Chapter 10 -Foreign Trade of India.

10 Nov 2020 11:23 am

Balbharati, solutions, for, Economics, HSC, 12th, Standard, Maharashtra, State, Board, Chapter 10, Foreign Trade of India, with, solutions, 2021

 

Chapter 10: Foreign Trade of India with solutions 2020

Q.1. Choose the correct option:

1. Types of foreign trade

a) Import trade

b) Export trade

c) Entrepot trade

d) Internal trade

a and b

a, b and c

a, b, c and d

None of these


2. Export trends of India’s foreign trade include

a) Engineering goods

b) Gems and Jewellery

c) Textiles and ready-made garments

d) Gold

a and c

a, b and c

b, c and d

None of these


3. Role of foreign trade is

a) To earn foreign exchange

b) To encourage investment

c) Lead to division of labour

d) Bring change in composition of exports

a and b

a, b and c

b and d

None of these


Q.2.Identify and explain the concept from the given illustration

1. India purchased petroleum from Iran.

Ans: – Import Trade – (Type of foreign trade)

Explanation:

a. Import trade refers to the purchase of goods and services by one country from another country or inflow of goods and services from a foreign country to the home country. 


b. For example, India imports petroleum from Iraq, Kuwait, Saudi Arabia, etc.

2. Maharashtra purchased wheat from Punjab.

Ans: – Internal Trade

Explanation:

Buying and selling of goods and services within the boundaries of a nation are referred to as ‘Internal Trade’ or ‘Domestic Trade’ or ‘Home Trade’.


Q.3. Distinguish between the following:

1. Internal trade and International trade.

BasisInternal tradeInter
national trade
MeaningInternal trade refers to the buying and selling of goods within the geographical limits of a country.International trade refers to the buying and selling of goods beyond the geographical limits of a country.
Countries InvolvedOnly one country is involved.Minimum Two countries are involved.
CurrencyPayments are made and received in-home currency only.Payment is made and received in mutually agreed foreign currency only.
RiskLess degree of risk is involvedHigh degree of risk is involved, such as transit risk, risk of fluctuation of currency and demand, etc
Govern
ment Restri
ctions
Internal trade is not restricted, except on a few goods.International trade is strictly monitored by the government and prior approval is required before international transactions.

2. Balance of payments and Balance of trade.

Basic for com
parison
Balance of paymentsBalance
of trade
MeaningBalance of Payment
is a statement that keeps track of all economic tran
sactions done by the country with the remaining world.
Balancue of Trade is a statement that captures the country’s export and import of goods with the remaining world.
RecordsTran
sactions related to both goods and services are recorded.
Tran
sactions are related to goods only.
ResultBoth the receipts and payment sides tallies.It can be Favorable, Unfavorable, or balanced.
Capital TransfersBalance of Payment is included.The Balance of Trade is not included.
ComponentCurrent Account and Capital Account.It is a component of the Current Account of Balance of Payment.

Q.4. Answer the following:

1. Explain the concept of foreign trade and its types.

Answer: –

Foreign Trade is traded between the different countries of the world. It is called International Trade or External Trade.

Types of foreign trade: –

Foreign trade is divided into the following three types: –

  1. Import Trade: Import trade refers to the purchase of goods and services by one country from another country or inflow of goods and services from a foreign country to the home country. For example, India imports petroleum from Iraq, Kuwait, Saudi Arabia, etc.

2. Export Trade: Export trade refers to the sale of goods by one country to another country or outflow of goods from one country to a foreign country. For example, India exports tea, rice, jute to China, Hong Kong, Singapore, etc.

3. Entrepot Trade: Entrepot trade refers to the purchase of goods and services from one country and then selling them to another country after some processing operations. For example, Japan imports raw material required to make electronic goods like radio, washing machine, television, etc. from England, Germany, France, etc. and sells them to various countries in the world after processing them.


2. Explain any four features of composition of India’s foreign trade.

Main feature of the composition of India’s foreign trade are as follows:

Change in the composition of exports: The composition of export trade in India has undergone a change. Prior to Independence, India used to export primary products like jute, cotton, tea, oil-seeds, leather, food grains, cashew nuts and mineral products. 

Change in the composition of imports: India used to import consumer goods like medicines, cloth, motor vehicles, electrical goods, etc. Apart from petrol and petroleum, India is now importing mainly capital goods like high-tech machinery chemicals, fertilizers, steel, etc.

Oceanic trade: Most of India’s trade is by sea. India has trade relations with its neighbouring countries like Nepal, Afghanistan, Myanmar, Sri Lanka, etc.

Development of new ports: For its foreign trade, India depended mostly on Mumbai, Kolkata and Chennai ports. Therefore these ports were overburdened. Recently, India has developed new ports at Kandla, Cochin, Visakhapatnam, Nhava Sheva etc. to reduce the burden on the existing ports.


3. Explain the trend in India’s imports.

Trends in Imports:

Petroleum: Petroleum has always remained the most important item of imports in India’s trade in the pre as well as post-reform period. It had a share of 27% of total imports in 1990-92 which currently stands at around 31%.

Gold: After petroleum, the second most imported item is gold. It has been observed that there is a significant drop in gold imports during 2013-14. The gold imports declined from 53.3 billion dollars in 2011-12 to 27.5 billion dollars in 2013-14. This was primarily due to a fall in international gold prices and various policy measures taken by the government to curb gold imports.


Q.5. State with reason whether you agree or disagree with the following statement:

1. During British rule, indigenous handicrafts suffered a severe blow.

Options

Agree

Disagree

YES I Agree with the above statement.

Explanation:

a. Before 1947, the pattern of India’s foreign trade was typically colonial. India was a supplier of raw materials to the industrialized nations, particularly England and importer of manufactured goods. 

b. This dependence on foreign trade did not permit industrialization at home. As a result, the indigenous handicrafts suffered a severe blow.


2. Trade is an engine of growth for an economy.

Options

Agree

Disagree

YES I Agree with the above statement.

Explanation:

a. Trade is an engine of growth of an economy because it plays an important role in economic development.

b. In developed countries, it represents a significant share of the Gross Domestic Product.


3. Foreign trade leads to division of labour and specialization at world level.

Options

Agree

Disagree

YES I Agree with the above statement.

Explanation:

a. Foreign trade leads to division of labour and specialization at world level.

b. Some countries have abundant natural resources, they should export raw material and import finished goods from countries which are advanced in skilled manpower. 

c. Thus, foreign trade gives benefits to all countries thereby leading to division of labour and specialization.


Q.6. Observe the following table and answer the questions given below the table:

Countries Organisations 1990-91              2015-16
Serial numberPer
centage
Per
centage
OECD54.028.8
OPEC16.323.6
EASTERN EUROPE7.81.9
DEVELOPING NATIONS18.643.2
OTHERS1.42.5

QUESTIONS: –

Which organisation has the least share in the direction of India’s imports in 2015-16?

Solution: – Eastern Europe

Which organization has maximum share in India’s direction 

Solution: – OECD

Expand the abbreviations of OECD and OPEC?

Solution: – ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT AND ORGANISATION OF THE PETROLEUM EXPORTING COUNTRIES.

State your opinion regarding the direction of India’s imports.

Solution: -INDIA’S IMPORTS INCREASING OVER THE YEARS

How much is the percentage of increase in the imports of developing nations in 2015-16 as compared to 1990-91. 

Solution: – 24.6


Q.7. Answer in detail:

1. Explain the meaning and role of foreign trade.

Meaning of Foreign Trade:

Foreign Trade is traded between the different countries of the world. It is called International Trade or External Trade.

Role of foreign trade can be justified on the basis of the following points:

To earn foreign exchange: Foreign trade provides foreign exchange which can be used for very productive purposes. Foreign trade is a remarkable factor in expanding the market and encouraging the production of goods.

Encourages Investment: Foreign trade creates an opportunity for the producers to reach beyond the domestic markets. It encourages them to produce more goods for export. This leads to an increase in total investment in an economy.

Division of labour and specialization: Foreign trade leads to the division of labour and specialization at the world level. Some countries have abundant natural resources, they should export raw material and import finished goods from countries which are advanced in skilled manpower. Thus, foreign trade gives benefits to all countries thereby leading to the division of labour and specialization.

Optimum allocation and utilization of resources: Due to specialization, resources are channelized for the production of only those goods which would give the highest returns. Thus, there is rational allocation and specialization of resources at the international level due to foreign trade.

Stability in price level: Foreign trade helps to keep the demand and supply position stable which in turn stabilizes the price level in the economy.


2. Explain the recent trends in India’s exports.

Following are the recent trends in India’s exports:

Engineering goods: According to the Engineering Goods Export Promotion Council (EGEPC) Report, the share of engineering goods was 25% in India’s total exports in 2017-18. Within this category, some of the prominent exported items are transport equipment including automobiles and auto components, machinery and instruments. During the period 2010-11 to 2014-15, exports of transport equipment have grown from 16 billion dollars to 24.8 billion dollars.

Petroleum products: India’s petroleum capacity increased significantly since 2001-02, due to which India turned as a net exporter of petroleum refinery products. Petroleum products had a share of 4.3% in India’s total exports in 2000-01, which rose steadily to 20.1% in 2013-14.

Chemicals and chemical products: An important export item that has performed reasonably well over the last few years is chemicals and chemical products. The share of this item was 10.4% in 2014-15.

Gems and Jewellery: Gems and jewellery are one of the major contributors to export earnings in India, having a share of 13.3% in India’s merchandise export in 2014-15.

Textiles and readymade garments: Textiles and garment exports together accounted for 11.3% of India’s exports 97in 2014-15. In fact, India is one of the leading exporting countries of textiles and readymade garments in the world.


All the very best students

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