Most of the time India's trade balance is negative. How you will explain the India's foreign trade using international trade theories?

Even if the balance of trade was not a specific source of concern, the commodity composition of trade was. Exports of manufactured goods were considered beneficial, and exports of raw materials were considered harmful; imports of raw materials were viewed as advantageous and imports of manufactured goods were viewed as damaging. This ranking of activities was based not only on employment grounds, where processing and adding value to raw materials was thought to generate better employment opportunities than just extraction or primary production of basic goods, but also for building up industries to strengthen the economy and the national defense. Mercantilists advocated that government policy be directed to arrange the flow of commerce to conform these beliefs. They sought a highly interventionist agenda, using taxes on trade to manipulate the balance of trade or commodity composition of trade in favor of the home country. But even if the logic of mercantilism was correct, this strategy could never work if all nations tried to follow it simultaneously. This is due to the fact that not every country can have a balance of trade surplus, and not every country can export manufactured goods and import raw materials. In each country Consumers have a preference for variety but there is a tradeoff between variety and cost, consumers want variety but since there are economies of scale a firm's unit costs fall as it produces more - more variety means higher prices. Preferences for variety push in the direction of more variety, economies of scale push in the direction of less. So suppose that without trade country I produces varieties A, B, C and country II produces varieties X, Y, Z. In every other respect the countries are identical so there are no traditional comparative advantage reasons for trade. Nevertheless, if trade is possible it is welfare enhancing. With trade, the scale of production can increase which reduces costs and prices. The number of world varieties will decrease even as the number of varieties available to each consumer increases. That is, with trade, production will concentrate in say A, B, X, Y so each consumer has increased choice even as world variety declines.