ANSWER 1: (a) Mercantilism: Mercantilism is in a country's interest to maintain a trade surplus (i.e.) export more than imports. It was proposed in the 16th century to obtain a surplus in balancing trade and the wealth of one's country is measured in terms of gold. Here in trade it is seen as a “ZERO SUM GAME” where one country gains and the other loses. Since 1950s India has been buying nuts from African countries and according to the theory of mercantilism it is trade between two countries and here it does not explain the trade between two countries. So India buys from one country and sells to another at a higher price and the richer company buys and resells it to developed countries like US and UK when their demand increased after 1970s. India exports only 50% due to its demand in the country but Brazil exports 85% to other countries. Therefore mercantilism does not clearly explain cashews. (b) Theory of absolute advantage: Adam Smith states that a country has more advantage when it is more efficient in producing a product than another country. It also states that the country specializing in a particular product has an absolute advantage in trading with other countries. From 1920s to 1970s India had an absolute advantage in producing cashew nuts in the processing industry where they had high demand in all countries and if other countries want to sell the nuts they have to bear other expenses like transportation. After the 1970s, when machinery hit the market, countries like Africa and Brazil stopped exporting cashews for processing in India. Thus India loses its advantage over Brazil as it does more exports where processors have to pay 30-36% of what Indian processors pay. India exports only 50 pieces of medium quality paper. By producing good quality we can demand higher prices and this generates more revenue for the country and we can give a higher reward to workers for producing good quality products. Instead of following the handmade type, we can opt for new machinery which will improve the efficiency of nut production and we can deliver at a faster pace. Testing is already underway on both dried fruit and fruit and can be used for commercial items such as jams, sweets, syrups, wine, etc. Making agreements with foreign countries to improve trade affairs and also to improve the economy of a country. To find a possible solution, committees like All-India Coordinated Spices and Cashew Nut Improvement Project should find more ways to improve nuts and also efficiency. Measures to be taken to avoid surplus cashews. Find new markets in various countries such as outlets, franchises, etc.