DIFFERENCE BETWEEN FOREIGN TRADE AND FOREIGN INVESTMENT
In this digitalized era , globalization is an important phenomenon. In globalization - selling,production and investing across countries are an important element.
Globalization has united all the markets around the globe and made one family where everyone is connected with each other. MNCs has increased their investment and because of that the role of foreign trade is also increasing due to which we are observing the integration of production and market across the globe.
In this article we will get to know the Difference Between Foreign Trade And Foreign Investment in easy and simple way.
IT IS BASICALLY THE PURCHASE AND SALE OF GOOD AND SERVICES ACROSS THE GLOBE AND WITH GLOBALIZATION ALL THE MARKETS OVER THE WORLD ARE INTER-CONNECTED WHICH ENHANCE THE ROLE OF FOREIGN TRADE. NO COUNTRY HAS EVERYTHING IN TERMS OF RESOURCES , IN SOME COUNTRIES THERE CAN BE SCARCITY OF ANY RESOURCES AND THAT SCARCITY CAN BE ELIMINATED IF ANY OTHER COUNTRY HAS A LARGE AMOUNT OF RESOURCES OF THAT PARTICULAR THING, SO IN ORDER TO FULFILL THE NEEDS OF EACH OTHER ONE COUNTRY IMPORTS A COMMODITY OR A RESOURCE WHICH FORMS THE BASIS OF FOREIGN TRADE. What is Foreign Trade ?
1.IMPORT TRADE IMPORT TRADE MEANS THE PURCHASE OF GOODS AND SERVICES FROM OTHER FOREIGN COUNTRIES TO YOUR HOME COUNTRY. COUNTRIES IMPORT THOSE GOODS AND SERVICES OR RESOURCES FROM OTHER COUNTRIES FOR WHICH THEY ARE FACING SCARCITY. 2.EXPORT TRADE EXPORT TRADE MEANS SELLING GOODS AND SERVICES TO OTHER COUNTRIES FROM YOUR HOME COUNTRY. COUNTRIES EXPORT THOSE GOODS AND SERVICES TO OTHER COUNTRIES WHICH THEY HAVE IN A LARGE AMOUNT. EXPORTING GOODS AND SERVICES CAN BE A GOOD WAY OF GENERATING INCOME. 3.ENTREPOT TRADE ITS A UNIQUE KIND OF TRADE MECHANISM , IN THIS A COUNTRY PURCHASES GOODS AND SERVICES FROM OTHER COUNTRY AND THEN MODIFY IT AND THEN SELL IT TO ANOTHER COUNTRY. Types Of Foreign Trade
1.ENSURES QUALITY AND STANDARD GOODS FOREIGN TRADE IS VERY COMPETITIVE AND TO MAINTAIN AND INCREASE THE DEMAND OF GOODS AND SERVICES , THE COUNTRIES WHO ARE EXPORTING THEY NEED TO MAINTAIN THE QUALITY OF GOODS AND BECAUSE OF THIS THE GOODS WHICH ARE PRODUCED ARE QUALITY AND STANDARDISED. 2.CAN RAISE THE STANDARD OF LIVING FOR THE PEOPLE THROUGH FOREIGN TRADE AND IMPORTS IT CAN BOOST UP THE STANDARD OF LIVING AS IT PROVIDES THE MULTIPLE CHOICES AND OPTIONS OF GOODS AND SERVICES. WHEN PEOPLE WILL CONSUME THE BETTER VERSION OF GOODS AND SERVICES IT WILL DIRECTLY BOOST THE STANDARD OF LIVING. 3. HELPS TO PROMOTE ECONOMIC GROWTH FOREIGN TRADE HELPS TO PROMOTE ECONOMIC DEVELOPMENT OF THE NATION BECAUSE WITH THE IMPORTS OF GOODS AND SERVICES AND TECHNOLOGY A NATION DEVELOP GROWTH IN ALL SECTORS OF THE ECONOMY. Importance of Foreign Trade
FOREIGN INVESTMENT MEANS THE INCOMING FLOW OF CAPITAL THROUGH WHICH FOREIGN COMPANIES OR INDIVIDUALS INVEST IN OTHER COUNTRIES OTHER THAN THEIR HOME COUNTRY TO TAKE BENEFITS OF OPPORTUNITIES OF DEVELOPMENT AS WELL AS CHEAPER RESOURCES AND A DYNAMIC BUSINESS ENVIRONMENT. IT IS AN ANOTHER FORM BUSINESS WHICH RUNS INTERNATIONALLY AND THROUGH THIS TYPE OF INVESTMENT FOREIGN COMPANIES AND INDIVIDUALS SET UP THEIR BUSINESSES AND MANUFACTURING PLANTS IN OTHER COUNTRIES. THIS ALSO BRINGS NEW TECHNOLOGIES AND RESOURCES WHICH ARE THE BEST ADVANTAGES OF FOREIGN INVESTMENT. What is Foreign Investment
1.FOREIGN DIRECT INVESTMENT (FDI) THE TERM FOREIGN DIRECT INVESTMENT (FDI) REFERS TO THE ACT OF AN INVESTOR RESIDENT IN ONE ECONOMY ESTABLISHING A LASTING INTEREST IN AN ENTERPRISE IN ANOTHER ECONOMY AND EXERTING SIGNIFICANT INFLUENCE OVER IT. 2.FOREIGN PORTFOLIO INVESTMENT A FOREIGN PORTFOLIO INVESTOR (FPI) IS A COMPANY REGISTERED ABROAD WITH THE PURPOSE OF INVESTING IN INDIAN SECURITIES LISTED AND TRADED ON EXCHANGES. THEY ARE NOW ALSO CALLED FOREIGN INSTITUTIONAL INVESTORS (FIIS). Types Of Foreign Investment
1.THE SOCIO-ECONOMIC DEVELOPMENT OF A COUNTRY CAN BE GREATLY IMPACTED BY FOREIGN CAPITAL AND 2.TECHNOLOGY.ITFACILITATES THE IMPORTATION OF CAPITAL GOODS, KNOW-HOW, RAW MATERIALS, OTHER INPUTS, AND EVEN CONSUMER GOODS NECESSARY FOR CARRYING OUT DEVELOPMENT PROGRAMS. 3. IT ALSO FACILITATES THE TRANSFER OF NEW TECHNOLOGY TO THE RECIPIENT COUNTRY. 4.FOREIGN INVESTMENT CONTRIBUTES TO THE NATION'S FINANCIAL STABILITY, GROWTH, AND DEVELOPMENT. Benefits of Foreign Investment
Conclusion
Foreign trade and foreign investment both are considered to be very important for the development of an economy and for a nation.
In this era of globalization , the nations across the globe are able to utilize the resources and technology through mutual cooperation.
Note- If you want to know about stock market and want to start your investment or trading journey then you can go for a stock market basic course which can help you with acquiring the knowledge.
