According to official data released by the government, India has recorded a trade deficit with nine of its top 10 trading partners, including China, Russia, Singapore, and Korea, in 2023-24, . Trade deficit is the difference between imports and exports.
- The data also showed that the deficit with China, Russia, Korea, and Hong Kong increased in the last fiscal compared to 2022-23, while the trade gap with the UAE, Saudi Arabia, Russia, Indonesia, and Iraq narrowed.
- China has emerged as India’s largest trading partner with $118.4 billion of two- way commerce in 2023-24, edging past the US.
- The bilateral trade between India and the US stood at $118.28 billion in 2023-24. The USA was the top trading partner of New Delhi during 2021-22 and 2022-23.
- India has a free trade agreement with four of its top trading partners — Singapore, the UAE, Korea and Indonesia (as part of the Asian bloc).
- India has a trade surplus of $36.74 billion with the U.S. in 2023-24.
- The USA is one of the few countries with which India has a trade surplus. The surplus is also there with the U.K., Belgium, Italy, France and Bangladesh.
- India’s total trade deficit in the last fiscal narrowed to $238.3 billion as against $264.9 billion in the previous fiscal.
Impact of trade deficit
- A deficit is not always bad, if a country is importing raw materials or intermediary products to boost manufacturing and exports.
- A deficit puts pressure on the domestic currency. A rising trade deficit can cause the country’s currency to depreciate because more foreign currency is needed for imports. This depreciation makes imports more expensive, worsening the deficit.
- To cover the growing deficit, the country might need to borrow more from foreign lenders, increasing external debt and this can deplete foreign exchange reserves and signal economic instability to investors, leading to reduced foreign investment.
