India’s trade deficit
#GS-03 External Sector
- Trade deficit or negative balance of trade (BOT) is the difference between exports and imports when imports are higher than exports.
- It can be calculated separately for different goods and services or for international transactions such as current account, financial account, and capital account.
- The opposite of trade deficit is called trade surplus and is the condition when exports are higher than imports.
- Trade deficit is a part of the Current Account Deficit.
- Trade deficit could be due to insufficient domestic manufacturing capability resulting in higher imports.
- Another common reason for trade deficit could be the lack of availability of natural raw materials in the country such as crude oil for India.
- It can also be sign of economic growth since a rise in the average income can mean consumers will purchase more goods from overseas, which will increase the trade deficit.
- An increase in the strength of a country’s currency can make imports cheaper which in turn increases trade deficit.
- Improving foreign relations by way of removal of barriers to trade, such as tariffs can make imports more accessible to people there by increasing imports.
Status of India’s trade deficit:
- The trade deficit reduced to $23.9 billion in November from $26.9 billion in the previous month.
- On a month-on-month basis in November, exports increased by 7.4%, while imports reduced by 1.4%, which helped to narrow the trade deficit.
- November saw the Imports falling to their lowest level in 10 months due to lower international commodity prices and weaker domestic demand.