Daily Hot Topic
Topic : India’s Trade Deficit
GS-3 Mains : Economy
Revision Notes
Why in News?
Latest Data (2023-24):
- India recorded a trade deficit with 9 of its top 10 trading partners, including China ($118.4 billion – highest two-way trade).
- Overall trade deficit narrowed to $238.3 billion (from $264.9 billion previous year).
What is a Trade Deficit?
- Occurs when a country imports more than it exports.
Causes:
- Insufficient domestic production of certain goods.
- Weak currency making imports expensive.
Impacts:
- Negative Impacts:
- Currency depreciation due to increased demand for foreign currency for imports.
- Job losses in export-related sectors.
- Increased external debt and potential for reduced foreign investment.
- Positive Impact (with caveats):
- Importing raw materials and intermediates can boost manufacturing and future exports (if managed effectively).
Government Initiatives to Reduce Trade Deficit:
- Production Linked Incentive (PLI) schemes to incentivize domestic manufacturing.
- Phased manufacturing plans to gradually increase domestic production of key components.
- Trade remedy options to address unfair trade practices.
- Mandatory technical standards to promote domestic production meeting global standards.
- Foreign Trade Policy 2023 for simplifying export processes.
Suggestions:
- A well-managed trade deficit can be a stepping stone for future export growth (importing raw materials for manufacturing).
- Key to reducing deficit: Boost exports, reduce unnecessary imports, develop domestic industries, and manage currency and debt effectively.
हिन्दी