International-Business-Dr-R-Chandran-E-book

From a Government Angle
1. Earning valuable foreign exchange
8
International Business- Dr. R. Chandran
Foreign exchange earning is necessary to balance the payments for
imports. India imports crude oil, defense equipments, essential raw
materials and medical equipments for which the payments have to be
made in foreign exchange. If the exports are high and imports are low
it indicates a surplus balance of payment. On the other hand if imports
are high and exports are low it indicates an adverse balance of
payment, which all economies would want to avoid. A vast majority
of the nations in the world are facing adverse balance of payment.
2. Interdependency of nations
From time immemorial, nations have depended on each other. Even
during the era of Indus valley civilization, Egypt and the Indus Valley
depended on each other for various items. Today, India depends on
the Gulf regions for crude oil and in turn the Gulf region depends on
India for tea, rice etc. Developed countries depend on developing
countries for primary goods, whereas developing countries depend on
developed countries for value added finished products. No single
country is endowed with all the resources to survive on her own.
3. Trade theories and their impact
The theories of absolute advantage, comparative advantage and
competitive advantage, which have been propounded by classical
economists, indicate that a few nations have certain advantages of
resources. The resources may be in the form of labour or
infrastructure or technology or even a proactive policy of the
government. Such theories are remaining foundations till today, for
international business practices with few changes and trends.
Only for Private Circulation