Indian Economy In The Global Context

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Every country is gifted with certain resources like natural resources, man-made resources. But those resources may not sufficient to satisfy all the needs of the country’s people.

Examples:

  • India does not have required oil reserves.

  • Indian people would like to travel to other countries.

  • Indian people interested in studies and look for jobs in other countries, and many more.

In order to satisfy needs that country need to acquire the required resources from other countries. This can be achieved by proper relation with other countries i.e International Economic relation.

Understanding Economic Relationship between Countries:

Every country is domestic country to their country citizens. And rest of the nations will be foreign countries to that country. Ex: For Indian citizens India is domestic country and the rest of the countries are foreign countries.

In order to satisfy needs and wants we need exchange of goods and services. Exchange of goods and services include both buying and selling. The exchange of goods and services is called as Trade.

The trade could be –

  • Internal Trade: Exchange of goods and services within the country. This is also called domestic transaction.

    Example: Transporting of textiles from Gujarat to Andhra Pradesh.

  • External Trade: Exchange of goods and services with other counties. This is also called as foreign exchange or international transaction.

Imports: Buying of goods and services by the domestic country from other countries. Example: Importing of Crude oil by India from OPEC countries.

Exports: Selling of goods and services by the domestic country to other counties. Example: Exporting of software services to many countries.

For this we need good economic relation with those countries.

Importance of Trade:

Trade is very important in present world. Requirement for quality goods and services has been increasing. This creates a way for trade. Globalization encouraged trade further.

Globalization:

“Globalisation is the process of interaction and integration among people, companies, and governments worldwide.”

Now-a-days globalization turns into different categories i.e, Economic Globalization, Cultural globalization and Political globalization.

In ancient days people used to visit other countries in order to know cultures and life styles of other countries. At the same time they trade different goods which are famous in that particular country. We call that trade as Barter system (exchange of goods for other goods).

During the trade in ancient days, there were many unfair trades.

Ex: Trade of slaves in Africa.

Unfair trades also exist in present day world. For example, trade of drugs and smuggled goods. This can be controlled by proper trade regulations. Many countries came forward to have a fair trade agreement for goods. That agreement was GATT (General Agreement on Tariffs and Trade) and effect from 1948. Later it was replaced with WTO (World Trade Organization) to regulate the trade between countries and to resolve the disputes regarding trade. WTO started its functions from 1st Jan, 1995.

There are many benefits associated with trading for both importer and exporter countries.

Benefits to Importing Countries:

  • They can import advanced technologies to start manufacturing in their own country.

  • Also they can import products to protect their country. (Defense Technologies)

  • They can get services from specialised countries at lesser cost then they produce.

  • That may build confidence in people about country, as it is satisfying their needs.

  • Standard of living could be increased.

Benefits to Exporting Countries:

  • They can earn more, in the form of foreign exchange reserves, by selling surplus goods and services.

  • Economic state of country will be improved.

  • They can become stronger in global market.

  • People of the country can enjoy high standard of living.

Export and Import by India:

India is a big country with huge population. The resources available in India may not meet the requirements by the people. So, India needs to do imports for required goods and services. At the same time India is specialized in certain areas through which it can do exports. India is having economic relationship with many countries in the world. The countries with which India is engaged in export and import activities are called India’s trading partners.

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