Class 12 Geography

India – People and Economy

Chapter 8: International Trade

Introduction to International Trade

International trade refers to the exchange of goods and services between countries through imports and exports. It has been a significant factor in India's economic development since ancient times when it traded spices, textiles, and precious stones via the Silk Route.

Significance of International Trade:

  • Helps in economic growth and development
  • Provides access to resources not available domestically
  • Creates employment opportunities
  • Enhances efficiency through competition
  • Facilitates transfer of technology and skills

Basis of International Trade:

  • Difference in national resources
  • Population factors
  • Transport development
  • Government policies
  • Specialization and division of labor

India's Trade Composition

Major Exports

  • Engineering Goods: Machinery, automobiles, iron and steel products (24% of total exports)
  • Petroleum Products: Refined petroleum (19% of exports)
  • Gems & Jewelry: Precious stones and gold jewelry (14% of exports)
  • Textiles: Ready-made garments, cotton yarn, fabrics
  • Chemicals: Pharmaceuticals, organic chemicals
  • Agricultural Products: Rice, spices, marine products, tea, coffee
  • Services: IT and software services (major contributor)

Major Imports

  • Crude Oil: Accounts for about 25% of total imports
  • Gold: Second largest import item
  • Electronic Goods: Computers, semiconductors, telecom equipment
  • Machinery: Electrical and non-electrical machinery
  • Pearls & Precious Stones: For jewelry industry
  • Chemicals: Fertilizers, plastics
  • Coal & Coke: For energy needs

Recent Trends in India's Trade:

  • Increasing share of manufactured goods in exports
  • Growth in services exports especially IT and ITES
  • Shift from traditional to non-traditional markets
  • Rising trade deficit due to high oil and gold imports
  • Government initiatives like 'Make in India' to boost exports

Direction of Trade

India's trade partners have diversified significantly since independence when UK was the dominant partner. Currently, India trades with most countries globally.

Major Export Destinations:

  1. United States (17% share)
  2. United Arab Emirates (9%)
  3. China (5%)
  4. Hong Kong (4%)
  5. Singapore (4%)
  6. United Kingdom (3%)
  7. Germany (3%)

Major Import Sources:

  1. China (16% share)
  2. United States (7%)
  3. United Arab Emirates (6%)
  4. Saudi Arabia (5%)
  5. Iraq (5%)
  6. Switzerland (4%)
  7. Hong Kong (4%)

Regional Trade Agreements:

  • SAFTA (South Asian Free Trade Area)
  • India-ASEAN Free Trade Agreement
  • India-Japan Comprehensive Economic Partnership Agreement
  • India-Korea Comprehensive Economic Partnership Agreement

Ports as Gateways of International Trade

India has a long coastline of 7,517 km with 13 major ports and about 200 non-major ports that handle about 90% of India's external trade by volume and 70% by value.

West Coast Major Ports:

  • Kandla: Tidal port, handles petroleum and chemicals
  • Mumbai: Largest natural port, handles diverse cargo
  • JNPT (Navi Mumbai): Largest container port
  • Mormugao: Iron ore exports
  • New Mangalore: Iron ore and petroleum products
  • Cochin: Shipbuilding center

East Coast Major Ports:

  • Kolkata-Haldia: Riverine port, handles jute and tea
  • Paradip: Exports iron ore and minerals
  • Visakhapatnam: Deepest port, handles iron ore and petroleum
  • Chennai: Second largest container port
  • Tuticorin: Pearl fishing center
  • Ennore: First corporate port

Sagarmala Project:

Government initiative to modernize ports and develop port-led industrialization with:

  • Port modernization and new port development
  • Port connectivity enhancement
  • Port-linked industrialization
  • Coastal community development

Balance of Trade and Payments

Balance of Trade:

Difference between value of exports and imports of visible goods

  • Trade Surplus: Exports > Imports
  • Trade Deficit: Imports > Exports (India's usual situation)
  • India's trade deficit in 2022-23: $267.45 billion

Balance of Payments:

Complete record of all economic transactions between residents of a country and the rest of the world

  • Current Account (trade in goods and services)
  • Capital Account (investments and loans)
  • Financial Account (financial assets)

Challenges in India's International Trade:

  • Persistent trade deficit
  • Dependence on oil imports
  • Slow growth in merchandise exports
  • Non-tariff barriers in developed countries
  • Competition from low-cost countries like China and Vietnam
  • Infrastructure bottlenecks at ports

Recent Developments in India's Trade Policy

  • Foreign Trade Policy 2023: Aims to achieve $2 trillion in exports by 2030
  • Make in India: Initiative to boost manufacturing and exports
  • Production Linked Incentive (PLI) Schemes: For electronics, pharmaceuticals, automobiles etc.
  • Export Promotion Councils: To support specific industry sectors
  • Special Economic Zones (SEZs): To promote exports with tax benefits
  • Duty Drawback Scheme: Refund of duties on export inputs
  • Rupee Trade Arrangement: Settling trade in Indian Rupees with some countries

Conclusion

International trade remains crucial for India's economic growth and development. While challenges like trade deficit and global competition persist, India is taking strategic steps through policy initiatives, infrastructure development, and diversification of trade partners.

The future of India's international trade looks promising with:

  • Growing services exports especially in IT sector
  • Increasing manufacturing competitiveness
  • Expanding trade agreements with new partners
  • Modernization of port infrastructure
  • Focus on self-reliance without isolation

With these developments, India is poised to strengthen its position in global trade in the coming decades.