Merchandise exports saw a little recovery in the month of February after contracting for six months in a row but the COVID-19 pandemic hampered the recovery. India’s trade deficit was continuously increasing since march but now the exports grew by 5.27% and imports slipped by 19.6% in the month of September as per the ministry of commerce. the trade deficit during the month narrowed to $2.91 billion which was $11.67 billion in the same period for last year. Out of the 30 major export items, 13 categories showed growth in the month of September. They are iron ore (109.52%), rice (92.44%), oil meals (43.9%), carpet (42.89%), pharmaceuticals (24.36%), Meat, dairy and poultry products (19.96%), Cotton yarn/fabrics/made-ups, handloom products (14.82%), Tobacco (11.09%), Spices (10.07%), petroleum products (4.17%), Engineering goods (3.73%), chemicals (2.87%), and coffee (0.79%).
The trade deficit is reducing drastically and India’s share in the global trade is improving, and that the government is trying to generate more reliable and better trade data for improved planning and policy making.PIYUSH GOYAL ,Commerce and Industry Minister
What is Trade Deficit?
It is the situation in which value of country’s imports increases with the value of exports. It’s one way to calculate foreign trade, and it’s also regarded as a negative trade balance. By subtracting the total value of a country ‘s exports from the total value of its imports, you can measure the trade deficit.
Trade deficit = Total imports-Total exports
Trade balance refers to the difference between the amount of exports and imports of visible items. Exports are entered as credit items in Balance of payment account(BOP), while imports are entered as debit items. Trade balance is just a part of BOP account and plays a crucial role in deciding the overall situation of BOP of a country. When the trade balance amounts in a negative figure trade deficit arises.
Causes of Trade deficit
Economic factors: Developing countries depend on developed nations for supply of machines, technology and other equipment. This leads to increased level of imports. When there is inflation in the domestic economy, foreign goods become relatively cheaper in comparison to domestic goods overall resulting in increased imports.
Social factors: When the people of underdeveloped countries come in contact with those of advance countries, they start adopting the foreign pattern of consumption. Due to an unfavorable change for domestic goods, their imports increase and it leads to an adverse balance of payment.
Main Exports and Imports of India
The top five exports are:
|Raw sugar||$1.45 billion|
|Refined petroleum||$25.4 billion|
The top five imports of India:
|Mineral fuels||$153.5 billion|
|Gems,precious metals||$60 billion|
|Electrical machinery, equipment||$50.4 billion|
|Machinery including computers||$44.1 billion|
|Organic chemicals||$20.5 billion|