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:
- India’s Foreign Trade
- Latest Trends
- 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
