Trade Deficit: Despite the emphasis on Make in India, imports from China rising, India’s trade deficit reaches record high

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Trade Deficit: Despite the emphasis on Make in India, imports from China rising, India's trade deficit reaches record high


Photo:India TV Despite the emphasis on Make in India, imports from China are increasing

Trade Deficit: India’s trade deficit stood at $124.7 billion in the April-August period of the current fiscal. This is the highest ever loss of any year during this period. The rise in international commodity prices, especially energy, has played a big role in widening the trade deficit, while on the other hand there are fears that Chinese imports are increasing. However, the emphasis of the Government of India is on Make in India. The government is trying to make most of the things imported from China in India itself. For this, many schemes have also been started by the government. Despite this, no significant help is being received in reducing the trade deficit.

Oil prices have a big role

Since crude oil is one of the largest imports of India, the trade account is always tracked with petroleum products. Data from the Center for Monitoring Indian Economy (CMIE) database for the first half shows that India has the highest trade deficit in 2022-23. Dollars spent on petroleum purchases constitute a major part of the trade deficit. The trade deficit is more easily understood by looking at it with GDP, although the GDP figures for the September quarter will be available in November. Not possible yet.

What are the reasons for the increase in India’s trade deficit with China?

Trade deficit mainly depends on two things. First export and second import. In terms of India’s trade deficit, imports have grown so fast that despite the increase in India’s merchandise exports, the trade deficit has widened (this does not include income from India’s IT exports, which comes under services). Not only has Chinese imports increased but India’s exports to China have also fallen. It has proved to be a double whammy as far as India’s trade balance with China is concerned. If this is explained to you in easy language, then suppose India buys goods worth Rs 100 from China, but is not able to sell it back for Rs 100. This is the reason why India’s trade deficit is increasing.

What does India buy the most from China?

India’s import (purchase) basket from China is higher than that of goods such as Diwali lights and domestic consumer goods and also includes capital goods and high technology products. Of this, electrical machinery and equipment, parts of nuclear reactors, and mechanical equipment and organic chemicals are manufactured in China, which is imported into India. Of the products that India buys from China, the top-5 imports are close to 70%.

What does India sell to China?

India’s exports to China include industrial inputs, construction materials and some perishable goods such as fish. Mainly, India sells cotton to China i.e. cotton, copper i.e. copper, diamond and other natural gems.

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