Transport, Communication and International Trade
Domain 4: Transport, Communication and International Trade
This domain links movement of people, goods and information with trade patterns. Expect questions on modes and their suitability, trade balance, trade composition and direction, and the role of ports and communication.
Core rules
- Transport choice: cost per tonne-km is lowest for water, then rail, then road, highest for air. Air is chosen for speed and high-value, low-bulk goods; pipelines suit continuous liquids and gases.
- Communication: moves information rather than goods; it can substitute for travel and enable trade.
- Trade balance: balance of trade = value of exports − value of imports. Positive = surplus; negative = deficit. Balance of payments is wider: it includes services, transfers and capital flows.
- Composition and direction: composition = what is traded; direction = with whom. Developing countries often export primary goods and import manufactures, though this is changing.
- Institutions: WTO sets trade rules; regional blocs such as EU, ASEAN and SAARC reduce barriers among members.
Worked example
A country exports goods worth ₹500 crore and imports goods worth ₹620 crore. Its trade balance is 500 − 620 = −₹120 crore, a deficit. If it also earns ₹80 crore from software services and tourism, the goods-and-services balance improves to −₹40 crore, but the goods trade balance remains −₹120 crore. Reasoning: service earnings enter the wider current account, not the goods trade figure.
Traps
Do not call a trade deficit a loss or bankruptcy. Do not mix up export value with export volume. Do not treat balance of trade and balance of payments as the same. Do not assume a port's hinterland is the same as its foreland.