India grappled with a trade deficit with nine of its top 10 trading partners in fiscal year 2023-24, according to official data. The prominent countries in this list include China, Russia, Singapore, and Korea.
A deeper look at the data suggests the deficit to have aggravated with key players like China, Russia, Korea, and Hong Kong when compared to the previous fiscal year. The trend was positive with the UAE, Saudi Arabia, Russia, Indonesia, and Iraq, as the deficit narrowed.
To be specific, India's trade deficit expanded with China to $85 billion, Russia to $57.2 billion, Korea to $14.71 billion, and Hong Kong to $12.2 billion in 2023-24 from $83.2 billion, $43 billion, $14.57 billion, and $8.38 billion, respectively, in the previous fiscal year.
However, the story changes in the case of China emerging as India's topmost trading partner, even ahead of the US, with bilateral trade of $118.4 billion. Meanwhile, trade between India and the US was pegged at $118.28 billion, and Washington was India's topmost trading partner in the previous two fiscal years.
Among the strategic engagements by India, free trade agreements with key partners such as Singapore, the UAE, Korea, and Indonesia, part of the Asian bloc, have been in place to strengthen economic ties and reduce trade barriers.
However, in all these developments, India maintains a trade surplus with the US, totaling $36.74 billion in 2023-24, making itself a part of the few countries maintaining a surplus with Washington. Similar cases are seen with the UK, Belgium, Italy, France, and Bangladesh.\n\nDespite these trends, India's overall trade deficit narrowed down to $238.3 billion from $264.9 billion in the previous fiscal year.
Experts warn that although a trade deficit might be seen as relatively constructive at times, when imports of raw materials help leverage manufacturing and exports, it puts pressure on the domestic currency. GTRI defines that bilateral deficits need not cause concern unless creating overdependence on firmed critical supplies from a particular country, in which case it will increase the overall deficit and thereby puts the economy at risk.
Ajay Srivastava, Founder, GTRI, states, "The increasing deficit is a concern and has to be addressed with the need for export promotion, stopping unnecessary imports, promotion of domestic industries, and proper management of currency and debt levels for sustained growth of the economy and stability in the economy."
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