Why in News?

According to the latest data of the Ministry of Commerce & India, India has recorded a trade deficit (difference between imports and exports) with 9 of its top 10 trading partners in fiscal year (FY) 2023-24.

What’s in Today’s Article?

• India’s Foreign Trade
• Latest Trends of India’s Foreign Trade
• India’s Trade Deficit with its Major Trading Partners

India’s Foreign Trade:

• Overview:
  • Foreign trade in India includes all (merchandise + services) imports and exports to and from India and it accounted for 48.8% of India's GDP in 2018.
  • At the level of the Central Government, trade is administered by the Ministry of Commerce and Industry.
  • In 2022, India was the number 15 in total exports, the number 8 in total imports.
  • According to the Commerce Ministry data, China was India's top trading partner from 2013-14 till 2017-18 and also in 2020-21.
  • Before China, the UAE was the country's largest trading partner. The US was the largest partner in 2021-22 and 2022-23.
• Exports (merchandise):
  • The top exports of India are Refined Petroleum ($86.2B), Diamonds ($25.9B), Packaged Medicaments ($19.5B), Jewellery ($12.6B), and Rice ($11.1B).
  • It exports mostly to the United States ($82.9B), United Arab Emirates ($31.6B), Netherlands ($17.6B), China ($15.3B), and Bangladesh ($13.8B).
  • In 2022, India was the world's biggest exporter of Diamonds ($25.9B), Rice ($11.1B), etc.
• Imports (merchandise):
  • The top imports of India are Crude Petroleum ($170B), Coal Briquettes ($58.7B), Gold ($35.8B), Petroleum Gas ($32B), and Diamonds ($26.1B).
  • It imports mostly from China ($110B), UAE ($51B) and the US ($48.5B), Saudi Arabia ($46.2B), and Russia ($40.4B).
  • In 2022, India was the world's biggest importer of Coal Briquettes ($58.7B), Diamonds ($26.1B), Palm Oil ($11.1B), Mixed Mineral or Chemical Fertilizers ($7.88B), and Nitrogenous Fertilizers ($7.37B).

Latest Trends of India’s Foreign Trade:

• As per the data from the economic think tank GTRI, China has overtaken the US as India's largest trading partner, with a total two-way commerce of $118.4 billion, in the FY 2023-24.
  • India's exports to China rose by 8.7% to $16.67 billion, while imports increased by 3.24% to $101.7 billion.
• On the other hand, exports to the US dipped slightly to $77.5 billion, and imports decreased by about 20% to $40.8 billion (the two-way commerce stood at $118.3 billion).
• The UAE with USD 83.6 billion, was the third largest trading partner of India. It was 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:

• Latest trends:
  • India’s trade deficit with China rose to $85 billion, Russia to $57.2 billion, Korea to $14.71 billion and Hong Kong to $12.2 billion in 2023-24 against $83.2 billion, $43 billion, $14.57 billion and $8.38 billion in 2022-23.
  • India has a trade surplus of $36.74 billion with the U.S. in 2023-24 and America is one of the few countries with which India has a trade surplus along 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.
• What can be drawn from these latest trends?
  • Imports are not always bad if a country is importing raw materials or intermediary products to boost manufacturing and exports.
  • However, it 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 and increasing external debt.
  • This can deplete foreign exchange reserves and signal economic instability to investors, leading to reduced foreign investment.
• What needs to be done to cut the trade deficit? Boosting exports, reducing unnecessary imports, developing domestic industries, and managing currency and debt levels effectively.