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Trade balance UPSC| Transport, Communication, and Trade | Geography of India

Table of Contents:

  • Trade, trade Types, International trade pattern
  • Trade Balance
  • Trade Deficit reason and  implication
  • Trade balance pattern
  • Major export and import goods
  • Changing Pattern of import goods
  • Trade surplus and deficit with countries

What is trade? 

The exchange of goods and services among people, states, and countries is referred to as trade. A market is a place where trade is done and transport and communication networks facilitated the trade.

Two types of Trade:

  • International trade
    • Bilateral trade
    • Multilateral trade
  • Internal trade

International Trade:

  • Trade between the two countries is called international trade. It may be done via land, sea, and air route.
  • Economic prosperity is measured by the advancement of the international trade of the country. It is also considered an economic barometer for the country.
  • As each country has limited resources, no country can survive without international trade.

The following are a pattern of  international trade :

  • 1950-51:
    • 1,214 crore
  • 2016-17:
    • 44,29,762 crore

Reason for growth of international trade:

  • Manufacturing growth
  • Liberalization
  • Diversification of market

Internal Trade:

  • Trade between the two countries is considered internal trade.

Trade Balance:

Trade balance or balance of trade is also called an International trade balance.

Trade balance = import minus export of goods and services.
  • When the value of export exceeds the value of import, it is called a favorable balance of trade and when import exceeds export; it is called the unfavorable balance of trade.
  • In 2012-13, India had a huge trade deficit, import exceeds export by around $ 195.6 billion.

A trade deficit can be for two reasons;

  • Not enough domestic production for consumption.
  • Costly domestic production is a result of consumers choosing foreign goods.

For example, 

  • Crude oil, pulse, and edible oil production are not enough to meet the domestic demand, we need to import.
  • In the case of Steel, dairy products, and toy products, we have enough capacity for production but the cost of production is higher compared to China, hence Indian consumers such as automobile companies are buying Chinese steel at a cheaper rate for the same quality.

The implication of trade deficit:

  • It reduces national saving
  • It may lead to a balance of crisis

This is why India refused to sign the Free trade agreement with RECP( regional Comprehensive Economic Participation agreement).

Changing trade balance pattern:

The following are trade balance pattern

  • 2004-05:
    •  -1.25 lakh crore
  • 2009-10: 
    • -5.18 lakh crore
  • 2013-14: 
    • -8.10 lakh crore
  • 2016-15:
    • -7.25 lakh crore

India Export goods by decreasing order:

  • Manufacturing goods; 73.6
  • Agriculture and product: 12.3 %
  • Crude and petrol product; 11.7 %

Changing pattern of India import: 

  • 1950-60: food mainly, capital, equipment
  • After 1970: no more food gran imported after the green revolution, but fertilizer and petroleum imports increased, edible oil also increase

India has a trade deficit with many countries;

  • China
  • South Korea
  • Japan
  • Asian nation
  • Australia
  • West Asia
  • African nation
  • Venezuela
  • Russia

India has a trade surplus with:

  • USA
  • Europe
  • Bangladesh
  • Nepal
  • Bhutan
  • Sri Lanka
Try to solve the following questions:
  • Account for the persisting negative trade balance of India. (UPSC 2018, 200 words, 15 marks)
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