What is TRADE?

TRADE means selling or buying something from others. A mechanism that allows trade is called a market. The original form of trade was barter (the direct exchange of goods and services). Modern traders instead generally negotiate through a medium of exchange such as money. Trade between two traders is called bilateral trade while trade between more than two traders is called multilateral trade.



For India to become a major player in world of trade an all comprehensive view needs to be taken for the overall development of the foreign country's trade. While increase in exports is of vital importance that we have also to facilitate those importswhich are required to stimulate our economy. Coherence and consistency among trade andother economic policies is important for maximizing the contribution of such policies to development. While incorporating the existing practice of enunciating an annual EximPolicy, it is necessary to go much beyond and take an integrated approach to thedevelopmental requirements of India's foreign trade. This is the context of the new ForeignTrade Policy..

Objectives of Foreign Trade Policy:-

Trade is not an end in itself, but a means to economic growth and national development.The primary purpose is not the mere earning of foreign exchange but thestimulation of greater economic activity. The Foreign Trade Policy is rooted in this belief andbuilt around two major objectives. These are:

  1. To double our percentage share of global merchandise trade within the next five years.
  2. To act as an effective instrument of economic growth by giving a thrust to employmentgeneration.


These objectives are proposed to be achieved by adopting among others the followingstrategies:

  1. Unshackling of controls and creating an atmosphere of trust and transparency tounleash the innate entrepreneurship of our businessmen industrialists and traders.
  2. Simplifying procedures and bringing down transaction costs.
  3. Neutralizing incidence of all levies and duties on inputs used in export products basedon the fundamental principle that duties and levies should not be exported.
  4. Facilitating development of India as a global hub for manufacturing, trading andservices.
  5. Identifying and nurturing special focus areas which would generate additional employment opportunities particularly in semi-urban and rural areas and developing aseries of ‘Initiatives' for each of these.


The new Policy envisages merchant exporters and manufacturer exporters businessand industry as partners of Government in the achievement of its stated objectives and goals.Prolonged and unnecessary litigation vitiates the premise of partnership. In order to obviatethe need for litigation and nurture a constructive and conducive atmosphere,, a suitableGrievance Redressal Mechanism will be established which, it is hoped, would substantially

Reduce litigation and further a relationship of partnership.

The dynamics of a liberalized trading system sometimes results in injury caused todomestic industry on account of dumping. When this happens, effective measures to redresssuch injury will be taken..

Present scene:-

  1. India occupies the 26th slot at $179billion in merchandise exports in 2008,accounting for a share of 1.1 per cent inglobal trade.
  2. In imports, India ranks 17th at $292 billion, accounting for 1.8 per cent share in global imports.
  3. Incentive to exporters available under Focus Product Scheme (FPS) raised from 1.25% to 2%.
  4. EPCG Scheme at zero duty has been introduced for certainengineering products, electronic products, basic chemicals andpharmaceuticals, apparel and textiles, plastics, handicrafts,chemicals and allied products and leather and leather products.
  5. Export obligation on import of spares, moulds etc. under EPCG scheme has been reduced by 50%.
  6. In an attempt to make India a diamond international trading
  7. It is planned to establish “Diamond Bourse.”(Awholesale polished diamond exchange where trade merchants meet to transact business. Diamond bourses are held in major diamond cutting center )
  8. India aims to become a hub for production and export ofgreen products and technologies. To achieve this objective special initiative will be taken to promote development and manufacture of such products and technologies for exports. To begin with, focus would be on items relating to transportation, solar and wind power generation and other products as may be notified which will be incentivised under Reward Schemes.
  9. 9.Certain specified flowers, fruits and vegetables areentitled to a special duty credit scrip, in addition to the normal benefit under VKGUY. (Vishesh Krishi Gram and Upaj Yojana )
  10. 10.Re-export of unsuitable imported materials such as raw hides and wet blue leathers is permitted.

The Foreign Trade (Development and Regulation) Act, 1992:-

An Act to provide for the development andregulation of foreign trade by facilitating imports into, and augmenting (increase) exports from India and for mattersconnected therewith or incidental thereto.

Main Provisions:-

  1. Development and Regulation.
  2. Prohibition and restriction.
  3. Exim-Policy.
  4. Importer-Exporter Code Number.
  5. Issue and Cancellation of License.
  6. Search, Inspection and Seizure.
  7. Penalty for contravention.


  1. Favorable Balance Of Payments - Valueof total receipts more than total payments.
  2. Adverse Balance Of Payments - Value oftotal receipts less than total payments.
  3. Balanced Balance Of Payments - Value oftotal receipts equals total payments.


  1. Total receipts and total paymentsinequality shows disequilibrium ofbalance of payments account.
  2. If payments> receipts BOP shows deficit.
  3. If payments < receipts BOP showsSurplus.


  1. Increase in imports.
  2. Slow progress in exports.
  3. Burden of interest payments.
  4. International developments.
  5. Deficit in capital account.

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