According to official data from Union Ministry of Commerce and Industry, in the FY 2023-24, India recorded trade deficit with 9 out of its top 10 trading partners.
- Trade deficit (also known as negative trade balance) occurs when country’s value of imports are more than that of exports.
Current Status of India’s External Trade (FY 2023-24)
- China, USA, UAE, Russia, and Saudi Arabia are India’s largest trading partners. (in descending order)
- India’s trade deficit with China, Russia, South Korea, and Hong Kong increased as compared to 2022-23, while it narrowed with UAE, Saudi Arabia, Indonesia, and Iraq.
- USA, Netherlands, UK, Belgium, and Italy are the top 5 trading partners with which India has trade surplus.
Impact of Higher Trade Deficit on Economy
Negative
- Depletion of Forex reserves due to the need to pay for excess imports, raising concerns of depreciation of domestic currency.
- Widening current account deficit which may adversely affect credit rating of the country and raise borrowing costs.
- Strategic implications due to sustained trade deficit, particularly for essential products or critical sectors.
Positive
- Access to wider range of goods, increased domestic investment if deficit is driven by imports of capital goods, etc.
Reasons behind India’s higher trade deficit
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