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.
Sources:
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