Group 1

The balance of

trade is the difference between the

monetary value of export and imports of output in an economy over a certain period. A favourable balance of trade is known as a trade

surplus.
The countrys net international asset position increases

. An unfavourable balance of trade is known as a trade

deficit
Trade gap where the net international asset
position decreases.

 The cost of production (land, labour, capital, taxes,

incentives, etc.) The cost and availability of raw materials, intermediate goods and other inputs; Exchange rate movements Multilateral, bilateral and unilateral taxes or restrictions on trade Non-tariff barriers such as environmental, health or safety standards The availability of adequate foreign exchange with which to pay for imports Demand and supply of the goods.

 Domestic policies and subsidies

External pressures:
Export items facing

heavy competition in

international market results in market segmentation and low pricing and may lead to trade deficit. Export items facing less competition in the international market create trade surplus as they fetch high prices.

 No , trade deficit is relative to the business cycle and

economy.

In

and demand.
In a

a recession- countries export more, creating jobs

strong expansion

import more providing price competition, limits inflation without increasing prices provides goods beyond the economy's ability to meet supply. Thus, a trade deficit is not a good thing during a recession but may help during an expansion.

 the trade balance is likely to differ across the business

cycle.
In export led growth (such as oil and early industrial

goods), the balance of trade will improve during an economic expansion.

Canada, Japan, and Germany, China have trade surpluses due to high growth in economy.
The United

States has high trade deficits as

domestic consumption is more.

Also some economies may be unable to export enough goods to pay for its imports but is able to find funds elsewhere: Service exports eg Hong Kong Foreign aid eg poor countries Transfers from nationals working abroad eg The Philippines, Bangladesh and Mexico

EXPORTS
Exports during October, 2009 were valued at US $

13193 million (Rs. 61639 crore) which was 6.6 per cent lower in dollar terms (minus 10.3 per cent in Rupee terms) than the level of US $ 14131 million (Rs. 68754 crore) during October, 2008.
Cumulative value of exports for the period April- October,

2009 was US $ 91048 million (Rs 439835 crore) as against US $ 123038 million (Rs. 533205 crore) registering a negative growth of 26.0 per cent in Dollar terms and 17.5 per cent in Rupee terms over the same period last year.

IMPORTS
Imports during October, 2009 were valued at US $

21994 million (Rs.102759 crore) representing a decrease of 15.0 per cent in dollar terms (minus 18.4 per cent in Rupee terms) over the level of imports valued at US $ 25869 million ( Rs. 125868 crore) in October, 2008. Cumulative value of imports for the period AprilOctober 2009 was US $ 148367 million (Rs. 716535 crore) as against US $ 210864 million (Rs. 916483 crore) registering a negative growth of 29.6 per cent in Dollar terms and 21.8 per cent in Rupee terms over the same period last year.

OIL IMPORTS Oil imports during October, 2009 were valued at US $ 6608 million which was 9.3 per cent lower than oil imports valued at US $ 7285 million in the corresponding period last year. Oil imports during April- October, 2009 were valued at US$ 42864 million which was 39.3 per cent lower than the oil imports of US $ 70570 million in the corresponding period last year.

TRADE BALANCE
The trade deficit for April- October, 2009 was
estimated at US $ 57318 million which was lower than the deficit of US $ 87827 million during AprilOctober, 2008.

India is leading exporter of:

gems and jewelry, textiles, engineering goods,

chemicals, leather manufactures services.

India is importer of :
Oil and oil products machinery, gems, Fertilizers

chemicals.

Main trading partners are European Union, United States, China and UAE .

US MILLION
EXPORTS (including re-exports) 2008-2009 2009-2010 %Growth 2009-2010/ 2008-2009 IMPORTS 2008-2009 2009-2010

123038 91048 -26.0

210864 148367 -29.6

%Growth 2009-2010/ 2008-2009

TRADE BALANCE 2008-2009 2009-2010

-87827 -57318

*Figures for 2008-09 are the latest revised whereas figures for 2009-10 are provisional.

Country China PRP USA United Arab Emirates Saudi Arabia Germany Singapore UK Hong Kong Belgium Netherland

Total Trade 163,202 155,353 152,668 105,602 67,602 63,280 50114 50,129 41552 33099

Trade Balance -92,676 12,254 -1934 -64303 -19497 2934 524 1772 -5294 19049

Source: Federal Ministry of Commerce, Government of India