Question

What is the importance of foreign trade in Indian Economy?

Answer 1

The following is the main importance of imports for Indian economy.

(i) To Meet the Shortage of Essential Consumer Goods :– Indian economy can meet the shortage of essential consumer goods like foodgrains, edible oils, sugar etc. through imports. For example, in 1994 due to less production of sugarcane in the country, there was shortage of sugar. To meet this shortage of sugar, it was imported in huge quantity from foreign countries.

(ii) To meet the Need of Capital Goods :– India needs many capital goods like machinery, equipments etc., for its industrial development. Out of these some capital goods can not be produced at all in India. In this way, the need of capital goods like machinery can be met through imports.

(iii) To obtain Important Inputs :– For industrial and agricultural development of India, many important inputs like petrol, chemical fertilizers, minerals etc. are needed. These cannot be produced in sufficient quantity in the country. Thus, their shortage can be met through imports.

The importance of exports in Indian economy is as follows:-

(i) Export of Surplus Production :– In India the production of some products like tea, jute etc. is more than its domestic needs. The advantageous and large scale production of these products is possible

due to the exports of these to the foreign countries.

(ii) To obtain Foreign Exchange :– India requires foreign exchange for its imports. This foreign exchange can be obtained by exporting its products.