Maharashtra Board Class 12 Economics Chapter 10 Foreign Trade of India Solutions

Choose the Correct Option:

 

Question 1. Types of foreign trade:
a) Import trade
b) Export trade
c) Entrepot trade
d) Internal trade

(a) a, b and c
(b) a and b
(c) b and c
(d) All of the options
Answer: (a) a, b and c
In simple words: Foreign trade is trade between different countries, which includes buying goods (import), selling goods (export), and importing goods to export them to another country (entrepot). Internal trade happens within the same country, so it is not foreign trade.

🎯 Exam Tip: Remember that 'internal trade' happens within a country's borders, so it is excluded from foreign trade categories.

 

Question 2. Export trends of India’s foreign trade includes:
a) Engineering goods
b) Gems and Jewellery
c) Textiles and ready-made garments
d) Gold

Options:
(a) a and c
(b) a, b and c
(c) b, c and d
(d) None of the options
Answer: (b) a, b and c
In simple words: India mainly exports manufactured items like engineering goods, gems, jewellery, and ready-made clothes to other countries, while gold is actually imported rather than exported.

🎯 Exam Tip: Remember that India is a major hub for refining gems and manufacturing engineering goods, which dominate our export list, while gold is a major import.

 

Question 3. Role of foreign trade is:
a) To earn foreign exchange
b) To encourage investment
c) Lead to division of labour
d) Bring change in composition of exports

Options:
(a) a and b
(b) a, b and c
(c) b and d
(d) None of the options
Answer: (b) a, b and c
In simple words: Foreign trade helps a country earn foreign money, encourages people to invest, and allows different countries to specialize in making what they are best at.

🎯 Exam Tip: Focus on the primary economic benefits of trade—earning foreign currency, boosting investments, and specialization (division of labour)—to easily identify the correct combination.

Identify and Explain the Concepts from the Given Illustrations:

 

Question 1. India purchased petroleum from Iran.
Answer:
Concept: Import trade
Explanation: Import trade means purchase of goods and services by one country from another country. This helps countries acquire essential resources that they do not produce domestically.
In simple words: When one country buys goods or services from another country, it is called import trade.

🎯 Exam Tip: Always state the concept name clearly first, followed by a precise one-sentence explanation to secure full marks.

 

Question 2. Maharashtra purchased wheat from Punjab.
Answer:
Concept: Internal/Home/Domestic trade
Explanation: Internal trade is also known as home trade or domestic trade. This trade is within the country. It is between two or more states of the country. This type of trade does not involve any foreign currency or international customs duties.
In simple words: When buying and selling of goods happens within the boundaries of the same country, it is called internal trade.

🎯 Exam Tip: Remember that trade between two states of the same country is always classified as internal or domestic trade.

 

Question 3. England imported cotton from India, made readymade garments from it and sold them to Malaysia.
Answer:
Concept: Entrepot trade
Explanation: It means purchase of goods and services from one country and selling the same to another country. This process often involves some processing or repackaging before re-exporting.
In simple words: Entrepot trade is when a country imports goods from one nation not for itself, but to process and sell them to another nation.

🎯 Exam Tip: Use the three-country flow (Country A -> Country B -> Country C) to easily identify and explain entrepot trade in exams.

 

Question 4. Japan sells smart phones to Myanmar.
Answer:
Concept: Export trade
Explanation: It means sell of goods and services by one country to another country. This helps the selling country earn valuable foreign exchange.
In simple words: When a country sells its products or services to another country, it is called export trade.

🎯 Exam Tip: Clearly distinguish between import (buying) and export (selling) to avoid confusing these basic trade concepts.

Distinguish between the following:

 

Question 1. Internal trade and International trade.
Answer:

Internal / Domestic / Home trade	External / Foreign / International trade
Trade is conducted within the geographical boundaries of a country.	Trade is conducted between two or more different countries.
It involves home currency for transactions.	It involves foreign currencies of the respective nations.

This distinction highlights how geographical boundaries and currency systems define the scope of trade.
In simple words: Internal trade is buying and selling inside your own country using local money, while international trade is trading with other countries using foreign money.

🎯 Exam Tip: When writing distinction tables, always include clear basis points like geographical boundary and currency to secure maximum marks.

p>Question 1. Internal Trade and Foreign Trade
Answer:

Internal Trade	Foreign Trade
(a) It means exchange of goods and services within the country.	(a) It means exchange of goods and services between two or more countries.
(b) The goods and services are produced and sold within the country.	(b) The goods and services are produced in one country and sold in other country.
(c) E.g. Kashmir apples sold in Maharashtra.	(c) E.g. Kashmir apples sold in Dubai.

In simple words: Internal trade is buying and selling within the same country, while foreign trade is trade that happens between different countries.

🎯 Exam Tip: Always use simple examples like Kashmir apples sold in Maharashtra versus Dubai to clearly illustrate the difference between internal and foreign trade.

 

Question 2. Trends in imports and Trends in exports of foreign trade.
Answer:

Trends in imports	Trends in exports
(a) It means year wise numerical changes in imports of a country.	(a) It means year wise numerical changes in exports of a country.
(b) India’s major imported goods are - petroleum, gold, fertilizers, iron and steel, etc.	(b) India’s major exported goods are engineering goods, petroleum and chemical products, gems and jewellery, etc.
(c) Petroleum has highest import percent of 22.6 in 2016-17.	(c) Engineering goods has highest export percent 23.7 in 2016-17.

In simple words: Import trends show how a country's purchases from abroad change over time, while export trends show the changes in what it sells to other nations.

🎯 Exam Tip: Highlighting specific commodities like petroleum for imports and engineering goods for exports helps you score maximum marks.

 

Question 3. Balance of payments and Balance of trade.
Answer:

Balance in payment	Balance in trade
(a) It means systematic recording of all international economic transactions of that country during a year.	(a) It means the difference between the value of a country’s exports and imports in a year.
(b) It is a broad concept.	(b) It is narrow concept.

In simple words: Balance of payments is a complete record of all economic transactions with other countries, while balance of trade only measures the difference between imported and exported goods.

🎯 Exam Tip: Remember that Balance of Trade is a narrower concept and is actually a part of the broader Balance of Payments.

Answer the Following:

 

Question 1. Explain the concept of foreign trade and its types.
Answer: Foreign trade is the exchange of goods and services between two or more countries. It represents trade across the geographical boundaries of a nation, allowing countries to acquire resources they cannot produce efficiently at home. There are three important types of foreign trade:

• Import trade: It is the buying of goods and services from another country by the home country. Excessive imports can have a negative impact on the home country's economy. E.g., India buying petroleum from Iraq, Kuwait, etc.
• Export trade: It is the selling of goods and services by the home country to another country. Excessive exports can have a positive impact on the home country's economic growth. E.g., India exporting tea and spices to USA, China, etc.
• Entrepot trade: It means buying of goods and services from one country and selling them to another country after some processing. E.g., England importing cotton from India, making readymade garments from it, and selling them to Malaysia.

In simple words: Foreign trade is when different countries buy and sell things to each other. It includes importing (buying from abroad), exporting (selling to other countries), and entrepot trade (importing goods to process and export them again).

🎯 Exam Tip: Clearly define all three types of trade (Import, Export, and Entrepot) with simple real-world examples to secure full marks.

 

Question 2. Explain any four features of composition of Indias foreign trade.
Answer: There are many changes in India’s foreign trade over the last seven decades (70 years). The key features of the composition of India's foreign trade include:

• Gross National Income: India’s foreign trade has great significance for its GNP. The share of foreign trade in India's GNP increased up to 48.8% in the year 2016-17, reflecting growing global integration.
• Change in composition of exports: After independence, there was a significant change in the composition of India’s export trade from primary products (like agricultural goods) to manufactured goods.
• Change in composition of imports: After independence, there was a change in the composition of India’s import trade from consumer goods to capital goods, industrial raw materials, and petroleum.
• Growth in volume and value of trade: Over the decades, the total value and volume of India's imports and exports have expanded exponentially, indicating robust economic development.

In simple words: Over the last 70 years, what India buys and sells has changed a lot. We now export more manufactured items instead of raw materials, import more machinery, and trade contributes a much larger share to our national income.

🎯 Exam Tip: When explaining the composition of trade, highlight the shift from primary agricultural goods to manufactured and capital goods as a sign of economic progress.

 

Question 3. Explain the trend in India’s imports.
Answer: India is importing various goods from other countries. These shifting patterns reflect the changing industrial and economic needs of the nation over time. Following are the major imported goods of India:
• Petroleum: It has largest share in India’s import. In the year 2016-17, it has 22.6% share in India’s total import.
• Gold: After petroleum, the second most imported item is gold. In the year 2011, ) India’s import of gold was $53.9 billion and in the year 2018-19 it declined upto $32.8 billion.
• Fertilizers: The share of fertilizers in import expenditure declined from 4.1% in 1990-91 to only 1.3% in 2016-17.
• Iron and Steel: In the year 2016-17, the share of iron and steel in India’s total import was 2.1%.
In simple words: India imports many items, with petroleum and gold being the largest. Over the years, the share of imports like fertilizers has decreased while others have changed based on our country's needs.

🎯 Exam Tip: Mention specific percentages and years (like 2016-17) for petroleum and gold to secure maximum marks.

 

5. State with Reasons Whether You Agree or Disagree with the Following Statements:

 

Question 1. During British nile, indigenous handicrafts suffered a severe blow.
Answer: Yes, I do agree with this statement. This systematic decline of local artisans led to widespread unemployment in rural areas.
• During the British rule India was exporting raw materials to England and was importing final goods from England.
• Indian handicraft was unable to face competition with imported goods from England.
• An imported goods were cheaper as compared to handicraft goods.
• The demand for machine made cheap commodity had raised in Indian market.
• That’s why Indian handicraft industries suffered during the British rule.
In simple words: During British rule, cheap machine-made goods imported from England flooded Indian markets. Local handmade goods couldn't compete with these low prices, causing Indian handicraft industries to collapse.

🎯 Exam Tip: Always start your answer by clearly stating 'Yes, I agree' or 'No, I disagree' before listing your supporting reasons.

 

Question 2. Trade is an engine of growth for an economy.
Answer: Yes, I agree with this statement.
• Trade permits a more efficient allocation of national resources.
• Foreign trade provide foreign exchange which can be used to import modern machinery and technology from advanced countries.
• Foreign trade encourages producers to produce more goods for export.
• It leads to an increase in total investment in an economy.
• Thus, we can say, trade is an engine to growth for an economy. This process ultimately enhances the overall standard of living for the citizens.
In simple words: Trade helps a country grow by allowing it to sell its own goods and buy advanced technology from other nations. This boosts investment and makes the whole economy stronger.

🎯 Exam Tip: When explaining why trade is an engine of growth, remember to highlight key terms like "efficient allocation of resources," "foreign exchange," and "investment."

 

Question 3. Foreign trade leads to division of labour and specialization at world level.
Answer: Yes, I agree with this statement.
• Some countries have abundant natural resources.
• These countries should export raw material and import finished goods from countries which are advanced in skilled man power
• Under specialisation specific work is given to the workers within a production process.
• Specialisation can increase the productivity of a firm or economy.
• Eg. Incase of car manufacturing company, some workers will design the cars, some workers will work on different section of assembly line, some workers will work on j testing cars, some workers will work on marketing of cars. This global division of labor ensures that goods are produced in the most cost-effective manner possible.
In simple words: Foreign trade allows countries to focus on producing what they are best at. Just like workers in a factory have specific jobs, countries specialize in specific industries, making global production much more efficient.

🎯 Exam Tip: Use the car manufacturing example to clearly illustrate how division of labor works in practice, as real-world examples score high marks.

Direction of India's Imports

Sr. No.	Countries / Organisations	Years
		1990-91 Percentage	2015-16 Percentage
1	OECD	54.0	28.8
2	OPEC	16.3	23.6
3	Eastern Europe	7.8	1.9
4	Developing Nations	18.6	43.2
5	Others	1.4	2.5

Questions

 

Question 1. Which organisation has the least share in the direction of India’s imports in 2015-16?
Answer: Eastern Europe has the least share in the direction of India’s import. This indicates a significant shift in trade relations over the years.
In simple words: Out of all the groups listed, Eastern Europe had the smallest percentage of imports coming into India in 2015-16.

🎯 Exam Tip: Always read the column headers carefully to ensure you are looking at the correct year (2015-16) before finding the lowest value.

 

Question 2. Which orgamsation has maximum share in India’s direction of imports in 1990-91?
Answer: OECD [Organisation for Economic Co-operation and Development has maximum share in India’s direction of imports in 1990-91. This group of developed nations was India's primary source of imports during this period.
In simple words: In the year 1990-91, India bought most of its imported goods from the OECD group of countries.

🎯 Exam Tip: When answering, write the full name of the organization along with its abbreviation to show complete understanding.

 

Question 3. Expand the abbreviations of OECD and OPEC
Answer: OECD : Organisation for Economic Co-operation and Development.
OPEC : Organisation of Petroleum Exporting Countries. These international bodies play a crucial role in global trade and economic policy.
In simple words: OECD stands for Organisation for Economic Co-operation and Development, and OPEC stands for Organisation of Petroleum Exporting Countries.

🎯 Exam Tip: Memorize these expansions as they are frequently asked in exams and carry direct marks.

 

Question 4. State your opinion regarding the direction of India’s imports from 1990-91 to 2015-16.
Answer: In the year 1990-91, OECD (54.0%) and in the year 2015-16, Developing nations (43.2%) has the highest share in the direction of India’s imports. India should focus on diversifying its import sources to reduce dependency on specific regions and strengthen domestic production.
In simple words: Over the years, India's imports shifted from developed OECD nations to developing nations, showing that India is trading more with growing economies now.

🎯 Exam Tip: For opinion-based questions, support your view with data from the table (like percentages) to make your answer strong.

 

Question 5. How much is the percentage of increase in the imports of developing nations in 2015-16 as compared to 1990-91?
Answer: There is 24.6% increase in the imports of developing nations. This significant growth highlights the expanding trade activities of these countries over the decades.
In simple words: The share of goods bought by developing countries from other nations grew by 24.6% between 1990-91 and 2015-16.

🎯 Exam Tip: Always mention the exact percentage and the comparison years clearly to secure full marks.

Answer in Detail

 

Question 1. Explain the meaning and role of foreign trade.
Answer: Trade means buying and selling of goods and services. Foreign trade means when goods and services are exchanged between two or more countries. According to Wasserman and Hultman “International trade consists of transaction between residents of different countries”. This exchange of goods and services plays a pivotal role in connecting global markets and fostering international relations.

Role of foreign trade:
• Brings reputation and helps earn goodwill: Exporting country can earn reputation and goodwill in the international market. Eg. Japan in electronic goods- Panasonic, Canon, Sony, Hitachi. Germany in Automobile – BMW, Audi, Mercedes-Benz, Volkswagen, Porsche. USA in food- McDonalds, KFC, USA in computers – Dell HP, IBM.
• Division of labour and specialisation: It helps to increase the productivity of a firm or economy. Under specialisation specific work is given to the workers within a production process. Eg. Some workers will design cars, some workers will work on assembly lines, some workers will work on testing cars, some workers will work on marketing of cars.
• To earn foreign exchange: Foreign trade is playing very important role in earning foreign exchange. This foreign exchange can be used to import advanced technology and machinery from developed countries.
• Encourages investment: Foreign trade leads to an increase in total investment in an economy. The rise in investment help to produce more goods and services for export.
In simple words: Foreign trade is when different countries buy and sell goods and services with each other. It helps countries earn foreign money, build a good reputation worldwide, specialize in what they do best, and attract more investments.

🎯 Exam Tip: When explaining the role of foreign trade, use bullet points with clear headings and provide real-world examples like Japan or Germany to make your answer stand out.

 

Question 2. Explain the recent trends in India’s exports.
Answer: Export means selling of goods and services by home country to another country. Excessive export can have a positive impact on the home country. This shift reflects India's growing capability in high-value manufacturing and global services.
(i) Engineering Goods : Engineering goods includes transport equipment, automobiles and auto components, machinery and instruments. India’s top export item is engineering goods accounting for 22.5% in India’s total export in 2014-15 and this share has increased upto 25% in the year 2017-18. India is exporting engineering goods to Sri Lanka, UAE and USA.
(ii) Petroleum Products : India’s refining capacity increased significantly since 2001-02 due to which India turned a net exporter of petroleum refinery products. In the year 2013-14 the share of petroleum products in total export was 20.1% and in the year 2016-17 it declined upto 11.7%.
(iii) Chemicals and chemical products: It includes drugs (Medicines) and pharmaceuticals. This is one sector where India is highly competitive on both quality and pricing factor. India became global hub for pharma production. India is exporting its chemicals and chemical products to USA, China and Germany. The share of this item was 10.4% in 2014-15.
In simple words: India's export trends show that we are selling more manufactured items like machinery, refined petroleum, and medicines to other countries, making our economy stronger.

🎯 Exam Tip: Clearly list the percentage shares and key destination countries for engineering goods, petroleum, and chemicals to secure maximum marks.

(iv) Gems and Jewellery: Gems and Jewellery plays an important role in earning the foreign exchange for India. In the year 2014–15 the share of Gems and Jewellery was 13.3% in India’s total export and it declined upto 5.32% in the year 2018-19.

(v) Textiles and Readymade Garments: India’s readymade garments have huge demand in the international market. India is exporting textiles to USA, China and Bangladesh. India is exporting readymade garments to USA, UAE and UK. In the year 2014-15 India’s export of textile and garments was 11.3% of total export of India and it has declined upto 6.3% in the year 2016-17.

Intext Questions

Try This: (Text Book Page No. 94)

 

Question 1. Name the goods exported to and imported from India to China and Japan in recent years.
Answer:

Goods exported by India	Goods imported by India
To China:	From China:
raw materials and industrial inputs like organic chemicals, mineral fuels, cotton, ores, plastic materials, etc.	electronic items, machinery, and plastic items.
To Japan:	From Japan:
fisheries products, wheat, tea, coffee, species and herbs.	mineral fuels, machinery and food items.

These trade patterns reflect the complementary economic needs and manufacturing strengths of each nation.
In simple words: India mainly sends raw materials to China and food items to Japan, while importing electronics and machinery from both countries.

🎯 Exam Tip: Presenting trade data in a neat table format helps the examiner read your answer quickly and awards you full marks.

Find Out: (Text Book Page No. 95)

 

Question 2. Find the recent share of India’s foreign trade in Gross National Income.
Answer: India’s foreign trade accounts for 48.8% of her Gross National Income. This substantial percentage highlights how deeply integrated India's economy is with global markets.
In simple words: Nearly half of India's total national income comes from trading goods and services with other countries.

🎯 Exam Tip: Always mention the exact percentage (48.8%) clearly, as precise statistical figures are crucial for scoring full marks in economics.

Find Out (Text Book Page No. 97)

 

Question. List the countries coming under OPEC and OECD.
Answer: The countries coming under OPEC (Organisation of Petroleum Exporting Countries) are: (a) Algeria, (b) Angola, (c) Congo, (d) Equatorial Guinea, (e) Gabon, (f) Iran, (g) Iraq, (h) Kuwait, (i) Libya, (j) Nigeria, (k) Saudi Arabia, (l) United Arab Emirates, and (m) Venezuela. Additionally, the OECD (Organisation for Economic Co-operation and Development) comprises 38 member countries, including major economies like the United States, United Kingdom, Japan, and Germany, which work together to promote economic growth and social well-being.
In simple words: OPEC is a group of oil-producing nations that cooperate to manage global oil supplies and prices. OECD is a group of developed countries that collaborate to improve economic policies and support global trade.

🎯 Exam Tip: Clearly distinguish between OPEC (oil-exporting nations) and OECD (developed economies) by writing their full forms and listing at least five major countries from each group.