India’s trade deficit

India’s trade deficit

#GS-03 External Sector

For Prelims

Trade Deficit:

  • 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.


For Mains

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.