What are Exports and Imports?
Import and export trade is an example of foreign trade. Some countries might be surplus in few resources while others might be in a deficit, so in order to fulfil the necessities of resources, the goods are imported if the country is deficient in such resources, and when the goods are in surplus, then goods are exported.
Types of Importing and Exporting
The importing types are listed below:
One-time import
Recurring import
Voter file import
Ballot import
The types of exporting are listed below:
Direct export
Indirect export
Merchant export
Deemed export
Penultimate sale
Export and Import Trade
Import means bringing goods from outside India or goods brought from foreign territory to Indian territory for monetary consideration in foreign currency in order to meet the demands of the people. There can be the import of goods as well as the import of services. The imported goods will be covered under the customs act, and customs duty will be levied on them. In case services are imported, they will be covered under the GST act, and IGST will be levied on them.
In the case of exports of goods, the goods are sold from India to a place outside India. Normally exports of goods are duty-free, but in some cases, it is levied at negligible rates. Moreover, the input tax credit is refundable in the export of goods under the GST tax regime.
The evolution of exports can be traced back to the era of the 18th century when the economies started shifting to liberalisation. The father of Economics, i.e., Adam Smith, wrote in his book “The Wealth of the Nation” in 1776 that he brought international trade into the picture.
Advantages of Import and Export
The balance of payments is established through export and import by regulating the balance between Indian and foreign currencies.
It provides a huge scope of growth for the entrepreneur across the global markets.
The government provides tax benefits through rebates or other promotional schemes from time to time.
It reduces the cost of the product by acquiring raw material or finished goods at a cheaper rate.
Due to liberalisation, the trade barriers have been removed and hence, it is very easy to import and export nowadays.
The investment amount is very less as there is no need to set up business in each and every geographical area.
Difference between Import and Export
Case Study
PQR Ltd wants to export the goods to China but it has no idea about the documents required in case of goods for exports. So, as a student of business studies, you are required to draft a list of documents required for the export of such goods.
Ans: The documents required for the export of goods are as follows:
Export Invoice
Packaging List
Certificate of origin
Certificate of inspection
Conclusion
Due to the fast spread of the internet across the globe, the import and export procedures have become more simplified than before. Now, the order can be placed with one click and customers can be served at their doorstep. It has not only enhanced the ease of doing business rather it added several advantages to the consumers as well. The world has now become a global village due to the fast spread of the internet.
FAQs on Importing and Exporting: The Roots of the Economy
1. What is the primary term for the activity of importing and exporting goods between countries?
The activity of importing and exporting goods and services between countries is known as international trade or foreign trade. It is a fundamental component of the global economy, allowing nations to exchange surplus resources for those they lack, thereby satisfying mutual demands.
2. What are some of the key documents required for import and export procedures in India?
Several critical documents are necessary for smooth import-export transactions as per Indian regulations. For exports, key documents include the Export Invoice, Packaging List, and Certificate of Origin. For imports, crucial documents include the Bill of Lading (for sea freight) or Airway Bill (for air freight), Bill of Entry, and Import Order or Indent.
3. What are the main advantages of a country engaging in import and export activities?
Engaging in international trade offers several significant advantages:
- It helps in achieving a favourable balance of payments by managing currency flows.
- It provides immense growth opportunities for businesses in global markets.
- Businesses can reduce production costs by sourcing cheaper raw materials or finished goods from abroad.
- It allows consumers access to a wider variety of goods and services not available domestically.
- The government often provides incentives like tax benefits and promotional schemes to encourage exports.
4. How do a country's import and export levels impact its Gross Domestic Product (GDP)?
Imports and exports are crucial components of a country's GDP calculation, specifically in the net exports component. When a country's exports are greater than its imports, it results in a trade surplus. This positively contributes to the GDP, signalling economic growth. Conversely, when imports exceed exports, it leads to a trade deficit, which negatively impacts the GDP and can indicate economic challenges.
5. What is the key difference between direct and indirect exporting, and which one is better for a new business?
Direct exporting involves the manufacturing firm selling its products directly to a customer in a foreign market without an intermediary. In contrast, indirect exporting involves selling through a domestic intermediary, such as an export house, which then handles the entire export process. For a new business, indirect exporting is often preferred as it is less risky and requires less initial investment and knowledge of foreign markets, logistics, and documentation.
6. Why is it often said that the world has become a 'global village' due to international trade?
This phrase highlights how importing and exporting, accelerated by the internet and economic liberalisation, have made the world more interconnected. It means that geographical boundaries are less of a barrier to business. Consumers can easily purchase products from other countries, and businesses can source materials and sell their goods globally, creating a single, integrated global marketplace.
7. What are the potential negative impacts on a domestic economy if it relies too heavily on imports?
Over-reliance on imports can lead to several negative economic consequences. It can create a persistent trade deficit, weakening the national currency. It may also harm domestic industries, as they struggle to compete with often cheaper foreign goods, potentially leading to business closures and job losses. Furthermore, it can make a country vulnerable to global supply chain disruptions and price fluctuations in international markets.
8. What is the purpose of the Export Promotion Capital Goods (EPCG) scheme in India?
The Export Promotion Capital Goods (EPCG) scheme is a trade promotion initiative by the Indian government. Its primary purpose is to allow an exporter to import capital goods, such as machinery, at zero or concessional customs duty for the purpose of producing high-quality goods for export. This helps make Indian exports more competitive in the global market by reducing the initial capital cost for manufacturers.
