WHAT IS INTERNATIONAL TRADE?
International trade is a global process which allows countries to exchange goods, services and resources across international borders. It allows countries to specialise in producing what they are best at, allowing them to focus on producing what is most efficient rather than producing everything they need. This global network connects people all around the world creating links and maximising economic growth. Imports and exports across nations help countries get better access to latest and advanced technologies, gain better quality products and overall improve a country’s balance of payments stability. It converts the world into one big market of buyers and sellers where economies share mutual benefits of goods and services.
WHY DO ECONOMIES GET INVOLVED IN INTERNATIONAL TRADE?
There are various reasons why countries may want to participate in global trading. One key reason involves having a comparative advantage. This is when firms can produce goods at a lower opportunity cost, leading to greater overall consumption and production even if another one is producing everything or has an absolute advantage. A lower cost of production will adversely affect the country’s production efficiency. Through trading, it may not need to produce everything on its own, cutting down large costs. International trade also gives countries resources that may be scarce or depleting, such as oil, minerals or even high tech machinery. One major benefit of international trade is the job opportunities created due to the rapid growth of countries' industries. This can overall lower cyclical unemployment, increasing a country's gross development. In addition, countries can increase or decrease their foreign exchange rate impacting imports and exports, strengthening its economy. Overall international trade creates political and cultural relationships as well, building stronger connections and making communicating easier. It increases consumer choice, creates higher incomes and allows countries to prosper.
INFLUENCE OF INTERNATIONAL TRADE ON INDIA'S ECONOMY
In recent years, India has been actively engaging with major economies trying to expand and reduce trade barriers, leading to much faster development. However, One major development involves the US-India tariff war. Over the last few years, the US and India have had numerous disagreements on products such as steel, aluminium from 25% to 50% and even prices on agricultural goods had increased rapidly. But the consequences are much more than just facts and numbers. These high import duties affected businesses in both countries, causing hundreds of people to lose
their jobs. Due to Donald Trump’s extreme prices on imports, Indian producers lost many orders and were forced to reduce their profit margins, overall lowering their revenue. This has not only created uncertainty about the future but also led to a massive decrease in international competitiveness. To bounce back, the Indian government diversified their export destinations, aided infant industries in the country itself and negotiated trade deals or protections for domestic firms. India took multiple initiatives as well such as in Make In India, which encouraged domestic production. It is also trying to improve its trade deficit by reducing export prices to improve this issue. Thanks to these efforts, India’s position in world trade is increasingly improving each year.
OTHER RECENT DEVELOPMENTS
The UK-India Free Trade Agreement (FTA) has become one of the most important developments in India's recent trade policy. It aims towards building stronger ties between the two countries, settling negotiations after decades. The agreement focuses on reducing or entirely removing tariffs on a large share of goods traded between India and the UK, overall lowering costs for both economies. This may increase the government spending on healthcare or education which can help the country achieve economic growth.This will make India exports much cheaper, increasing international competitiveness. India has also agreed to lower duties on several UK products from machinery to vehicles, giving Indian consumers access to better quality products and at lower prices. Beyond goods, the FTA also includes cooperation in services, investment, digital trade, and easier business visas, making it broader than traditional trade agreements. For India, this FTA not only opens new opportunities in a wealthy and stable market like the UK but also supports long-term economic growth by making trade smoother, faster, and more predictable for industries on both sides.
FUTURE DIRECTIONS
In the coming years international trade is not only going to globalise further but play an even larger role in shaping economies as countries aim for sustainable development, advance further technologically and prosper. As for India, focusing on digital trade, exporting eco-friendly resources and building even stronger trading connections will be crucial for long term and steady growth. By pulling down trade barriers and maintaining international competitiveness, free trade will always continue to drive economic growth and give aid in transforming India's economy. It is the driving force which overall improves incomes and raises living standards all over the world.
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