In the fiscal year 2023-24, India found itself grappling with a trade deficit across nine of its top 10 trade partners, a scenario where imports exceeded exports. The nations in question, including China, Russia, Singapore, and Korea, contributed to this economic imbalance, as per official records. Interestingly, the data unveiled a widening deficit concerning China, Russia, Korea, and Hong Kong compared to the preceding fiscal year. Conversely, the trade gap with the UAE, Saudi Arabia, Russia, Indonesia, and Iraq exhibited a narrowing trend.
Delving into specifics, India’s trade deficit with China surged 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, contrasting with USD 83.2 billion, USD 43 billion, USD 14.57 billion, and USD 8.38 billion, respectively, in the preceding year. Notably, China ascended as India’s principal trading partner, with a bilateral commerce worth USD 118.4 billion in 2023-24, surpassing even the US.
Meanwhile, bilateral trade with the US amounted to USD 118.28 billion during the same period, maintaining its status as New Delhi’s foremost trading ally, a position held since 2021-22. Notably, India boasts free trade agreements with four significant trading counterparts: Singapore, the UAE, Korea, and Indonesia (as part of the Asian bloc).
Contrastingly, India showcased a trade surplus of USD 36.74 billion with the US in 2023-24, a rarity given its surplus is limited to a select few nations like the UK, Belgium, Italy, France, and Bangladesh. This surplus, however, came against the backdrop of a reduced total trade deficit for India, narrowing to USD 238.3 billion from USD 264.9 billion in the previous fiscal year.
Economic pundits caution against interpreting deficits solely as negative indicators. While deficits may signal increased imports for manufacturing and export purposes, they simultaneously exert pressure on domestic currency. The Global Trade Research Initiative (GTRI) highlights that bilateral deficits only become concerning when they foster dependency on critical supplies from specific nations. Nonetheless, a sustained overall deficit can inflict significant harm on the economy.
According to GTRI Founder Ajay Srivastava, persistent deficits, even stemming from essential imports, can devalue a nation’s currency, rendering imports costlier and exacerbating the deficit further. To counterbalance this trend, Srivastava advocates for strategies such as bolstering exports, curtailing unnecessary imports, nurturing domestic industries, and prudently managing currency and debt levels.