ABSTRACT
Third World Countries have been integrated with the world capitalist system which has created a division of labour on world scale, according to which, the less developed countries (LDCs) produce the primary commodities and the DCs produce manufactured goods. Hans Singer observes that since the seventies, the trend of prices has been working heavily against the sellers of food and raw materials (LDCs) and in favour of the sellers of manufactured articles (DCs). The LDCs use the profits for expanding their production rather than investing them on capital goods. According to him, the deterioration in the terms of trade of the LDCs is a sort of backwash effect which is a serious drag on economic development. International trade has been given an important role to play in the dependency analysis for the explanation of development and underdevelopment of the centre and periphery.
