The all-pervading impact of external sector of an economy on its domestic sector necessitates that a country should take its trade policy seriously. Its external sector has the potential of generating growth multipliers on the one hand and inflicting immense harm on the other.
The extent and composition of its impact does not depend only upon its size in relation to that of the domestic sector, but also on several other contributory factors. Conceptually, its impact does not vanish even in the extreme case of a complete economic isolation of a country.
An isolated country is deprived of potential growth benefits derivable from rest of the world; this can seriously affect its economic efficiency and performance.
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It needs no arguing that India should have a comprehensive trade policy incorporating a well considered and comprehensive set of strategies for both merchandise and services. India has come to recognise the immense potential of its foreign trade as an engine of economic and social growth and is continuously restructuring its foreign trade policy.
It is noteworthy that global trade in services is increasing faster than that in merchandise. It is, however, packed with deeper uncertainties and risk factors forcing most trading countries to search for gainful strategies.
Backed by WTO and GATS, advanced countries are most active in this pursuit. Though trade in services is currently dominated developed countries, India is also emerging as one of the leaders in it.
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Economic Survey 2004-05 estimates that it has the potential of exporting services worth $57-65 billion by 2008. This potential can be tapped by diversifying into export of new services which were note even heard of till recently.