrepreneurship
Answer
(D)
Land, labor, capital, and entrepreneurship are the four factors of production. Land refers to the Natural Resources that are used to produce goods and services. Labor refers to the human resources that are used to produce goods and services. Capital refers to the physical resources that are used to produce goods and services. Entrepreneurship refers to the risk-taking and innovation that are necessary to start and run a business.
Question 3
Which of the following is not a type of business organization?
(A) Sole proprietorship
(B) PARTNERSHIP
(C) Corporation
(D) Government
Answer
(D)
A sole proprietorship is a business that is owned and operated by one person. A partnership is a business that is owned and operated by two or more people. A corporation is a business that is owned by its shareholders and is managed by a board of directors. Government is a non-profit organization that is responsible for providing public goods and services.
Question 4
Which of the following is not a type of market structure?
(A) Perfect competition
(B) Monopoly
(C) Oligopoly
(D) Duopoly
Answer
(D)
A perfect competition is a market structure in which there are many buyers and sellers of a homogeneous product, and there is no barrier to entry or exit. A monopoly is a market structure in which there is only one seller of a good or service. An oligopoly is a market structure in which there are a few large sellers of a good or service. A duopoly is a market structure in which there are two large sellers of a good or service.
Question 5
Which of the following is not a type of economic growth?
(A) Positive economic growth
(B) Negative economic growth
(C) Zero economic growth
(D) Stagflation
Answer
(D)
Positive economic growth is an increase in the real gross domestic product (GDP) of a country. Negative economic growth is a decrease in the Real GDP of a country. Zero economic growth is a situation in which the real GDP of a country does not change. Stagflation is a situation in which a country experiences high Inflation and high Unemployment.