Import and export business affect both the economy and the consumer as well as the native currency which further determines India’s economic growth. The exchange of goods amid nations is what creates the global market and thus is very significant in finance. A consistent growth of both import and export business leads to a strong economy.
While on one hand export business brings in capital, on the other hand import business bring in options to consumers which can be seen through a healthy demand in the nationwide market. The development of import and export business though stable must not be in favour of a rising trade deficit (higher imports in comparison to exports) as a constant surge in trade deficit paves a way to lower exchange rates (value of the native currency as in contradiction of foreign currency) which may result in price escalation in the market. The constant dilapidation of currency exchange rate has a serious impact on the economy as well as customers who will now get the imported products at a huge price in the market. Whereas, a trade surplus (higher exports in comparison to imports) works in favour of the domestic economy.
You must note that the trade balance (be it surplus or deficit) is a financial indicator of a country. An unmanageable deficit typically points to a reduction of the domestic currency.
Apart from this, the import business of some products which could be raw materials in manufacturing of others lessens the production cost that a company incurs and thus enhances scenarios for profits and reduces investment in a fully and well set up manufacturing plant. When it comes to importing of a product, the exchange rate has a vital role to play for the business. It is the exchange rate that fixes the competitiveness of a product in the market. Take for instance, a currency that has an exchange rate of INR 40 is desirable to one having an exchange rate of INR 50. (This is in case both sell off their products at the same value in their native currencies).
Too high or low value of exchange may disturb the import and export business in an adverse manner. Both stronger as well as weaker domestic currencies have their pros and cons like two sides of the coin, while one has an impact on the competitiveness in exports business, other affects the domestic economy when it comes to labor and manufacturing expenditures. Therefore, it is significant to maintain the exchange rates so as to uphold a trade balance and a stable growth of economy.
Thus, international trade affects our everyday life even if we are not straight involved in these import export business practices. The price escalations that customers often complain about are not just owing to low production, but also owing to some of the facts which has just been mentioned. Thus, it is imperative to keep an eye out for investment selections to protect your assets in this changeable economy and to be prepared for all kinds of situations.