India’s Foreign Trade Class 12 | Inward Looking Trade Strategy |


India’s Foreign Trade Class 12 | Inward Looking Trade Strategy | Chapter 5 |

India’s Foreign Trade

Export and import of goods and services across different countries is known as international trade. When the domestically produced goods are sent to some other country, it is known as export of goods and services whereas when the foreign products are demanded by the domestic people, it is known as import of goods and services.

With the help of international trade, a consumer gets a wider range of products and higher level of investment leads to growth in the level of GDP and also get international specialisation. In addition to this, the domestic producer get some market where he can sell its surplus production to gain some amount.

India’s Foreign Trade at the time of Independence

At the time of independence, the following was the condition of India’s foreign trade:

  • India’s foreign trade was exploited by the Britishers.
  • Indian products were exported to Britain to serve the purpose of raw material.
  • British products were imported to serve the purpose of fulfilling demand of Indian people as they were forced to buy British made goods.
  • The direction of trade was restricted majorly between Britain and India.
  • The quantity of the goods exported was more but the value of same product is very less as Indian producers exports only primary goods which can serve as the purpose of raw material.
  • The value of goods imported was very high whereas the quantity of the goods was very less because the goods which were imported are finished goods.
  • The domestic producer were restricted by trade policy to pay a heavy export duty for the export of Indian manufactured goods.
  • Also, Indian producers had to a heavy duty for the import of capital goods

Overall the condition of foreign trade of India was very poor due to which the balance of payment account showed a high deficit from which India could not recover itself for many years.

India’s Foreign Trade after Independence – Volume, Composition, Direction

After independence, a drastic change India’s foreign trade was recorded.

Volume of Foreign Trade

The volume of foreign trade refers to the value of goods and services which are exported and imported in a country.

Elements of Increase in the Volume are as follow:

  • Firstly, an increase in the volume of export and import of goods and services is due to the base effect. With the increase of total volume of goods and services shows as significant rise in terms of percentage.
  • With the introduction of new economic policies under globalisation the export and import of goods and services showed a rise.
  • The economic reforms had also increased India’s share in the world trade.

Composition of Foreign Trade

The composition of the foreign trade refers to the type of goods and services which are exported and imported by a country.

Change in Composition of Trade is due to following factors:

  1. Decline in Share of Agriculture Goods: The fall in the export share of agriculture goods was noted because of the two facts. Firstly, India started using raw material from primary sector for their own domestic industries. Secondly, with the rise in the level of population the domestic consumption of primary goods has also increased.
  2. Decline in Share of Conventional Goods: Conventional goods are those goods on which people have common interest like jute, tea, food grains etc. With the planned development programs, the demand for conventional goods has increased due to which the export of such goods decreased.
  3. Increase in Share of Manufactured Products: With the help of planned development programs, the share of manufactured products to export has increased. Currently, India highly exports gems and jewelleries.

Direction of Foreign Trade

The direction of foreign trade refers to the route of the goods and services which are exported and imported by a country.

Before independence the trade was restricted between India and Britain but after the independence, a drastic change in the direction of trade can be noted. Now, UAE, China, Singapore, Australia, Belgium etc. are some major trading partner of India with long term trade contracts.

Inward Looking Trade Strategy/ Import Substitution Strategy

Inward looking trade strategy refers to the policy under which India became self-dependent for the production of goods and services and to protect the domestic industries. It is done by import restriction or substitution in which very less amount of goods and services were imported from foreign.

With that, the flow of domestic product had increased which the country was importing from the other countries. The capital goods were also imported for the purpose of growth and development in the country and less of foreign currency is required to pay as India was importing very less amount goods.

Good Impact of Inward Looking Trade Strategy

Good impact of inward looking trade strategy are as follow:

  1. High Rate of Industrial Growth: Under import substitution strategy, India became dependent on domestic industries for the satisfaction of wants due to which domestic industries had took reduce more and good quality of products which helped in the increase in the rate of GDP.
  2. Diversification of Industrial Growth: After independence, modern industries started producing a wide range of consumer goods and were called as sun rise industries. Sun rise industries were the rising industries of that time. Electronic industries and automobile industries had also showed a rise in production level.
  3. Increase in Investment Opportunities: With the programs like SSI, the investment opportunities had increased in the country. As those industries were employment friendly, government of India had also promoted them.

Bad Impact of Inward Looking Trade Strategy

Bad impact of inward looking trade strategy are as follow:

  1. Growth of Public Sector Monopoly: After independence, private sector acted as a secondary industries whereas public industries acted as major industries due to lack of investment. Therefore, it lead to create a monopoly for the public sector industries due to which private sector could not grow as it could grow.
  2. Lack of Competition: With the restriction on import of goods, there was lack of competition among the producers as they could only had competition among domestic producers and they were not aware about the international competition which is a serious issue for an economy as competition leads to perfection.
  3. Spread of Public Enterprise: Majorly Public enterprises showed a greater growth as private investor did not have enough amount to invest and were also restricted with licenses.

You May Also Read Indian Economy on The Eve of Independence,  Economic Planning, Agriculture Sector, Strategy of Industrial Growth, India’s Foreign Trade, Economic Reforms Since 1991, Poverty, Human Capital Formation, Rural Development, Unemployment, Environment, India China Pakistan Comparative Study for better understanding of the chapters and scoring higher in upcoming exams.

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