Importance Of Foreign Trade

Trade is an exchange or dealing in goods and services. If the trading is taking place internally within the political boundaries of a country, it is a domestic trade. If it takes place externally with other countries beyond the boundaries of a country, then, it is a foreign trade. Foreign trade of a country includes the imports and exports or merchandise and services.

In the modern economic environment Foreign Trade (FT) is inevitable for a country‘s growth and development for the following reasons:

• It earns foreign exchange required for payment for imports and to pay foreign debts. It reduces the burden for the foreign debts.
• Export increases the economic activity and results in greater income and standard of living. Increased competition reduces prices. For example TV, computers other electronic goods, cars etc.
• Contributes to the national income of the country.
• Expands and widens the market for domestic products and hence fetches better price and profit.
• Foreign exchange earned through FT, generates economic development activities.
• People live happily, gratifying the varied tastes and wants.
• It encourages international specialization using the special facilities and natural resources, capital efficiency and efficiency of human power.
• FT provides for expanding employment opportunities and industrial production.
• Helps to import capital goods and technology which will modernise the industrial sector and increase the efficiency.
• FT enables to make the best use of all available resources including human resources.
• FT makes available by sharing the scarce resources.
• FT enables to equalize the prices among countries. It moves the commodities where it is available in plenty to countries where it is costly. The vast difference in prices will be reduced in due course by the principle of demand and supply.
• FT expands market and leads to large scale production to achieve the benefits of economic of scale and to improve specialization and modernization.
• Any invention in any corner of the country spreads to all countries through International Trade / FT.