According to official data from Union Ministry of Commerce and Industry, in the FY 2023-24, India recorded trade deficit with 9 out of its top 10 trading partners.

• Trade deficit (also known as negative trade balance) occurs when country’s value of imports are more than that of exports.

Current Status of India’s External Trade (FY 2023-24)

• China, USA, UAE, Russia, and Saudi Arabia are India’s largest trading partners. (in descending order)
• India’s trade deficit with China, Russia, South Korea, and Hong Kong increased as compared to 2022-23, while it narrowed with UAE, Saudi Arabia, Indonesia, and Iraq.
• USA, Netherlands, UK, Belgium, and Italy are the top 5 trading partners with which India has trade surplus.

Impact of Higher Trade Deficit on Economy 

Negative

• Depletion of Forex reserves due to the need to pay for excess imports, raising concerns of depreciation of domestic currency.
• Widening current account deficit which may adversely affect credit rating of the country and raise borrowing costs.
• Strategic implications due to sustained trade deficit, particularly for essential products or critical sectors.

Positive

• Access to wider range of goods, increased domestic investment if deficit is driven by imports of capital goods, etc.