{"id":110727,"date":"2024-05-28T20:18:06","date_gmt":"2024-05-28T14:48:06","guid":{"rendered":"https:\/\/pwonlyias.com\/stage\/?post_type=current-affairs&#038;p=110727"},"modified":"2024-05-28T20:18:06","modified_gmt":"2024-05-28T14:48:06","slug":"india-in-trade-deficit","status":"publish","type":"current-affairs","link":"https:\/\/pwonlyias.com\/stage\/current-affairs\/india-in-trade-deficit","title":{"rendered":"India in Trade deficit with 9 of top 10 trading partners in 2023-24"},"content":{"rendered":"<h2><span style=\"font-size: 18pt;\"><strong>Context<\/strong><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">As per official data, <\/span><b>India has recorded a trade deficit\u00a0 with nine of its top 10 trading partners<\/b><span style=\"font-weight: 400;\">\u00a0 in 2023-24.<\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><strong>India&#8217;s FY 2023-24 Trade Deficit Narrows Amid Shifts in Trade Dynamics with Major Partners<\/strong><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Trade Deficit:<\/b><span style=\"font-weight: 400;\"> India&#8217;s <\/span><b>total trade deficit in FY 2023-24 narrowed down to $ 238.3 billion<\/b><span style=\"font-weight: 400;\"> as against $ 264.9 billion in the previous fiscal.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Increase in Deficit:<\/b><span style=\"font-weight: 400;\"> India saw a rise in the deficit with <\/span><b>China ($ 85 billion), Russia ($ 57.2 billion), Korea ($ 14.71 billion) and Hong Kong ($ 12.2 billion)<\/b><span style=\"font-weight: 400;\"> in FY 2023-24, compared to 2022-23<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Reduction in deficit: <\/b><span style=\"font-weight: 400;\">The trade gap with the <\/span><b>UAE, Saudi Arabia, Russia, Indonesia, and Iraq narrowed.<\/b><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Trade surplus: India has a trade surplus of $ 36.74 billion with the US <\/b><span style=\"font-weight: 400;\">in 2023-24.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">India also records a surplus with other trade partners like the <\/span><b>UK, Belgium, Italy, France and Bangladesh.<\/b><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Largest Trading Partner:<\/b> <b>China has overtook the USA <\/b><span style=\"font-weight: 400;\">to emerge as India&#8217;s largest trading partner with $ 118.4 billion of two-way commerce in 2023-24.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Washington was the top trading partner of New Delhi during 2021-22 and 2022-23.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Free trade agreement:<\/b><span style=\"font-weight: 400;\"> India has a free trade agreement with four of its top trading partners ie. <\/span><b>Singapore, the UAE, Korea and Indonesia <\/b><span style=\"font-weight: 400;\">(as part of the Asian bloc).<\/span><\/li>\n<\/ul>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/www.pw.live\/batches\/upsc?utm_source=seo+upsc+batch&#038;utm_medium=seo+upsc&#038;utm_campaign=seo&#038;utm_id=upsc\" target=\"_blank\" rel=\"noopener\">Enroll now for UPSC Online Course<\/a><\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><strong>What is a Trade Deficit?<\/strong><\/span><\/h2>\n<ul>\n<li><span style=\"font-weight: 400;\">A trade deficit\u00a0 also known as a<\/span><b> negative balance of trade (BOT)<\/b><span style=\"font-weight: 400;\"> occurs when a<\/span><b> country&#8217;s imports exceed its exports.<\/b>\n<ul>\n<li><span style=\"font-weight: 400;\">The balance can be<\/span><b> calculated on different categories<\/b><span style=\"font-weight: 400;\"> of transactions ie, <\/span><b>goods or merchandise, services, goods and services<\/b><span style=\"font-weight: 400;\"> and also <\/span><b>for international transactions ie<\/b><span style=\"font-weight: 400;\">. (current account, capital account, and financial account)\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li><span style=\"font-weight: 400;\">Cutting trade deficit requires boosting exports, reducing unnecessary imports, developing domestic industries, and managing currency and debt levels effectively,<\/span><\/li>\n<li><b>Advantages:\u00a0<\/b>\n<ul>\n<li><b>Boost consumption: <\/b><span style=\"font-weight: 400;\">A trade deficit allows a country to consume more than it produces and in short run, can help nations to avoid shortages of goods and other economic problems.<\/span><\/li>\n<li><b>Comparative Advantage: <\/b><span style=\"font-weight: 400;\">It provides countries with comparative Advantage as the country can be more focused on its strength and resources rather than to worry about producing everything.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Concerns:\u00a0<\/b>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Depreciation of currency:<\/b><span style=\"font-weight: 400;\"> A rising trade deficit can cause the country&#8217;s currency to depreciate because more foreign currency is needed to cover for imports. This depreciation makes imports more expensive, worsening the deficit.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>More borrowing: T<\/b><span style=\"font-weight: 400;\">he country might need to borrow more from foreign lenders to cover the imports, increasing external debt leading to depleted foreign exchange reserves\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Investment sentiments: <\/b><span style=\"font-weight: 400;\">overall rising Trade deficit can signal economic instability to investors, leading to reduced foreign investment.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Dependency:<\/b><span style=\"font-weight: 400;\"> Bilateral trade deficit becomes a major issue when a country gets overtly reliant on the other for critical supplies<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"3\"><b>Example: <\/b><span style=\"font-weight: 400;\">India&#8217;s dependency on China for critical rare earth minerals and Active Pharma Ingredients.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<table style=\"width: 100.233%;\">\n<tbody>\n<tr style=\"height: 36px;\">\n<td style=\"width: 5695.25%; 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