• UGI USER
  • Jul 16, 2024
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INDIA’S TRADE DEFICIT WIDENS AMID RISING IMPORTS, EXPORTS GROW

Why in the news?

  • India’s merchandise exports increased by 2.55% in June, reaching $35.2 billion.
  • The trade gap widened to $20.9 billion, continuing the trend of imports outpacing exports.
Source: Wallstreetmojo

Sectoral Performance and  Import Dynamics :

  • Sectoral Performance :

Key export sectors saw mixed results: spices (11.50%), drugs and pharmaceuticals (11.58%), engineering goods (11.93%), and electronic goods (18.67%) showed gains, while petroleum products (-18.30%) and gems & jewellery (-1.42%) declined.

  • Import Dynamics :
    • China remains the top import source, with significant increases from Russia (18.57%) and UAE (48.15%)
    • Imports rose by 5% to $56.2 billion, leading to a 9.4% increase in the trade deficit compared to the previous year.

About Trade Deficit:

  • Trade Deficit Definition: When import costs exceed export values.
  • Components: Includes both goods and services.
  • Alternate Term: Also known as a negative balance of trade.
  • Calculation: Subtract total exports from total imports.
  • Component: Part of the Current Account Deficit.
About Current Account Deficit (CAD):

  • Definition: CAD occurs when a country’s imports exceed its exports of goods and services.
  • Impact: Combined with the fiscal deficit, CAD forms the twin deficits, influencing the stock market and investor sentiment.
  • Fiscal Deficit: Represents the shortfall between the government’s expenditures and receipts, indicating the borrowing needed for the year.

What is Balance of Trade?

  • Negative Trade Balance: More imports than exports, creating a trade gap.
  • Positive Trade Balance: More exports than imports, resulting in a trade surplus.
  • Balance of Trade: A component of a nation’s current account.

Associated Article:

https://universalinstitutions.com/india-faces-trade-deficit-with-nine-of-top-trading-partners/