Foreign trade plays an important role in the economic development of country. It is said, “Foreign trade is not simply a device for achieving productive efficiency but is an engine of economic growth.”

Many reasons certify this statement.

(i) Nation can optimally use its resources.

(ii) Technical know-how can be imported.


(iii) Surplus production can be exported.

(iv) Machinery and raw materials can be imported as and when needed.

(v) Food grains and necessary help can be imported during natural calamities like earthquake, & flood etc.

Keeping in mind all these reasons Planning Commission of India has emphasized the development of foreign trade in plans.


Salient Features of Foreign Trade:

The following are the features of foreign trade:

(i) Change in the composition of exports:

After independence many changes took place in export trade. India exported tea, jute, cloth, iron, spices and leather before independence. Now chemicals, readymade garments, gems, jewellery, electronic goods, processed foods, machines. Computer software etc. are exported along with tea, jute and cotton textiles.


(ii) Change in the composition of imports:

India imported consumer goods, medicines, textiles, motor vehicles and electrical goods before independence. After independence, imports are fertilizers, petroleum, steel, machines, industrial raw materials, edible oils and unfinished diamonds.

(iii) Direction of foreign trade:

Direction of foreign trade means those countries with which India has trade ties. Before independence, India has trade relations with England and Commonwealth Nations Now India has trade relations with U.S.A, Russia, Japan, European Union and Organization of Petroleum Exporting Countries (OPEC).

(iv) Balance of trade:

Simply speaking balance of trade means the difference between value of exports and imports. Balance of payments is favourable if exports exceed imports and un-favourable if imports exceeds export. India’s balance of payment was favourable before Independence. It was favourable to Rs. 42 crore, but after independence it becomes un-favourable. It was Rs. 65741 crore adverse in 2003-04.

(v) Dependent trade:

Before independence, Indian foreign trade was dependent on foreign shipping, insurance and banking companies. After independence, cargo ships are being built in India. Banks and insurance companies have started taking interest in foreign trade.

(vi) Trade through sea routes:


India’s foreign trade is through sea routes. India has very little trade relations with neighbouring countries like Nepal, Afghanistan, Pakistan, Bhutan and Sri Lanka etc.

(vii) Dependence on a few Ports:

Indian foreign trade is through Chennai, Kolkata and Mumbai ports. These ports are always over-crowded. After independence ports like Kandla, Cochin and Vishakhapatnam have been developed.

(viii) Less percentage of world trade:


India’s share in world trade has been diminishing. It was 1.8% of world’s total imports and 2% of world’s total exports in 1950-51. In 2003-04 India’s share in total world imports was 1% and in total world exports was 0.8%.

(ix) Increased Share in Gross National Income:

Foreign trade has significant contribution in Indian national income. In 1950-51, India’s foreign trade contribution into national income was 12% and rose is 29% in 2003-04.

(x) Increae in value and volume of trade:


The value and volume of imports and exports increased many fold. In 1950-51 imports were Rs. 608 crores and exports were Rs. 606 crores. So total value was Rs. 1214 crores. In 2003-04, it increased to Rs. 6, 52,475 crore. Value of exports 2, 93,367 crore and of imports 3, 59,108 crore.