10

Foreign Trade of India

Objective Questions:
(A) Choose the correct option:
Foreign trade is also known as:
. Internal trade ii. External trade
ii. Home trade International trade
iv
a. i, i, ii b. ii and iv
C. i and ii d. ii and iv
2 Types of foreign trade: (T)
Import trade Export trade
ii. Entrepot trade iv. Internal trade
ii and ii
b. i, i and ii
i, i, ii andiv None of these
Trade represents a significant share of Gross Domestic Product in:
.
developed countries developing countries
ii. poor countries iv. least developed countries
a i, ii and iv
b. i and ii
d. ii and iv
4 Role of foreign trade is: (T)
To earn foreign exchange i. To encourage investment
ii. Lead to division of labour IV. Bring change in composition of exports
a. i and i
b. i, ii and ii
C. ii and iv
d. None of these
5 Foreign trade helps to maintain stability in:
demand position
Supply position
1. prices
a.
V.
employment
b. ii and iv
C. i, i and ii
d:i, ii and iv
6. Export trends of India's foreign trade includes:
.
(T)
Engineering goods ii. Gems and Jewellery
. Textiles and ready-made garments iv. Gold
d. i and ii
b. i, ii and ii
i, ii and iv
d. None of these
7. The commodities purchased by India from other countries
i. Fertilizers include:
ii. Steel
Spices iv. Iron
a. i, ii and iv
b. ii and ii
C. i, i and ii
d ii and iv
8 The leading trade partners of India are:
USA
ii.
ii. Japan Germany
iv. Bhutan
a. i, i, ii andiv
b. i and iv
C. i, ii and ii
d. ii and ii
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 Chapter 30: Foreign Trade of hdia

Balance of payments is
constructed for given period systematie record
value of all international transactions based on market prices
i and iv b ,andW
ii and iv W and iv

10 The balance of trade incudes the vallie oft

Imports of visible goods Exports of visible goods
Imports of invisible goods Exports of invisible goods
iand i and v
i and i b LR andv
Answer
1-d 2-b 4-b
3-
S-c 6-b 7- 8-
9-b 10-d
(8) Assertion and Reasoning-Choose the correct answer from the following:
1 Assertion (A}: Import trade leads to infow of goods to home country
Reasoning (R): Import trade is a type of internal trade
(A) is True but (R) is False
(A) is False but (R) is True
C 8oth (A) and (R) are True and (R) is the correct explanation of (A)
Both (A) and (R) are True but (R) is not the correct explanation of (A

2 Assertion (A): Foreign trade leads to optimum allocation of resources

Reasoning (R): There are three types of foreign trade
a. (A)isTrue but (R) is False
(A) is False but (R) is True
Both (A) and (R) are True and (R) is the correct explanation of (A)
Both (A) and (R) are True but (R) is not the correct explanation of (A).
3. Assertion (A): Foreign trade raises the standard of lving
Reasoning (R): Being highly competitive, foreign trade ensures quality of goods.
(A) is True but (R) is False
b (A)is False but (R) is True
Both (A) and (R) are True and (R) is the correct explanation of (A)
Both (A) and (R) are True but (R) is not the correct explanation of (A

Assertion (A): Foreign trade stabilizes the price level in the economy
Reasoning (R): Foreign trade helps to maintain the stable demand and supply position
(A) is True but (R) is False
(A) is False but (R) is True
Both (A) and (R) are True and (R) is the correct explanation of (A)
Both (A) and (R) are True but (R) is not the correct explanation of (A)

S. Assertion (A): India turned a net importer of petroleum refiney products

Reasoning (R): India's petroleum capacity increased significantly since 2001-02
a. (A) is True but (R) is False.
b. (A) is False but (R) is True
Both (A) and (R) are True and (R) is the correct explanation of (A)
a. Both (A) and (R) are True but (R) is not the correct eNplanation of (A)
 Std. XIt: Economics

ASsertion (A): The government undertook various policy measures to curb gold imports,
Reasoning (R): There was a significant drop in gold imports during 2019- 1
(A) is True but (R) is False.
(A) is False but (R) is True.
Both (A) and (R) are True and (R) is the correct explanation of
d.
(A)
Both (A) and (R) are True but (R) Is not the correct explanation of (A).

Answers:
1-a 2-d 3-C 4-C
5-b 6-d

(C) Complete the following statements by choosing the correct alternative:

Before the pattern of India's foreign trade was typically colonial.
a. 1960 b 1980 1947
1951 d. 1947
If goods produced in Mizoram sold to
are Nagpur, then it is known as
a. export trade entrepot trade home trade
C home trade d. external trade
3 There are types of foreign trade.
a. two four three
C. three d. five
4. Prior to independence, India used to import
a. consumer goods b. capital goods Consumer goods
C food products d. machinery
5. Most of India's trade takes place through routes.
a. sea b. road Sea
rail d. air
6. Prior to Independence, much of India's trade was done with
a. Britain b. UK Britain
C US d. Kuwait
7 Textiles and garment exports together accounted for of India's exports in
2014-15.
a. 15.5% b. 11.3% 11.3%
C. 21% d. 17%
. has always remained the most important item of imports in India's trade.
a. Petroleum b. Gold Petroleum
C. Fertilizer d. Steel
9. The share offertilizers in import expenditure declined to in 2016-17.
a. 1.3% b. 4.1% 1:3%
C. 2.5% d. 1.1%
10. According to Ellsworth, " is a summary statement of all the
transactions between the residents of one country and the rest of the world."
Balance of trade Balance of payments
a. b. Entrepot trade
C. Import trade d. Balance of payments
11. If import value is export value, then it is called as trade deficit.
a. greater than b. equal to greater than
less than d. proportional to
 Chapter 10: Foreign Trade of india

is also referred to as the international trade balance

Balance of trade b Entrepot trade Balance of trade
mport trade d Balance of payments

ol Complete the correlation:

pomestic trade:Internal trade: : International trade: Externaltrade
Trade between different countries: :Trade within the country:nternational Trade
Domestic Trade /External Trade
Highest share in imports:Petroleum :Highest share in exports Engineeringgoods
: Second mastimported : : Petroleum: Most imported item Gold

Imports> Exports Trade defict

Trade surplus: Exports >Imports:

E Find the odd word out:

Types of toreign trade: Import trade, Internal trade, Export trade, Entrepot trade internaltrade
India's exports priorto independence: Oil seeds, jute, gems & jewellery,
tea Gems&jeweleny
india's imports prior to independence: Electrical goods, motor vehicies, cloth, hgh Hgh tech machinery
tech machinery
India's export items: Chemicals, Gems, Iron, Textiles Iron

India's import items: Gold, Steel, Fertilizer, Jewellenry Jewellery

F)Suggest an economic term for the given statements:

boundaries of a nation. Internal/Domestic
Buying and selling ofgoods and services within the Home Trade
Export trade
Outflow of goods from home country to foreign country.
2
& services and then exporting
3 Type of foreign trade which involves importing goods Entrepot Trade
them after some processing operations.
these kinds of products. Primary products
Prior to Independence, India used to export
which India exports its goods and
services and the Direction offoreign
5 It means the countries to the trade
countries from which
it imports goods and services.
6 A svstematic record of all international economic transactions or d couny dut Balance of payments

given period, usually a year.

exports and imports for a given
The difference between the
value of a country's Balance of trade

period.

the concepts from the given illustrations

ldentify and explain

1. Maharashtra purchased wheat from Punjab. (T)

Ans: Concept: Internal trade

Explanation:
nation are referred to as
The buying and selling of goods
and services within the boundaries of a
i
Internal Trade' or 'Domestic Trade'
wheat
as Maharashtra purchased
Hence, this illustration relates to
the concept of internal trade'
11

within the country i.e. Punjab.

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Std. Xll: Economics

2. Japan sells smart phones to Myanmar. (T)

Ans: Concept: Foreign trade
Explanation:
Foreign trade refers to trade between different countries of the world.
Hence, this illustration relates to the concept of 'foreign trade' as Japan (i.e. one country)ssells phones
toMyanmar (i.e. another country)
3. India sells spices to
Singapore.
Ans: Concept: Export trade
Explanation:
Export trade refers to the sale of goods by one country to another or outrloW or goods from home

country to foreign country.

Hence, this illustration relates to the concept of 'export trade' as India (i.e. home country) sells spices
to Singapore (i.e. foreign country)
4. India purchased petroleum from Iran. (T)
Ans: Concept: Import trade
Explanation:
Import trade refers to the purchase of goods by one country from another orinfow of goodsto home
country from foreign cOuntry.
Hence, this illustration relates to the concept of import trade' as India (i.e. home country)purchased
petroleum from Iran (i.e. foreign country)
5. England imported cotton from India, made readymade garments from it and sold them to
Ans: Concept: Entrepot trade
Malaysia. (T)
Explanation:
Entrepot trade refers to' purchase of goods and services from one country for reselling to another
country after some processing.
Hence, this illustration relates to the
concept of 'entrepot trade as England imported cotton from
India, made readymade garments from it (i.e. processing operations) and sold (i.e.
exported) them to
Malaysia.
6. The imports of Bhutan are almost double their exports.
Ans: Concept: Trade deficit

Explanation:
Balance of trade is the difference between the value of
country's exports and
a
imports for a given
period. If import value is greater than the export value, it is called as trade deficit.
I1. Hence, this illustration relates to the concept of trade deficit' as the imports of Bhutan are double of
their exports.

State with reasons whether you agree or disagree with the following statements:
1. During British rule, indigenous handicrafts suffered a severe blow. (T)
Ans: Yes, l agree with the above statement.
Reason:
i. Before 1947, the pattern of India's foreign trade was
typically colonial.
if.India used to supply raw materials to industrialized nations,
particularly England.
ii. India was also an importer of the manufactured goods at that time.
iv. This dependence on foreign trade did not permit industrialization at home.
V. Hence, the indigenous handicrafts suffered a severe blow.
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 faae oT India
Trade is an
engine of
2 growth for an economy. (T)
Yes, lagree
AnS:
with the above statement.
Reason:
Trade refers to
buying and selling goods and services in
Trade plays an exchange of money.
important role in the process of economic
ill. In
developed countries, it development.
represents a
significant share of Gross Domestic
foreign exchange for a country which can be putProduct
Foreign trade helps to earn (GDP).
. Trade to productive
encourage investment in the economy. use.
It
VI.
leads to division of labour & specialisation. It also leads to
resources. optimum allocation and utilisationof
vii. It also
brings stability in prices in the economy.
vii. Thus, trade is an
engine of growth for an economy.
3. Foreign trade restricts the
No, I do not
investment in economy.
Ans: agree with the above
statement.
Reason:

Foreign trade offers

producers an opportunity to reach beyond the domestic
In
simple words, producers can cater markets.
to demands of domestic as well as
ii. So, it encourages them to international consumers.
produce more goods for the purpose of exports.
iV. In order to
produce more, producers need to increase their
investment in business.
V. Hence, foreign trade leads to rise in
total investment in economy.
4 Foreign trade leads to division of labour and
Yes, I
specialization at world level. (T)
Ans: agree with the above statement.
Reason:
Foreign trade refers to trade between different countries of the
world.
ii. Some countries have
plentiful natural resources.
ii. ldeally, such countries should
export raw materials and import finished goods from the countries
which have abundant supply of skilled
manpower.
IV. Foreign trade enables countries to specialize in production of those goods for which it has abundant
resources.
In other words, each country specialize in production of those goods which is best suited for themn
can

as per the availability of resources. E.g.: India can export services as it has abundant skilled workforce,
Africa can export diamonds since it has abundant diamond mines etc.
vi. Hence, we can say that, foreign trade leads to division of labour and specialization at world level.

5. Britain continues to dominate India's foreign trade.

Ans: No, I do not agree with the above statement.
Reason:
India's foreign trade has undergone drastic change in terms of direction over the last 70 years.

. Prior to Independence, much of India's foreign trade was with Britain. So, Britain used to hold the first
position in India's trade.

TI. However, after Independence, new trade relations with many other countries were established.
iv. Now, USA has emerged as the leading trading partner followed by Germany, Japan and United
Kingdom.
V. Hence, Britain does not continue to dominate India's foreign trade.

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