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Foreign Trade and Globalisation

The trade between nations is known as foreign trade or international trade. Foreign trade is of three types—

  • Imports
  • Exports and
  • Entrepot trade

Imports refer to the purchasing of goods from other countries into a country for its internal use. Exports refer to the selling of goods to other countries. Entrepot trade takes place in countries like Singapore, where goods are purchased from one country to be sold to another country.

Resources are not distributed uniformly on the earth’s surface, and hence, no nation is self-sufficient in all its needs. Goods are exported from countries of surplus production, which are imported by nations which have a deficit of those resources. India needs to import machineries and raw materials for her industrial development. Minerals such as petroleum, zinc, lead, etc. fall short of India’s demand and hence these commodities need to be imported. On the other hand, India has a surplus production of iron ore, manganese, tea, sugar, etc. which are exported to various countries. Thus, such exchange of commodities between nations helps to maintain economic cooperation and also provide employment opportunities which are necessary to increase the standard of living in an economy.


Historically, India had trade relations with ancient empires such as Rome, Egypt, Greece, China, etc. for silk, precious stones, metals and spices. It was due to trading that the East India Company came to India. After India’s Independence from the British rule, the Five Year Plans were introduced in India which brought many changes in the foreign trade scenario. India has close trade relations with countries such as the USA, the UK, the UAE, Australia, Japan, China, etc. Many steps like setting up export promotion councils for minerals, handicrafts, etc. were taken to promote exports.


India exports raw cotton, iron ore, manganese, mica, leather products, jute goods, tea, spices, handicrafts, garments, etc. to different countries. The main items of imports for India are petroleum and petroleum products, machineries, chemicals and chemical fertilizers, medicines, etc.

Through foreign trade, the producers of a nation can reach beyond the markets of their own country. The abundance of products made in foreign countries yet sold in Indian markets is a common feature today. Toys, electronic goods, etc. manufactured in China are found all across India. Therefore, the opening of trade due to globalisation has resulted in a large range of products being available in the domestic markets. Producers from across boundaries complete with each other, and prices tend to equalise. Thus, markets get integrated.


The Multinational Corporations have entered the Indian economic scenario in the last two or three decades. Foreign investments in India have increased rapidly. MNCs contribute to the foreign trade by not only producing for the domestic market, but also exporting their products to foreign destinations. Trade in goods and services has increased in India. There has been a greater integration of the products and interlinking of markets across the nations. This process of integration, known as globalisation, has encouraged goods, services, technology and investments to cross borders and move to different countries through the MNCs. Similarly, the movement of people between countries in search of better opportunities has increased in this process. Rapid strides in technological advancements have encouraged globalisation. Improvement in transport facilities, developments in information and communication technology have largely benefitted movement of goods and services. Telecommunication facilities, computers and the Internet have made information reach even remote places at a rapid pace.


India’s foreign trade had been guided by barriers to imports, exports and foreign investments, etc. after the independence. Protecting the indigenous industry was the chief reason for this. Around 1991, the government had decided to lift these trade barriers and restrictions on foreign investments to a large extent, so that India can compete in the international market with producers from other countries. This process is called liberalisation. Government imposes fewer restrictions to foreign trade after liberalisation.

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