Importance of Export Trade

The importance of foreign trade can be explained from the viewpoint of Exports.

1) Foreign Exchange :

Exports help a country to earn valuable foreign exchange. The foreign exchange can be utilized to pay for imports and for repayment of external loans.

2) International Relations :

country involved in export can maintain good international relations. Such international relations are important for any country in today's modern world.

3) Balance of Payments :

xports earn foreign exchange. Such foreign exchange help a nation to solve its balance of payments problem. Therefore, export are vital for favourable balance of payments position.

4) Reputation :

A country which is involved in exports gets name or goodwill in the international market. For instance, Japan has earned a lot of goodwill in foreign markets due to quality exports of electronics. India has earned goodwill in the world markets for computer software, handicrafts, gems and jewellery.

5) Employments :

Exports help to generate employment in the country. (a) Exports generate direct employment in the export sector. (b) Export also generate indirect employment in the other sectors such as banking, transport, communications, etc. which facilitates export trade.

6) Research & Development :

Because of export sector, a country spends a lot of money on r & d. This results in better quality of goods. Thus, the domestic market as well as the export markets get benefit.

7) Optimum Use of Resources :

Exports facilitates optimum use of resources. If there were no exports, some of the resources would have remained unutilised, and so economic development would be affected.

8) Spread Effects :

There can be spread effect due to export sector. Because of export sector, other supporting industries come into existence. Thus, exports facilitate spread effect.