Summary

Foreign trade, in short, means exchange of good and services between

different countries. It usually affects to GDP of a country. Some under
developed countries which do not have sufficient funds or capital require
capital from other countries or people, this is known as foreign capital.
Countries keep systematic record of all the trade with the outside world, this
is known as Balance of Payment. But all this foreign trade requires an
authority which has to control the exploitation of underdeveloped countries
and make trade between equal and fair. All this is done by World Trade
Organization(WTO). Today almost every country is involved in foreign trade
and foreign capital and all this is because of Globalization. Now you can find
Chinese made goods in American and American goods in china this is just
because of globalization.

Keywords
Some of the keywords used in the project are foreign trade, foreign
capital, globalization, Gross Domestic Product,

Introduction
Meaning of Foreign Trade
Foreign trade is exchange of capital, goods, and services across
international borders or territories. In most countries, it represents a
significant share of gross domestic product (GDP). While international
trade has been present throughout much of history, its economic, social,
and political importance has been on the rise in recent centuries.
According to Wasserman and Haltman, International trade or foreign
trade consists of transaction between residents of different countries.
All countries need goods and services to satisfy wants of their people.
Production of goods and services requires resources. Every country has
only limited resources. No country can produce all the goods and services
that it requires. It has to buy from other countries what it cannot produce
or can produce less than its requirements. Similarly, it sells to other
countries the goods which it has in surplus quantities. India too, buys
from and sells to other countries various types of goods and services.
Thus foreign trade involves both import and export.
 Generally, no country is self-sufficient. It has to depend upon other
countries for importing the goods which are either non-available with it
or are available in insufficient quantities. Similarly, it can export goods,
which are in excess quantity with it and are in high demand outside.

Meaning of Foreign Capital

Foreign capital involves capital flows from one country to another,
granting extensive ownership stakes in domestic companies and assets.
Foreign investment denotes that foreigners have an active role in
management as a part of their investment.
Foreign capital is largely seen as a catalyst for economic growth in the
future. Foreign investments can be made by individuals, but are most
often endeavours pursued by companies and corporations with substantial
assets looking to expand their reach. As globalization increases, more and
more companies have branches in countries around the world. For some
companies, opening new manufacturing and production plants in a
different country is attractive because of the opportunities for cheaper
production, labour and lower or fewer taxes.

Indias foreign trade

Composition and direction
Composition of Indian foreign trade means major commodity or sectors in
which India is doing export and import. India is a very old participant in
world trade. Indian foreign trade registered a number of structural changes
during the planning period. The percentage of non- traditional goods in total
export has increased i.e., export of chemical and engineering goods has
shown a good rise. Some other items are gems and Jewellery. India is
making export of few traditional goods like; tea, coffee, rice, pulses, spices,
tobacco, jute, iron ore etc.
Lets have a look at the condition of Indian Trade;
A. Exports (including re-exports)
Exports during October, 2015 were valued at US$ 21352.79 million (Rs.
138916.98 crore) which was 17.53 per cent lower in Dollar terms (12.53 per
cent lower in Rupee terms) than the level of US$ 25891.39 million (Rs.
158822.95 crore) during October, 2014
B. Imports:
Imports during October, 2015 were valued at US$ 31120.06 million (Rs.
202460.88 crore) which was 21.15 per cent lower in Dollar terms and 16.38
per cent lower in Rupee terms over the level of imports valued at US$
39468.76 million (Rs. 242109.24 crore) in October, 2014
Direction of foreign trade means the countries to which India exports its
goods and the countries from which it imports. Thus direction consists of
destination of exports and sources of our imports. Prior to our Independence
when India was under British rule, much of our trade was done with Britain.
India's largest trade partners with their total trade (sum of imports and exports)
in millions of US dollars for financial year 201415 were as follows:

Features
Some features of Indias foreign trade policy are as follows: -
 1. Negative or Unfavourable Trade:
India had to import various items like heavy machinery, agricultural
implements, mineral oil and metals on a large scale after Independence
for economic growth.
But our exports could not keep pace with our imports which left us with
negative or unfavourable trade.
2. Diversity in Exports:
Previously, India used to export its traditional commodities only which
included tea, jute, cotton textile, leather, etc. But great diversity has been
observed in Indias export commodities during the last few years. India
now exports over 7,500 commodities. Since 1991, India has emerged as a
major exporter of computer software and that too to some of the advanced
countries like the USA and Japan.
3. Worldwide Trade:
India had trade links with Britain and a few selected countries only before
Independence. But now India has trade links with almost all the regions
of the world. India exports its goods to as many as 190 countries and
imports from 140 countries.
4. Change in Imports:
Earlier we used to import food-grains and manufactured goods only. But
now oil is the largest single commodity imported by India. Both the
imports as well as exports of pearls and precious stones have increased
considerably during the last few years. Our other important commodities
of import are iron and steel, fertilizers, edible oils and paper.

Indias Balance of Payment

Meaning
 o The balance of payments(BOP) of a country is a systematic record of
all its economic transactions with the outside world in a given year. It
is a statistical record of the character and dimensions of the countrys
economic relationships with the rest of the world.
o According to Bo Sodersten, The balance of payments is merely a
way of listing receipts and payments in international transactions for a
country.
Classification
o The balance of payments is broadly classified into:
(a) Current account
and
(b) Capital account.
The current account includes: visible exports and import; invisible items
relating to receipts and payments for various services like banking,
insurance, shipping, travel etc. and other unilateral transfer of payments like
donations, grants, taxes etc.
The capital accounts of balance of payments include all the current economic
transaction for the countrys international financial position resulting
changes in the foreign financial assets and liabilities. The capital transaction
includes both private, banking and official transactions.
Indias BOP in recent years stood as follows: -

World Trade Organization

A brief History
 The WTO was officially created and came into force on 1 of January
1995 and essentially replaced the General Agreement on Tariffs and
Trade (GATT), which had been in force since 1948, a few years after the
Second World War. Before the WTO was created, an initiative to start
something similar known as the International Trade Organization (ITO)
took place. Unfortunately, the ITO treaty was not approved by the U.S.
and a few other countries and ultimately never went into effect.
In the 1980s, as the world economies became more global in trade and
business, it became evident that GATT was not built or structured to
address many of the new global trading challenges that were arising. As a
result, the biggest trade negotiating event on record began in 1986. It was
known as the Uruguay Round, seeing as it took place in Punta del Este,
Uruguay. One of the final accomplishments of this round was the creation
of the WTO. WTO has 164 members as of 26th July.
Objectives
Important objectives of WTO are mentioned below:
(i) to implement the new world trade system as visualised in the
Agreement;
(ii) to promote World Trade in a manner that benefits every country;
(iii) to ensure that developing countries secure a better balance in the
sharing of the advantages resulting from the expansion of international
trade corresponding to their developmental needs;
(iv) to demolish all hurdles to an open world trading system and usher in
international economic renaissance because the world trade is an effective
instrument to foster economic growth;
(v) to enhance competitiveness among all trading partners so as to benefit
consumers and help in global integration;
(vi) to increase the level of production and productivity with a view to
ensuring level of employment in the world;
(vii) to expand and utilize world resources to the best;
(viii) to improve the level of living for the global population and speed up
economic development of the member nations.

Functions
 The former GATT was not really an organisation; it was merely a legal
arrangement. On the other hand, the WTO is a new international
organisation set up as a permanent body. It is designed to play the role of
a watchdog in the spheres of trade in goods, trade in services, foreign
investment, intellectual property rights, etc. Article III has set out the
following five functions of WTO;
(i) The WTO shall facilitate the implementation, administration and
operation and further the objectives of this Agreement and of the
Multilateral Trade Agreements, and shall also provide the frame
work for the implementation, administration and operation of the
plurilateral Trade Agreements
(ii) The WTO shall provide the forum for negotiations among its
members concerning their multilateral trade relations in matters
dealt with under the Agreement in the Annexes to this Agreement.
(iii) The WTO shall administer the Understanding on Rules and
Procedures Governing the Settlement of Disputes.
(iv) The WTO shall administer Trade Policy Review Mechanism.
(v) With a view to achieving greater coherence in global economic
policy making, the WTO shall cooperate, as appropriate, with the
international Monetary Fund (IMF) and with the International
Bank for Reconstruction and Development (IBRD) and its
affiliated agencies.

Globalization
Meaning
 Globalization or globalisation is the process of international integration
arising from the interchange of world views, products, ideas, and other
aspects of culture. Advances in transportation (such as the steam
locomotive, steamship, jet engine, and container ships) and in
telecommunications infrastructure (including the rise of the telegraph and
its modern offspring, the Internet, and mobile phones) have been major
factors in globalization, generating further interdependence of economic
and cultural activities.
Effect of Globalization on world economy
Following are some effects of Globalization on world economy: -
1. More efficient markets: -Efficient markets should be what every
economy strives for. Essentially, the sign of an efficient market is
where there is an equilibrium between what buyers are willing to
pay for a good or service and what sellers are willing to sell for a
good or service. If you can improve the way you produce a good or
service by doing things such as outsourcing certain processes or
buying from an overseas supplier that offers discounts, you can
then afford to lower your selling price which results in increased
demand and affordability. Even if businesses dont lower prices,
they can make additional profits and then reallocate that excess
profit into doing things like increasing wages, taking on more
investments or even creating more expansion projects.
2. Increased competition: -Anytime that you have multiple
producers competing for a hold of the economy, thats a good sign
for consumers, as the quality of goods and services often goes up
as a result. When businesses started to venture across international
borders, what they often did was introduce a new standard into the
global marketplace. Consumers then had more options to choose
from. With more competitors to fight over market share, each
company has to constantly look to improve their goods or services
or create more value for their customers. This means better
products and sometimes lower prices, which is always a good thing
for buyers.

Conclusion
 Thus I would like to conclude that to understand the economic relations
between nations it is important to study that how nations trade with each
other and how the capital flows between them. It is also important to
study how the trade is controlled to avoid exploitation of poor countries.