Trade theory, India's trade policy, WTO and global financial institutions
Foreign Trade Policy of India: Objectives and Instruments
The Basics
Foreign Trade Policy is the set of government rules controlling exports and imports. It is also called the Exim Policy. Trade balance is the difference between a country's exports and imports in a year. It is favourable if exports exceed imports. It is unfavourable if imports exceed exports. Trade Policy is the main tool to improve this balance and manage foreign exchange.
Export promotion schemes are tools governments use to help exporters. They make it cheaper or more profitable to sell goods abroad. For example, a scheme may let an exporter skip import duty.
Comparative advantage is an idea in trade. It explains why countries gain by specialising and trading. This is true even if one country makes everything more cheaply.
A government cannot always let all goods come in freely. Sometimes it wants to protect local farmers or factories. Sometimes foreign sellers sell goods unfairly cheap. For this, governments use trade protection tools. These tools restrict or control imports. The three main tools are tariffs, quotas, and anti-dumping duties.
Foreign Direct Investment: Policy, Routes and Sectoral Caps
The Basics
Foreign Direct Investment, called FDI, is money a foreign investor puts into an Indian company. The investor owns and helps run part of the business. This is different from buying shares just to trade them for profit. FDI is called a non-debt creating flow. The company does not repay it like a loan. Instead, the investor shares ownership and risk.
External Commercial Borrowings and ADRs/GDRs/FCCBs
The Basics
Indian companies need foreign currency, for example to buy machinery from abroad. Foreign loans can also cost less than loans at home. There are four main ways to raise this money abroad: ECBs, American Depository Receipts, Global Depository Receipts, and Foreign Currency Convertible Bonds. All these are recorded in the capital account.
World Trade Organisation: Origin, GATT and Structure
The Basics
The World Trade Organisation (WTO) is the main body for trade rules. It makes and enforces rules for trade between countries. It gives a rule-based, transparent, predictable system. This covers trade in goods, services, and ideas.
WTO Agreement on Agriculture and Subsidy Classification
The Basics
The Agreement on Agriculture (AoA) is a WTO agreement. It was signed in 1994, during the Uruguay Round. It sets rules for farm subsidies and farm trade.
The Doha Round, also called the Doha Development Agenda, started in 2001. World Trade Organisation members launched these trade talks. It aimed to lower trade barriers in agriculture, goods, and services. It gave special focus to helping developing countries. It is the most ambitious round of World Trade Organisation talks. So far, it is also the least successful.
Regional Trade Agreements and India's Trading Blocs
The Basics
A Regional Trade Agreement is a deal between a few countries. These countries are usually neighbours. They trade with each other on easier terms. They still trade with other countries normally. This is different from multilateral trade. Multilateral trade works through the World Trade Organisation (WTO). The World Trade Organisation sets trade rules for all member countries equally.
The International Monetary Fund is an international organisation that helps countries facing a shortage of foreign currency to pay for imports or debts. In plain words, it is like a common fund that countries can borrow from when their foreign exchange runs short, so that trade and payments between nations do not break down.
The World Bank Group gives money for long-term development. The International Monetary Fund gives money for short-term currency problems. These are different jobs.
Developing countries wanted more say in global finance. They felt the Bretton Woods institutions, the International Monetary Fund and the World Bank, gave too much power to rich Western countries. So newer development banks were set up. Groups of countries own these banks. They lend money mainly for infrastructure and development projects.