India recorded a trade deficit with nine of its top ten trading partners, including China, Russia, Singapore, and Korea, in the fiscal year 2023–24, according to official data.
The trade deficit with China rose to USD 85 billion, up from USD 83.2 billion in 2022–23. The deficit with Russia increased significantly to USD 57.2 billion from USD 43 billion.
Additionally, the trade gap with Korea widened to USD 14.71 billion and with Hong Kong to USD 12.2 billion, compared to USD 14.57 billion and USD 8.38 billion, respectively, in the previous fiscal year.
Despite the growing deficits, the trade gaps with the UAE, Saudi Arabia, Russia, Indonesia, and Iraq narrowed during the same period.
China emerged as India's largest trading partner, with bilateral trade amounting to USD 118.4 billion in 2023–24, surpassing the United States. India-U.S. trade stood at USD 118.28 billion. The U.S. had been India's top trading partner in 2021–22 and 2022–23.
India has a free trade agreement with four of its top trading partners: Singapore, the UAE, Korea, and Indonesia, as part of the Asian bloc.
India reported a trade surplus of USD 36.74 billion with the U.S. in 2023–24. The country also has trade surpluses with the UK, Belgium, Italy, France, and Bangladesh.
Overall, India's total trade deficit narrowed to USD 238.3 billion in the last fiscal year from USD 264.9 billion in 2022–23.
Trade experts note that a trade deficit is not inherently detrimental if a country is importing raw materials or intermediate products to boost manufacturing and exports. However, it can put pressure on the domestic currency.
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), emphasised that a bilateral trade deficit is not a major concern unless it makes India overly reliant on a single country's critical supplies. However, a rising overall trade deficit can be harmful to the economy.
"A rising trade deficit, even from importing raw materials and intermediates, can cause the country's currency to depreciate because more foreign currency is needed for imports," Srivastava said. "This depreciation makes imports more expensive, worsening the deficit."
To address the growing deficit, Srivastava suggested boosting exports, reducing unnecessary imports, developing domestic industries, and effectively managing currency and debt levels.
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