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.


  • Insufficient domestic production of certain goods.
  • Weak currency making imports expensive.


  • 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.


  • 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.



Source :  https://www.thehindu.com/business/Economy/india-in-trade-deficit-with-nine-of-top-10-trading-partners-in-2023-24/article68217897.ece

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