Foreign trade is as old as history. Trade among countries is natural and desirable. It exists for different reasons, as the theories explain later will explain.
The factory means that the natural resources of the earth are evenly distributed. One country processes product X in surplus and lacks in respect of product y. In another country, the reverse may be true. Countries also differ in their preferences and technologies, scale, economics economic and social institutions, and capacities for growth and development. All this account forever growing foreign trade.
Whatever the reasons for the existence of foreign trade, there is no gainsaying the fact that external trade is significant for the economic development of the countries, particularly the developing ones. It provides the urge to develop the knowledge and experience that make development possible, and the means to accomplish it. An economy that has decided to embark on a program of development is required to extend its productive capacity at a faster rate. For these imports of machinery and equipment which cannot be produced in the initial stages at home, they are essential. Such imports which either help create new capacity in some lines of production or enlarge capacity in the other lines of production are called development imports. For instance, imports required for the setting up of Steel plant locomotives and hydroelectric projects are developments are imports. Second, a developing country that sets in motion the process of industrialization at home requires the imports of raw materials and intermediate goods to properly utilize the capacity created in the country.imports which is made to make full use of the productive capacity and called maintenance imports. These imports are vital for a developing economy as many of the industrial projects are also held up for lack of maintenance imports. For developing the economy, developmental and maintenance imports limit to the extent of industrialization which can be carried out in a given period. Besides these imports are developing economic is also required to import consumer goods which are in short supply at home during industrialization. Such imports are anti-inflationary because they reduce the scarcity of consumer goods.
Prof. Dr. Rashmi Gujrati Principal KCSMCA, Nawanshshr, Punjab , India