Subject: Social Studies

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Trade is known as the action of buying and selling goods and services. International trade enables us to earn this foreign currency, by selling our products. This note contains description of trade along with its type and importance.


The action of buying and selling goods and services is called trade. It involves transfer or exchange of goods for moneyIt is essential fo the satisfaction of human needs/wants.Broadly they are two types of trade are as follows:

Internal Trade

Traders buy goods in one part of the country and sell in other places inside Nepal. Fruits vegetables, animals, wood and some manufactured goods such as Coca-Cola and noodles move around like this. This is an internal trade.

External Trade


Very few countries have everything they need. For example, many countries have no oil. So countries buy goods (import) from other countries and sell other goods (export) to other countries. It is good to sell more than you buy. This is trade surplus. If a country buys more than it sells, it has a trade deficit which means less money for investment and development. The patterns of international trade are very complicated, and an important part of world politics, but many LDC export one or two raw materials ( such as coffee, sugar, cotton), while MDC export more expensive manufactured goods.

Importance of international trade

Some big countries such as India have tried a policy of being self-sufficient, that is not to trade at all with other countries, but only to use their own natural and human resources, and developing their own industries to supply all their own national needs

Even countries which could be self-sufficient are now entering into world trade. Increasingly all countries are waiting to join in free world trade. So there must be advantages! However, poorer countries with only one or two raw materials to export may be always in danger: too much of their product causes low prices, but the harvest fails there may be insufficient to export, or world demands may change. So there are dangers as well. But let's look at the advantages.

  1. If one country concentrates on a certain product, they can develop skills and knowledge and product very high-quality goods.
  2. It is sensible to use resources and tools in the place where they are found.
  3. Once a trade is established and more than local needs have to be produced, employment opportunities increase.
  4. The currency of the rich nations is reliable, so international trade enables us to earn this foreign currency, by selling our products.
  5. Many countries will buy our craft items, and this help to preserve our traditional art and craft skills, encouraging young people to learn them.

International trade for Nepal

Nepal's international trade is in deficit. The trade is India-centered but the government has started trade diversification by keeping trade relation with other countries. Nepal exports raw materials at a low price and imports manufactured goods at the high price. The main exports of our country are ready-made dresses, carpets, agriculture and forest-related goods. But the international market of many of our exports has declined recently.


Nepal's international trade is not prospering. It has many problems, which are ,

  1. Too much import and too little export
    Nepal's export mainly constitutes primary products or raw materials, which get a little price. In turn, it has to pay much more for its large imports which are mostly manufactured goods. Investors in Nepal are encouraged in trade so they trade more in foreign goods, which also helps to grow the volume of imports.

  2. Open border
    Nepal borders with India on three sides. More than one-third of our trade is with India. Large quantities of goods move across the border through several secret routes. Consumers from each country collect their daily goods outside so that they get at a cheaper price. Due to such illegal trade practice, transaction statistics taken cannot be real.

  3. Land-locked
    Sea transport is a cheapest and most widely used system of transport for international trade. Being a landlocked country, Nepal is deprived of this cheapest system. It has to use Indian Territory to reach the sea. Transport is costly and goods become expensive. There is not an easy alternative way because our border with china in the north is geographically difficult and the sea their lies at the greater distance.

  4. Heavy import of luxury items
    Nepali consumers are fascinated a lot by foreign-made luxury goods. The government also has a policy of importing such goods so that more customs duty can be charged. When a country wealth is drained out in importing luxury items, there is a lack of capital left for development of indigenous industries.

  5. Unaware consumers and irresponsible traders
    Nepali consumers are easily moved by popular luxury goods of foreign brands. Their needs are created by others, say manufacturers and advertisers. Many traders are found smuggling goods across the border.

Solutions measures

  • Grow indigenous industries to supply consumer goods
  • Export more agro-products and forest product
  • Strict control over border
  • Raise awareness among consumers for their love for national products
  • Develop trade relations with more countries other than India
  • Limit the import of luxury goods
  • Create conducive environment to encourage Nepal investors to invest in industries
  • Modernized agriculture
Things to remember
  • International trade enables us to earn this foreign currency, by selling our products 
  • Problems of Trade for Nepal are: too much import and too little export, open border, land-lockedness, heavy import of luxury items and unaware consumers and irresponsible traders.
  • If one country concentrates on a certain product, they can develop skills and knowledge and product very high quality goods by the help of trade.

  • We can grow indigenous industries to supply consumer goods.

  • It includes every relationship which established among the people.
  • There can be more than one community in a society. Community smaller than society.
  • It is a network of social relationships which cannot see or touched.
  • common interests and common objectives are not necessary for society.
Videos for Trade
Fair trade organisation changes lives in Nepal neighborhood
Nepal: Improving International Trade
Questions and Answers

Trade is the practice of buying or selling of goods and services for profit.

The difference between national and international trade are:

National Trade International Trade
The supply of goods and services within a country is known as National trade. The buying and selling the goods and services with other countries is known as International trade.
National trade doesn't include huge money. International trade includes lots of money.
Fruits, vegetables, animals, woods and some manufactured goods such as Coca-Cola and noodles are some examples. Coffee, sugar, cotton and expensive goods are some examples.

Our international trade is India-centric. Most of our imports are done from India. Our economy sustains with Indian help. As Nepal is small and less developed country we don't have much to offer for export. To improve the trade deficit Nepal must improve its output for trading. Better qualitative and expensive products should be encouraged for export. Our trade must diversify. We should trade keeping good relation with other countries.

International trade is important in Nepal for following reasons:

  • It helps to promote the relation with other countries.
  • It promotes the technology.
  • It promotes skill of people.
  • It makes people market competitive.
  • It supports maximum utilization of means and resources.
  • It helps to recognize the country in international market.
  • It promotes the economic condition of country.
Yes, there are more problems of Nepal's international trade, which are listed below:
  • Lack of technology for industrial development
  • Open border
  • More import and less export
  • Heavy import of luxurious goods
  • Landlockedness
  • ¬†Poor mobilizing of available resources
  • Lack of industrials as well as agricultural products

These problems can be solved by implementing following points:

  • Modern technology should be used.
  • Establish more industries.
  • Modernize agricultural sector.
  • Make easy policies for the establishment of industries.
  • Mobilize means and resources.

Nepalese trade highly depends on India. Lack of export of primary goods, import of readymade and manufactured goods, imports of luxury goods, high import cost, lack of study and research are some of the characteristics of Nepalese foreign trade.

If the things to be sold are of higher price than the things to be bought, it is considered as a trade surplus and if the things to be sold are lower price than the things to be brought, it is considered as trade deficit.

When the total import of the country is equal to the total export or the export is more than import there is no adverse fluctuation in the national economy and this stage is considered as balance of trade. For example, if Nepal had imports worth Rs 10,000,000,000 in 1995 A.D. and the exports worth 10,000,000,000 then it would be considered as balance of trade in Nepal in 1995 A.D.

The benefits of trade of foreign in Nepal are:
  • Maximum use of means and resources.
  • Earning foreign currencies.
  • Less cost, better production.
  • Development of international understanding.
  • Skill development.
  • Technological development.
  • Growth in employment.
The achievements of internal and external trade are:
  • Advantage of specialization: It develops the skill of the native people i.e. it develops the necessary manpower in the country. They can use their expertise to produce standard goods.
  • Maximum utilization of employment: It also makes the maximum and best use of the natural means and resources available in the country. Diversification saves this waste of valuable resources.
  • Increasing opportunities of employment: It boosts national economy, the nation establishes many more industries and factories. These in turn give rise to job opportunities or growth employment.
  • Development of quality goods at low price: It encourages healthy competition. So, nation tries best to produce standard goods at low cost. Then it can sell its products at cheaper rate in the international market and draw more and more consumers.
  • Technical progress: People take sophisticated training to make best use of raw materials, roads and other pre requisites of development. This finally leads to economic development.

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