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Import and export: A key driver of the country’s economic growth

07 November 20234 mins read by Angel One
Imports provide access to raw materials, whereas exports enable revenue generation with India excelling in pharmaceuticals and IT services.
Import and export: A key driver of the country’s economic growth
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International trade is a complex and under continuous revolution, but at its core, it revolves around two fundamental processes called the import and export of commodities. These two forces work in tandem to drive economic growth, enable international relations, and meet domestic demand for various products.

Imports: Accessing the World’s Bounty

Imports are goods or services that a country or business purchases from another country. Companies import commodities for a variety of reasons, such as to (1) Access raw materials or semi-finished goods that are unavailable or more expensive domestically. (2) Diversify their supply chain and reduce risk. (3) Offer consumers a wider range of products at competitive prices.

For example, India is the world’s third-largest importer of crude oil due to limited domestic production, and it’s also one of the leading importers of gold, primarily for investment and cultural purposes. Additionally, India ranks as the world’s second-largest coal importer, relying on it as a significant energy source.

Exports: Sharing Abundance with the World

Exports are goods or services that a country or business sells to another country. Companies export commodities for a variety of reasons, such as to (1) Sell surplus goods or services that are not consumed domestically. (2) Tap into new markets and expand their customer base. (3) Generate revenue and create jobs.

For example, India is a prominent global exporter of pharmaceuticals, contributing to more than 20% of the world’s generic drug exports. Additionally, India holds a significant share of the international IT services market, with over 50% global market presence, and is a leading producer and exporter of textiles, responsible for more than 10% of worldwide textile exports.

The Currency Connection

Import and export transactions are typically denominated in a foreign currency. This means that importers must exchange their domestic currency for foreign currency in order to purchase goods or services, and exporters must exchange the foreign currency they receive for their domestic currency. Currency exchange rates can have a significant impact on the cost of imports and the revenue from exports. For example, if the value of the US dollar falls against the Indian rupee, US importers of Indian goods will have to pay more, while US exporters of goods to India will earn more.

Conclusion

International trade of commodities is very important for the economy. It allows countries to sell their goods all over the world, which makes more money and creates more jobs. Specialization, increased competition, and access to resources make businesses more efficient and productive. This helps the economy grow and new technologies are shared between countries.

Additionally, international trade helps countries spread out their risk, earn more foreign currency, and build better infrastructure. This makes countries more stable and prosperous. Finally, consumers have a wider variety of goods to choose from at lower prices, which raises their standard of living.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.

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