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India's Trade Overview

INDIA IN WORLD TRADE

ANALYSIS OF INDIA’S MERCHANDISE TRADE

On closer analysis of India’s merchandise trade, we find that exports and imports have both shown an increase from 2014 to 2018 along with trade deficit as imports have always grown faster than exports for this period. The main reason behind this is the import basket, which mainly consists of intermediate goods and raw material goods though latter’s share has declined in 2018 indicating a positive sign for the economy. Surprisingly, India’s imports are showing slight increase in consumer goods and intermediate goods. On the other hand, the export basket is shifting from agricultural to non-agricultural commodities and bending towards capital and intermediate goods.

In bilateral country analysis it was found that during 2014-18, exports have increased to USA, Singapore and China and declined with UAE and Hong Kong, whereas India’s imports have increased to China, USA and Iraq with decline in UAE and Saudi Arabia. The continuous maintenance of trade deficit indicates that India’s import have always been higher than export. To dig deeper into this concept it becomes necessary to analyse India’s deficit with major trading countries. From the table 3.1 it can be observed that with USA and UAE, India has been maintaining a trade surplus since 2014-18 though it has declined over the period. The major countries contributing to India’s deficit are China, Saudi Arabia and Iraq.

If we dissect bilateral trade, it has been seen that Saudi Arabia and Iraq are the main countries from which India is importing oil i.e. raw material product group , whereas, India is dependent on China for electrical and machinery and organic chemicals. Further, if we gauge on the table it can be seen that Singapore and Hong Kong are the new entrants in contributing toward India’s trade deficit as India had a trade surplus with both these countries from 2014-2017. But it recorded a trade deficit in 2018. Another interesting trend to be analysed is that the decline in trade deficit with China has shown an increase in trade deficit with Hong Kong in 2018 indicating that china’s exports to India are rerouted through Hong Kong after a deeper analysis into the products being imported from both the countries.

India’s trade balance with major trading partners

Partners 2014 2015 2016 2017 2018
World -141.82 -126.36 -96.38 -148.21 -184.52
United States of America 22.25 19.85 21.60 21.96 18.96
United Arab Emirates 5.63 9.71 10.80 6.92 2.22
China -44.80 -52.03 -51.57 -59.48 -57.33
Hong Kong, China 7.27 6.19 6.09 4.01 -2.69
Singapore 2.61 0.41 0.64 4.35 -3.90
Saudi Arabia -19.64 -14.38 -13.42 -15.84 -22.86
Iraq -15.28 -10.16 -9.00 -14.05 -21.21

Source: ITC Trade Map, Data is in US$ billion.

Hence, India should take steps to curtail its trade deficit specifically with Hong Kong and Singapore who are the new entrants and increase exports with China especially in emerging sectors such as pharmaceuticals and food products to decrease its enormously high trade deficit.

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