Gujarat BoardEnglish MediumSTD 11 CommerceEconomicsEconomic Reforms3 Marks
Question
Explain the foreign trade policy before globalization.
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Answer
Foreign Trade Policy before globalization
To sell goods or services in foreign is called export and to buy goods or services from foreign is called import.
Here, internal trade differ from international trade because international trade is connected with exchange rate.
So generally in foreign trade policy, import, export and exchange rate are the main points.
There was golden period of India of foreign trade before British rule.
But after British rule the foreign trade was decreased.
To become success in industrial revolution, the foreign trade policy implemented by Britishers has created lot of problems to Indian industries.
After getting independence in $1947$, India has accepted the path of planning since $1951.$
At this time, India has accepted state controlled socialist policy.
And accepted mixed economy system. This system is benefited to public sector and private sector is avoided.
To establish big industries and for development of industries, India has to import.
So due to shortage of foreign exchange, India has implemented foreign trade policy to save foreign exchange by putting restrictions on imports of consumable goods.
In planned foreign trade policy of India, more stress is laid on industries of import substitution and to protect local industries.
For this, policy regarding control on import and save foreign exchange and increase export to earn more foreign exchange is implemented.
Hence, in foreign trade policy in the initial years emphasis was laid upon measures of protection for domestic industry against foreign competition.
Various import restrictions were imposed and export promotion measures were introduced.
Later on, along with the traditional items of exports like agricultural product, handicrafts, gems and jewellery, the exports of non traditional industrial goods were also promoted.
Rates of exchange were basically determined and the rupee was devalued in order to increase exports and reduce imports.
With devaluation, imports become costly but since the items of imports were necessary for India's industrialization there was no significant decline in imports.
Import bills increased and there was a deficit in India's Balance of Payments.
A policy of import substitution was also adopted.
Import substitution is a policy of substitution imports by domestically produced goods.
That is, imports are reduced and replaced by domestic goods.
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