India Reports Trade Surplus With US While Trade Deficit With China, Russia Increase, Gap Narrows Down With Middle East

India has reported a trade deficit with nine of its top 10 trading partners in 2023-24, including China, Russia, Singapore and Korea, according to a report by The Hindu.

The data indicated that the deficits with China, Russia, Korea and Hong Kong increased in the last fiscal year compared to 2022-23.

Meanwhile, the trade gaps with the UAE, Saudi Arabia, Russia, Indonesia and Iraq decreased.

India has also posted a trade surplus of $36.74 billion with the US in 2023-24. The country maintains trade surpluses with the UK, Belgium, Italy, France and Bangladesh.

In 2023-24, the trade deficit with China rose to $85 billion, with Russia to $57.2 billion, with Korea to $14.71 billion, and with Hong Kong to $12.2 billion, up from $83.2 billion, $43 billion, $14.57 billion, and $8.38 billion, respectively, in 2022-23.

China emerged as India's largest trading partner with $118.4 billion in two-way commerce in 2023-24, surpassing the US, whose bilateral trade with India stood at $118.28 billion. The US was India's top trading partner in 2021-22 and 2022-23.

India has a free trade agreement with four of its top trading partners: Singapore, the UAE, Korea and Indonesia (as part of the Asian bloc).

India's total trade deficit for the last fiscal year narrowed to $238.3 billion, down from $264.9 billion in the previous fiscal year.

Trade experts note that a deficit is not necessarily detrimental if a country imports raw materials or intermediary products to boost manufacturing and exports. However, it can exert pressure on the domestic currency.

The economic think tank Global Trade Research Initiative emphasised that a bilateral trade deficit with a country is not a major concern unless it results in over-reliance on that country's critical supplies. However, an increasing overall trade deficit is harmful to the economy.

To address the growing deficit, the country may need to borrow more from foreign lenders, increasing external debt, which can deplete foreign exchange reserves and signal economic instability to investors, reducing foreign investment.