Explain any four roles of foreign trade.

Answer: Foreign trade plays the following roles in the development of India:

1. Earns foreign exchange: exports earn foreign exchange which is used to import capital goods, technology and essential goods.
2. Promotes industrialisation and investment: imports of machinery, raw materials and know-how help set up new industries; foreign capital flows in.
3. Market expansion / economies of large scale: exports widen the market for domestic goods, so production increases and the cost per unit falls.
4. Generates employment: export-oriented industries create employment opportunities.
5. Improves standard of living: consumers get a variety of goods at reasonable prices.
6. Meets shortages and emergencies: imports of food grains, crude oil, medicines etc. help during scarcity, droughts and natural calamities.
7. Promotes international co-operation: trade brings countries closer and improves relations.