Lecture 01

Added: 2026-05-12

[00:00:03][music] [music] Dear students, welcome to the first lecture of week one that is conceptual foundation.

[00:00:29]In this first lecture, we are going to talk about introduction to export and import wherein we will be focusing on definitions and importance.

[00:00:41]Let us begin.

[00:00:44]Before we start explanation, it is important to look towards the contents of today's lecture.

[00:00:52]We will be discussing about introduction to export and import.

[00:00:57]We will be discussing the importance of export and import why they are important.

[00:01:04]Then we will talk about what is exempt that is export import management.

[00:01:11]After that we will go into some historical perspectives about the evolution of export import trade.

[00:01:21]Followed by we will talk about the key drivers of evolution in exam that is export import.

[00:01:30]During our course of discussion a question will pop up that is why do nations trade.

[00:01:38]We will also try to answer this question.

[00:01:44]After that we will go towards India's exports prospects followed by a discussion on challenges in export and import.

[00:01:54]Finally after discussing all these issues and topics we will conclude our lecture one.

[00:02:03]Let us start this journey of lecture one.

[00:02:08]The first important thing is export.

[00:02:12]What is export?

[00:02:14]Export is the shipment of goods and services from one country to another for sale or trade.

[00:02:22]We know that each country sells some goods or services to the foreign countries and all these are known as exports.

[00:02:33]There are different purposes because of which a particular country may export goods and services. The first one is to sell surplus production in international market.

[00:02:48]At times it happens that a country is self-sufficient in a particular product or service and there is abundance. Now what to do of that abundance of goods or services? The only reason is to sell it in the international market. That is why exports become an important element in international trade.

[00:03:15]The second purpose or objective is to increase market share and revenue.

[00:03:21]Each company belonging to a country always aims to access new markets so that its market share increases globally as well as it also achieves more revenue. For this objective, it is always important to go for exports.

[00:03:41]The third purpose is to achieve economies of a scale.

[00:03:46]Economies of a scale is a concept in economics which means a company getting benefit of cost due to large scale production.

[00:03:57]What happens in exports is that a country always look towards producing more and more goods and services at large scale and this gives them incentive and benefit of economies of a scale.

[00:04:18]Let us now move to the another term that is import. What is import?

[00:04:25]Import is the purchase and bringing in of goods and services from a foreign country into the home country.

[00:04:34]For example, if India buys a machinery from Germany, it is imports.

[00:04:41]There are different purposes of imports.

[00:04:45]The first is to acquire resources, goods or technology not available domestically.

[00:04:53]The reason why India has imported a machinery from Germany is that the technology may not be available in India.

[00:05:04]This is the reason why countries imports.

[00:05:08]The second purpose is to access higher quality or lower cost products.

[00:05:15]At times it also happens that a country wants to buy a product at low cost or want to buy a product which is of higher quality but the product is not available in own country then the only way left is to import that particular product.

[00:05:39]The third purpose is to meet domestic demand that local production cannot satisfy.

[00:05:47]Sometimes the opposite of self-sufficiency happens in a country.

[00:05:53]It means that the country is in dire need of more goods but it does not have that much quantity of goods in its own country.

[00:06:05]then the only way left is to import further goods from other countries that is foreign countries.

[00:06:15]Let us now try to understand the importance of export.

[00:06:21]The first point in importance of export is source of foreign exchange.

[00:06:27]When a country's export goods or services to rest of the world that is foreign countries, the foreign countries gives them back pay them back with amount in their own currency.

[00:06:42]For example, if Indian companies sell goods or services to American people, the American people will pay back in dollars and those United States dollar will become part and parcel of India's forex reserves that is foreign exchange reserves which is an asset for the country.

[00:07:06]The second importance is boost industrial growth.

[00:07:10]We know that industrial growth refers to more production and more production is only possible if we have access to new or international markets where we can sell those produced items.

[00:07:28]Thus in any country when industrial production increases and the country is having access in international market it is able to sell them. This totality proves boost in industrial growth of the country.

[00:07:47]The third point is enhances competitiveness.

[00:07:52]Competition is very important in the global markets.

[00:07:58]A company from India needs to compete with a company from United States of America. But this competition is not possible in the domestic market because so many safeguard measures are available in the domestic country for the domestic companies. Thus, it is important that these domestic companies may go in the international or the global market to compete with the foreign companies.

[00:08:31]The fourth importance of export is that it promotes diplomatic and trade relations.

[00:08:39]When a country exports goods to other countries, there comes up different levels of agreement and disagreement.

[00:08:50]Bilateral treaties, negotiations, cooperation, coordination, all these things happen between the two governments of the two countries.

[00:09:01]This paves way for diplomatic and trade relations among those two countries.

[00:09:08]This is the importance of exports.

[00:09:14]Similarly, imports is also very important for any country.

[00:09:19]Let us now focus on some of the points related to importance of import.

[00:09:27]The first point is ensures resource availability.

[00:09:33]Any country is not having abundance in all different types of resources.

[00:09:41]Some countries are abandoned in some type of resources. Other countries are dependent and have availability of other resources.

[00:09:52]For example, India is abandoned in labor resource in comparison to other countries.

[00:10:00]United States of America for example is abandoned in capital goods.

[00:10:07]Thus, if India wants more of capital goods, it has to buy from United States of America. It means resource availability is lacking in one country and because of which the country is going to import more of those kinds of goods or resources.

[00:10:28]The second is provides advanced technology and machinery.

[00:10:35]A country may need better machineries, advanced technologies which may not be available in the home country.

[00:10:45]Therefore, the only way for the country is to buy those machineries and advanced technologies from rest of the world that is from foreign countries.

[00:10:58]This is where import comes into play and its importance is highlighted.

[00:11:05]The third point is import supports domestic industries and consumers.

[00:11:12]Domestic industries refers to industries of the home country.

[00:11:18]For example, the industries that are established in India are domestic industries for India and Indian consumers are the domestic consumers.

[00:11:29]These domestic industries and consumers may have certain needs that may not be fulfilled by the Indian companies.

[00:11:38]Thus, they need to import certain goods or services from rest of the world.

[00:11:45]An example can be Microsoft.

[00:11:48]The computer services of Microsoft are available from United States of America but they are not homemade. Thus it appreciates the use of imports.

[00:12:04]The fourth and final point is it helps to maintain price stability.

[00:12:11]When goods from other parts of the world that is rest of the world are brought into the domestic economy, it challenges the prices that prevails in the domestic economy and because of which market forces of demand and supply work harder and appreciates and moves to perform a work with which price stability is maintained in the domestic market.

[00:12:44]Now the question which we need to answer is what is exam management or export import procedures and documentation.

[00:12:53]Exim management is the strategic planning coordination and control of all activities involved in moving goods and services across international border.

[00:13:06]In simple words, it is the way through which goods and services flow freely from one country to another country benefiting all the participating countries.

[00:13:20]Also, exam management is a multidisciplinary function. It is not just about logistic of moving goods from one place to another. It includes international marketing, trade finance, logistics and shipping, legal and regulatory compliance and documentation.

[00:13:43]What is the objective? The core objective or of export import management is to ensure the smooth, efficient, cost effective and compliant transfer of goods from one seller in one country to a buyer in another country.

[00:14:03]Thus we can appreciate over here that exim management is very important for international trade for exports imports benefiting the countries participating in international trade.

[00:14:22]Dear students, we will now try to focus on the historical perspective of export import trade. It is very important to understand how over the centuries export import trade has developed and has participated in the growth of the nations and the world.

[00:14:45]The first historical perspective starts from the silk road which was between 130 B.CE to 1453 CE. It included the overland caravan routes connecting Asia and Europe.

[00:15:02]It was primarily used for trade of silk, spices, gems and culture.

[00:15:09]The key feature of the silk road in international trade was it that it was the first major intercontinental trade link.

[00:15:20]Today also the silk route is remembered because of the huge international trade which it promoted.

[00:15:29]The second historical perspective is the age of exploration between 15th to 17th century.

[00:15:38]It was primarily focused on seaws that were established by European powers.

[00:15:45]This seaw route was mainly used for gold, silver, tobacco trade as well as some trades related to unfortunate things such as slave trade as well. The key feature of this particular trade regime was mercantalism philosophy which propounded that every country should maximize exports and minimize imports.

[00:16:11]The reason being that if more exports are maximized the more gold will flow into the country.

[00:16:23]In continuation, the third historical perspective relates to the industrial revolution which was between 18th and 19th centuries. It was primarily came because of steam engines, railroads and telegraphs.

[00:16:41]It mainly related to the mass produced goods and raw materials.

[00:16:47]The key feature of industrial revolution was the dramatic drop in transportation and communication cost which ultimately gave way for the rise of colonialism.

[00:17:03]Another historical perspective relates to the 20th century wherein we found out the rulesbased system. In this century, institutions started to emerge and started to coordinate between different countries to develop a rule-based system where every country can trade based on certain rules and regulations that are agreed upon.

[00:17:30]In this line, a creation of the journal agreement on tariffs and trade happened in 1947 popularly known as GAT and also its successor was formed by the title of the World Trade Organization in 1995.

[00:17:50]Due to this rule-based system, it primarily focused on the multilateral negotiations to reduce tariffs and non-tariff barriers.

[00:18:01]Tariff and non-tariff barriers are a type of tax in international trade which we will be discussing in detail in the future slides.

[00:18:11]The key feature of this rulebased system was shift from bilateral deals to a global framework for trade.

[00:18:20]Due to this rule-based system and the formation of world trade organization, the global trade emerged superior and the total volume of the trade increased globally.

[00:18:36]The final historical perspective relates to the present times of the 21st century which can be characterized as the digital and globalized era. This era is characterized by internet containerization, complex supply chain and free trade agreements between the countries.

[00:18:59]It inculcates everything from physical goods to digital services and data.

[00:19:06]The key feature of digital and globalized era is speed, complexity and interconnectivity.

[00:19:15]As well as there is rise of e-commerce that is economic commerce giants and global just in time manufacturing.

[00:19:26]Dear students, let us now try to focus on what are the key drivers of evolution in export import.

[00:19:36]There are five key drivers that have pushed export import towards the boundaries wherein global trade has increased and all participating nations have benefited out of it.

[00:19:52]First is technology. Technology sharing has increased because of export import as well as focus on developing new technologies has also been on the rise.

[00:20:05]The second is transportation.

[00:20:07]All the transportation modes such as air, maritime, road etc have been used in international trade.

[00:20:17]The third is communication. Better communication networks, email, telegraphs as the old version and other such channels have improved the way in which businesses can communicate with the rest of the beneficiaries.

[00:20:36]The fourth is political and economic theories have also been developed due to export and import wherein the political power of a country in international trade is linked to development and finally the consumer demand which has to be met by domestic resources as well as coupled by the international market.

[00:21:03]Dear students, you must be having a question in your mind that if trade is so important, why nations trade? What is their motivation to trade?

[00:21:16]And several economists and researchers have attempted to answer this question.

[00:21:22]We'll try to find out the answers and what are the reasons for those answers.

[00:21:28]The first answer is in the form of a theory which is known as absolute advantage theory propounded by Adam Smith known as father of economics in 1776.

[00:21:42]The core idea of this theory is that a country should produce and export goods it makes more efficiently than others.

[00:21:53]Let us take a very simple example. Say for example, country A can produce 10 units of milk or five units of cloth in a day. On the other hand, country B can produce only five units of milk or 10 units of cloth in one day.

[00:22:13]According to this theory, a country which has superiority over other in terms of production should focus on that particular product. If we compare both the countries, we can see that country A is having advantage in milk because it can produce more milk than the cloth in a day. On the other hand, country B can produce more cloth than milk in a day.

[00:22:43]Which means that country A should focus on producing and exporting milk. It is having an absolute advantage over country B. On the other hand, country B should focus on clothes because it is having absolute advantage in terms of producing and exporting clothes. This way they should specialize and then they should participate in the international trade.

[00:23:11]However, this theory has one limitation.

[00:23:16]What if one country is more efficient at producing everything?

[00:23:21]Does trade stop? That is where the next theory comes in.

[00:23:31]The next theory is given by David Ricardo in 1817.

[00:23:36]He was an economist and the theory is known as comparative advantage.

[00:23:42]According to this theory, trade is beneficial even if one country is better at everything.

[00:23:49]The key concept used in this theory is opportunity cost.

[00:23:55]Just for your information, opportunity cost is the cost of opportunity lost.

[00:24:01]The fundamental rationale or the reason is that this opportunity cost is the bedrock or the basic principle that will justify all international trade.

[00:24:14]Let us try to understand this theory according to the same example which we have previously seen.

[00:24:22]In this theory, we'll try to calculate the opportunity cost and then we will try to find out the answer whether these two countries A and B will trade among themselves or not. If we see for country A if we calculate the opportunity cost the mill cost is.5 that is 5 divided by 10. On the other hand the opportunity cost of clothes is 10 / 5 which is equal to 2.

[00:24:53]For country B the same calculation pertains as the opportunity cost of milk is two units that is 10 by 5 and the opportunity cost of one unit of cloth is.5 which is 5 by 10. What we can conclude? We can easily see that company A has lower opportunity cost for milk because it is 0.5 which is less than two for cloth and country B has a lower opportunity cost for cloth because five is less than two for milk. Therefore, country A should specialize in milk and country B in cloth and both will be having more of both goods through trade.

[00:25:40]The next theory is Hexure Olan model propounded by two researchers Hexure and Bertlin Ol. And it was propounded it between 1990 and 1933.

[00:25:53]This theory is also known as factors endowment theory.

[00:25:58]The core idea of this theory is that comparative advantage arises from a country's factor endowments. That is the factors of production which a country possesses in abundance. For example, a country may have abundance of land. A company for example a country may have abundance of land or another country may have abundance of labor and some other country may have abundance of capital.

[00:26:31]In line of that, a labor rich country for example India, Bangladesh will have a comparative advantage in labor intensive goods such as textiles, garments and handiccrafts.

[00:26:45]On the other hand, a capital rich or intensive country, for example, Germany or United States will have a comparative advantage in capital intensive goods, for example, automobiles, machinery, chemicals.

[00:27:03]What is the prediction? Based on this theory, a country will export goods that use its abundant factor intensively and import goods that use its scarce factor intensively.

[00:27:19]This theory is very important because it explains why cost differences and hence comparative advantage exist.

[00:27:29]moving beyond simple productivity to a nation's underlying resource.

[00:27:38]Let us now see some of the modern theories and the most important modern theory is given by Michael Porter in 1990 who was a management scientist known as competitive advantage. The core idea of the theory is that in the modern global economy, comparative advantage is not just inherited from the factors of productions rather nations and firms must create and sustain competitive advantage.

[00:28:11]The diamond as a concept was given by Michael Porter and he highlighted the national advantage as four parameters.

[00:28:22]The first advanced factors such as skilled labor, infrastructure, innovation, the demanding customers who need sophisticated local markets that drive quality, strong supply chains which are important for globally competitive related industries and intense rivalry which talks about the domestic competition fueling innovation.

[00:28:52]The question is why it matters. This theory matters because it explains how countries like Japan and Germany created dominance in high- techch sectors through strategy and not just natural endowments that is factors of production.

[00:29:13]Dear students, let us now focus on India's exports prospects.

[00:29:18]India has key strength in certain sectors and these are information technology and software services which includes digital solution, IT enabled services etc. Then second is pharmaceutical. India is known as pharmacy of the world because India produces a large number of generic drugs and vaccines.

[00:29:42]Textile and apparel is another area where India is excelling in exports because India is a heritage in cotton, garments and handiccrafts. And finally, India is also performing well in terms of engineer goods like machinery, automobiles and auto components.

[00:30:02]There is a growing demand in different parts of the world for Indian exports.

[00:30:07]Significant opportunities are there in emerging markets across Africa, Southeast Asia and Latin America. The government has also identified the strength of India's exports and have incorporated several policies like production linked incentive scheme make in India and India's foreign trade policy.

[00:30:33]What are the challenges in export and import? The first is trade barriers and tariffs. These are a kind of tax in the form of duties, quotas etc. that restrict trade. So it is very important to do trade by understanding them and curtailing them so that the negative effect of trade barriers and tariffs should not discourage exports and imports. The second is exports and imports are part of international market and therefore different currencies are exchanged. So the exchange rate fluctuations are also an area of concern. The third is political and economic risk. The different political scenarios do challenge exporters and importers. For example, a situation of conflict and war creates problems for goods and services to reach to a destination. Economy risk involves different crisis, challenges, inflation that are also very interesting to understand because they can hamper exports and imports. And finally, quality standards and compliance issues in any country. If goods are entering from foreign markets, every country has certain bureau standards and if goods are not according to those standards, then they will not be allowed to enter the territory. So this is also a challenging concern for both exporters and importers.

[00:32:08]Dear students, let us now conclude the first lecture which we have studied in detail.

[00:32:15]We have talked about exports and imports and we have understood that they form the backbone of global trade and economic growth.

[00:32:25]We have also highlighted that balanced exim management strengthens stability, competitiveness and global integration.

[00:32:35]By understanding the evolution, drivers and challenges of trade, it is helpful to prepare us for effective participation in the global economy.

[00:32:47]And finally, the key takeaways that a strong export import strategy ensures long-term national prosperity and business success.

[00:32:58]Thank you very much for being there in lecture one.

[00:33:05]>> [music]