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India’s Trade Deficit with Major Trading Partners in FY 2023-24

Context:

According to the latest data from the Ministry of Commerce & Industry, India has recorded a trade deficit with 9 of its top 10 trading partners in the fiscal year (FY) 2023-24.

Relevance:

GS III: Indian Economy

Dimensions of the Article:

  1. India’s Foreign Trade
  2. Latest Trends
  3. India’s Trade Deficit with its Major Trading Partners

India’s Foreign Trade:

General Overview:

  • Significance: Foreign trade in India includes all (merchandise + services) imports and exports to and from India, accounting for 48.8% of India’s GDP in 2018.
  • Administration: At the Central Government level, trade is administered by the Ministry of Commerce and Industry.
  • Global Ranking (2022): India was number 15 in total exports and number 8 in total imports.
Trading Partners:

Historical Trends:

  • China was India’s top trading partner from 2013-14 till 2017-18 and again in 2020-21.
  • UAE was the largest trading partner before China.
  • The US was the largest partner in 2021-22 and 2022-23.
Exports (Merchandise):

Top Exports:

  • Refined Petroleum: $86.2B
  • Diamonds: $25.9B
  • Packaged Medicaments: $19.5B
  • Jewellery: $12.6B
  • Rice: $11.1B

Top Destinations:

  • United States: $82.9B
  • United Arab Emirates: $31.6B
  • Netherlands: $17.6B
  • China: $15.3B
  • Bangladesh: $13.8B
  • Global Standing (2022): India was the world’s biggest exporter of Diamonds and Rice.
Imports (Merchandise):

Top Imports:

  • Crude Petroleum: $170B
  • Coal Briquettes: $58.7B
  • Gold: $35.8B
  • Petroleum Gas: $32B
  • Diamonds: $26.1B

Top Sources:

  • China: $110B
  • UAE: $51B
  • United States: $48.5B
  • Saudi Arabia: $46.2B
  • Russia: $40.4B
  • Global Standing (2022): India was the world’s biggest importer of Coal Briquettes, Diamonds, Palm Oil, Mixed Mineral or Chemical Fertilizers, and Nitrogenous Fertilizers.

Latest Trends:

FY 2023-24 Data:

  • China overtook the US as India’s largest trading partner with a total two-way commerce of $118.4 billion.
  • India’s exports to China rose by 8.7% to $16.67 billion, while imports increased by 3.24% to $101.7 billion.
  • Exports to the US dipped slightly to $77.5 billion, and imports decreased by about 20% to $40.8 billion (total two-way commerce stood at $118.3 billion).
  • The UAE was the third-largest trading partner of India with $83.6 billion, followed by Russia ($65.7 billion), Saudi Arabia ($43.4 billion), and Singapore ($35.6 billion).

India’s Trade Deficit with its Major Trading Partners:

  • China: Trade deficit rose to $85 billion in 2023-24 from $83.2 billion in 2022-23.
  • Russia: Trade deficit increased to $57.2 billion in 2023-24 from $43 billion in 2022-23.
  • Korea: Trade deficit rose to $14.71 billion in 2023-24 from $14.57 billion in 2022-23.
  • Hong Kong: Trade deficit increased to $12.2 billion in 2023-24 from $8.38 billion in 2022-23.
  • United States: India has a trade surplus of $36.74 billion with the U.S. in 2023-24. The U.S. is one of the few countries with which India has a trade surplus, along with the U.K., Belgium, Italy, France, and Bangladesh.
  • Total Trade Deficit: India’s total trade deficit in the last fiscal narrowed to $238.3 billion from $264.9 billion in the previous fiscal.
Analysis of Trends:
  • Positive Aspect of Imports: Imports can be beneficial if a country is importing raw materials or intermediary products to boost manufacturing and exports.
  • Currency Depreciation: Increased imports can cause the country’s currency to depreciate due to higher demand for foreign currency.
  • Economic Impact: Depreciation makes imports more expensive, worsening the trade deficit and increasing external debt.
  • Foreign Exchange Reserves: Depletion of foreign exchange reserves can signal economic instability to investors, leading to reduced foreign investment.
Strategies to Reduce Trade Deficit:
  • Boosting Exports: Focus on enhancing the export capacity of domestic industries.
  • Reducing Unnecessary Imports: Implement measures to limit the import of non-essential goods.
  • Developing Domestic Industries: Strengthen local industries to reduce dependence on imported goods.
  • Managing Currency and Debt: Implement policies to stabilize the currency and effectively manage external debt levels.

-Source: Times of India


June 2024
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