Quantity Factor and Foreign Trade

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 Quantity Factor and Foreign Trade


There are numerous factors to consider while assessing the competitive situation in a country's foreign trade. Quantity is one such factor that analysts take into consideration while assessing fuel imports. This is because the price fluctuation in fuel is very high and assessing the import trends on the basis of price is misleading. So the growth rate of import of such products should be measured in quantity as well.

Nepal witnessed a 35.13% growth in import of diesel in terms of value in the first month of fiscal year 2022/23 in comparison to the same period of the previous fiscal year 2021/22, whereas import in terms of quantity declined by 30.73% in the same period. Likewise, the import of petrol increased by 44.75% in value whereas it showed a 6.58% decline in quantity during the period. Similarly, very high divergence in import in terms of price and quantity is seen also in case of Liquefied Petroleum Gas (LPG) and Aviation Turbine Fuel (ATF).

So the performance of foreign trade should not be judged on the basis of value alone as a rise in the price may show an upward trend in import even though import may have gone down in terms of quantity. Fluctuation in import of the product categorised under final consumption may not make meaningful difference in the national economy, but fluctuation in imports of fuel, industrial raw materials and capital goods will have serious repercussions on the economic activities of the country. Analysis of foreign trade in terms of quantity is not in vogue in Nepal. Policymakers, media and even academia are confined to value factors while analysing the trend of Nepal's foreign trade.  

The quantity-focused trade analysis has other benefits as it also reveals the unit price of the traded commodity and per unit tariff imposed on it. Once the analyst compares the unit price of imported commodity with its local market price, it reveals the nitty-gritty of the practices in Nepal's foreign trade. The revelation of such facts becomes the source of trade intelligence.

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