Foreign trade has got an important place in the economic development of India and the importance of those trades for economic development are:
Ø First, foreign trade helps a developing country like India in its economic development. Iron and steel industry, has been established due to stored iron-ore and coal. But for the establishment of this type industry, we have to import technical knowledge from foreign countries. Had there been no foreign trade, then it would not have been only difficult but also too expensive.
Ø Secondly, foreign trade increases the scope of market because of domestic demand and foreign demand for the product. So there is mass production. If the production of goods increases, average cost declines and price of goods declines.
Ø Thirdly, foreign trade helps the people to get different varieties of goods both in quantities terms and qualitative terms.
Ø Fourthly, foreign trade helps to produce those commodities which have a comparative cheaper cost than others. It results in less cost of producing a commodity. If all the countries adopt the procedure to produce these goods which they have less comparative cost, it will lead to availability of goods at a lower price.
India benefit greatly from FDI to generate employment and productivity enhancement that encourages the transfer of management skill, intellectual property and technology, increase in tax revenue and increase in exports.
India has been the home to a number of multinational companies since the financial liberalization in 1991, and the number of multinational companies in India has increased noticeably. These multinational companies in India represent a diversified portfolio of companies from different countries. Though the American companies - the majority of the MNC in India, account for about 37% of the turnover of the top 20 firms operating in India, but the scenario has changed a lot off late. More enterprises from European Union like Britain, France, Netherlands, Italy, Germany, Belgium and Finland have moved or outsourced their works to India.
Without foreign trade, it is not possible to fulfill the demand for petroleum products and it will retard the economic development of India. There is also scarcity of consumer goods due to natural calamities or due to any other reason. During the time of scarcity in consumer goods, the governments imports these goods from foreign countries and keep prices stable which help people to get their commodities.
Due to all these above reasons, foreign trade has got an important place in every country.