Source: India records trade deficit with 9 of top 10 trading partners in 2023-24 (The Hindu, May 27, 2024)
According to official data, India experienced a trade deficit—the gap between imports and exports—with nine of its top ten trading partners, including China, Russia, Singapore, and Korea, in the fiscal year 2023-24.
Increased Trade Deficit
- The trade deficit with China, Russia, Korea, and Hong Kong increased in the last fiscal year compared to 2022-23.
- Trade gap with UAE, Saudi Arabia, Russia, Indonesia, and Iraq narrowed.
Specific Trade Deficit Numbers
- China: Increased to $85 billion in 2023-24 from $83.2 billion in 2022-23.
- Russia: Increased to $57.2 billion from $43 billion.
- Korea: Increased to $14.71 billion from $14.57 billion.
- Hong Kong: Increased to $12.2 billion from $8.38 billion.
Top Trading Partners
- China: Largest trading partner with $118.4 billion in 2023-24.
- U.S.: Bilateral trade stood at $118.28 billion in 2023-24.
- Top trading partner in 2021-22 and 2022-23.
Free Trade Agreements: India has free trade agreements with Singapore, UAE, Korea, and Indonesia.
Trade Surplus
- India has a trade surplus of $36.74 billion with the U.S. in 2023-24.
- Other surplus countries: U.K., Belgium, Italy, France, and Bangladesh.
Overall Trade Deficit: Total trade deficit narrowed to $238.3 billion in the last fiscal from $264.9 billion in the previous fiscal.
Trade Deficit Insights
- A deficit is not always bad if a country is importing raw materials or intermediary products to boost manufacturing and exports.
- However, it puts pressure on the domestic currency.
Bilateral Trade Deficit:
- A bilateral trade deficit with a country isn’t a major issue unless it makes us overly reliant on that country’s critical supplies.
- A rising overall trade deficit is harmful to the economy.
Currency Depreciation:
- Rising trade deficit, even from importing raw materials and intermediates, can cause the country’s currency to depreciate.
- Depreciation requires more foreign currency for imports, making imports more expensive and worsening the deficit.
Borrowing and Debt:
- To cover the growing deficit, the country might need to borrow more from foreign lenders.
- Increased external debt can deplete foreign exchange reserves and signal economic instability to investors.
- Economic instability can lead to reduced foreign investment.
Reducing Trade Deficit
- Boost exports.
- Reduce unnecessary imports.
- Develop domestic industries.
- Manage currency and debt levels effectively.