Image used for representational purposes only. | Photo source: PTI
According to official data, India recorded a trade deficit, or the difference between imports and exports, with nine of its top 10 trading partners, including China, Russia, Singapore and Korea, in 2023-24.
The data also showed that the deficit with China, Russia, Korea and Hong Kong increased in the last fiscal quarter compared to 2022-23, and the trade gap with the UAE, Saudi Arabia, Russia, Indonesia and Iraq narrowed.
The trade deficit with China increased to USD 85 billion, Russia to USD 57.2 billion, Korea to USD 14.71 billion and Hong Kong to USD 12.2 billion in 2023-24 compared to USD 83.2 billion, USD 43 billion, respectively $14.57 billion and $8.38 billion in 2022–2023.
China has emerged as India’s largest trading partner with bilateral trade worth $118.4 billion in 2023-24, overtaking the US
Bilateral trade between India and the US was USD 118.28 billion in 2023-24. Washington was Recent Delhi’s main trading partner in 2021-22 and 2022-23.
India has a free trade agreement with four of its most essential trading partners – Singapore, UAE, Korea and Indonesia (as part of the Asian bloc).
India’s trade surplus with the US in 2023-24 will be USD 36.74 billion. America is one of the few countries with which India has a trade surplus. There is also a surplus in the UK, Belgium, Italy, France and Bangladesh.
India’s total trade deficit in the last fiscal year narrowed to $238.3 billion compared to $264.9 billion in the previous fiscal year.
According to trade experts, a deficit is not always a bad thing if a country imports raw materials or intermediate products to boost production and exports. However, this puts pressure on the domestic currency.
The Global Trade Research Initiative (GTRI) economic advisory panel has concluded that a bilateral trade deficit with a country is not a sedate problem unless it makes us overly dependent on that country for key supplies. However, the growing overall trade deficit is damaging to the economy.
“A growing trade deficit, even resulting from imports of raw materials and semi-finished products, can depreciate a country’s currency because imports require more foreign exchange. This depreciation makes imports more costly, widening the deficit,” said GTRI founder Ajay Srivastava.
He said that to cover the growing deficit, the country may have to borrow more from foreign lenders, which will escalate external debt, and this could deplete foreign exchange reserves and signal economic instability to investors, leading to a reduction in foreign investment.
“Reducing the trade deficit requires increasing exports, reducing unnecessary imports, developing domestic industries and effectively managing currency and debt levels,” Srivastava added.
