Favourable balance of trade
Also called: Trade surplus, Positive balance of trade · Topic: International Trade: Patterns, Ports and the WTO · NCERT: Class 12, Ch 8 "International Trade"
Meaning
A favourable balance of trade, or trade surplus, exists when the value of a country's exports is greater than the value of its imports. Balance of trade means exports minus imports, and strictly it counts goods only. A surplus means the country earns more from selling abroad than it spends on buying. The extra earnings add to its foreign-exchange reserves.
Example
China, Germany and the Gulf oil exporters run trade surpluses. For example, the Gulf countries sell large amounts of oil abroad but import less in value. India, by contrast, has run a goods trade deficit in most years since independence.
Don't confuse with
- Balance of payments: this is the full record of all dealings with the rest of the world. Besides goods, it includes services, income, transfers, investment and loans. Balance of trade covers goods only.
- Unfavourable balance of trade: here imports are greater than exports, which is a trade deficit.