In a world where global trade is on the rise, boundaries between countries are on the decline and institutions such as the World Trade Organisation (WTO) and trade groups shape the pattern of trade. It is crucial to understand the factors that dictate the ability of a country to trade with other countries.
But why is trade so important, and how is it crucial from India’s perspective?
Trade enables a country to enjoy a variety of goods and services which widens the market, and ensures competitive pricing that benefit consumers. India, being the second most populated country in the world, needs to provide an access to the necessary commodities and services from other countries, and also need to provide a market for excess capacities in India.
Way back since early 1980’s, USA has been India’s largest trading partner till the middle of the last decade. This includes the early 90’s when India opened its door to global industry. It was only in the latter part of the last decade that the European Union began expanding its trade with India and is now among the largest importers from India. However, it is the India-China trade which leads the pack, and accounts for 8.7 percent share in India’s total trade (USA comes second with 8.1 percent share and UAE 3rd with an 8 percent share), during the first nine months of the current fiscal.
Globalisation is a leading cause for the rise in foreign trade worldwide. While political alignment is the key factor influencing trading partners and trading patterns; other key factors include geographical location, productivity levels, competition intensity, availability of raw material, labour, standard of living, etc.
India’s direction of foreign trade has exhibited a structural shift during the last decade. Foreign trade has become a key component of most countries’ economic activities. India, with its distinct development strategy, has the potential to influence economic activities of the global economy, in the years to come.
By,
Students of Grade 9