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Advancement of International Trade of a Country is an Index to its Economic Prosperity

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International trade is the exchange of capital, goods, and services across international borders or territories because of a need or lack of a good or service. In most countries, this trade accounts for a significant share of gross domestic product.

Importance of international trade 

  1. International trade allows countries to expand markets and access goods and services that may not be available domestically. 
  2. Thanks to international trade, the market is more competitive. This ultimately leads to more competitive pricing and cheaper products for consumers.  
  3. Global trade gives consumers and countries the opportunity to be exposed to goods and services that are not available in their home countries or are more expensive in the domestic market.

Economic prosperity

Economic prosperity refers to the economic growth, security, and competitiveness of a country. Economic prosperity is important because it is a key component of quality of life and is also necessary for a country to be able to compete in the global economy.

Importance of economic prosperity 

Better economic performance helps to build peace and vice versa. Together, these elements can form a virtuous circle. Likewise, worsening peaceful activity will hamper economic growth, forming a vicious circle. Thus, economics and peace can be thought of as a system that can evolve in favor of destruction. The eight pillars of the Positive Peace Framework IEP are closely linked to private business and the economy. 

For example, the Free Flow of Information pillar is not only necessary for an informed society but also contributes to market integration due to the greater availability of information about current prices. onion. The free flow of information also helps keep tariffs low, which is important for the efficient allocation of inputs available to the economy. Greater acceptance of the rights of others, another pillar of positive peace, increases the economic participation of disadvantaged groups.

Countries that are open to international trade tend to grow faster, innovate, improve productivity, and bring higher incomes and more opportunities to their people. Trade openness also benefits low-income households by providing consumers with more affordable goods and services.

How advancement of international trade of a country is an index to its economic prosperity

It is evident from the balance of payment crisis that India faced in 1991 that international trade is required not only for economic growth but also for economic stability. Only after opening up the economy and adopting a flexible exchange rate system, the Indian economy was able to solve the balance of payment crisis in 1991. The advancement of international trade of a country is an index to its economic prosperity.

It is considered the economic barometer of a country. International trade plays a significant role in the growth and development of a country. Foreign trade via export and import of goods and services helps in earning foreign currency. Foreign direct investment helps in developing infrastructure and increasing employment in the economy. While foreign portfolio investment provides the required capital in order to the expansion of domestic business.

The advent of MNCs in the domestic economy helps in the overall growth and development of the economy. It provides employment to local people and improves their standard of living. With the help of foreign currency exchange, it makes an economy resilient to sustain and absorb economic shock. “The progress of a country’s international trade is an indicator of that country’s economic prosperity.” 

  1. Since no country can be self-sufficient in all its resources, it cannot exist without international trade. 
  2. If the balance of international trade is favorable, a country will be able to earn more foreign currency. 
  3. International trade encourages a country to develop secondary and tertiary sectors to export goods that can yield more foreign currency.
  4. A country’s economic prosperity is measured by its international trade health. 
  5. A country can obtain a large amount of foreign currency through international trade.

Therefore it can be said the advancement of international trade in a country is an index to its economic prosperity.

Sample Questions 

Question 1: How does foreign trade lead to cross-border market integration?  

Answer:

There is competition between producers and buyers in different countries. In this way, foreign trade leads to cross-border integration of markets. For example, during the Diwali season, Indian buyers can choose between Indian and Chinese decorative lights and light bulbs.

Question 2: How important is international trade in the Indian economy?

Answer:

Foreign trade has played a very important role in the development of our country’s agricultural sector. Every year we export rice, cotton, fruits and vegetables to other countries. Exporting goods makes us farmers more prosperous. It awakens the spirit of growth in them.

Question 3: What benefits do consumers and producers get from foreign trade? Explain with examples? 

Answer:

The advantages of foreign trade for producers and consumers are: It has created opportunities for  producers to reach out to the domestic market, i.e.  their own market. It has given consumers a wider choice of good quality products. It helps each country  make the best use of its natural resources.


Last Updated : 15 Jan, 2024
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