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Foreign Trade - Coggle Diagram
Foreign Trade
Pre 1991 Strategy
Public Sector was given more imp. post Independence
Private sector subject to many controls and restrictions
For developing domestic industries
, they were protected through
quantitative restrictions and import duties
Restrictions were
imposed on inflow of foreign capital and foreign tech
Salient Features of 1991
Trade and Exchange controls
Selective access to foreign investment
Discretionary control on industrial investment and capacity expansion
Public sector dominance
Public ownership and regulation of private sector
Need for economic reforms
Recurrent fiscal deficits, perpetuating subsidies, tech backwardness
Low competitiveness, and low production
Indian economy was on the brink of collapse
Controls and regulations on trade had outlived their usefulness and now hampered economic growth
Hence there was a need for economic reforms
Foreign companies decided to withdraw investment as they lost confidence in our economy
We were forced to borrow money from the World Bank and IMF
Integration of Markets
Foreign trade
creates opportunity for producers
to
reach beyond domestic markets
Producers can also
compete in markets of other countries
Import of goods
allows buyers to
expand their choice of goods
Choice of goods in markets rises
Prices of similar goods in the 2 markets become equal
Producers in both countries compete closely against each other