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Context

• India recorded a trade deficit, indicating a difference between imports and exports, with nine out of its top 10 trading partners in the fiscal year 2023-24, based on official data.
• Notable trading partners include China, Russia, Singapore, Korea, among others.

READ ALL ABOUT TRADE DEFICIT: https://www.iasgyan.in/daily-current-affairs/trade-deficit-33#:~:text=A%20trade%20deficit%20is%20an,a%20negative%20balance%20of%20trade.

TRADE TRENDS IN THE FISCAL YEAR 2023-24

Trends in Trade Deficit

• Increased Deficit: The deficit with China, Russia, Korea, and Hong Kong widened compared to the previous fiscal year.
• Narrowed Deficit: However, the trade gap with the UAE, Saudi Arabia, Russia, Indonesia, and Iraq narrowed during the same period.

Bilateral Trade Highlights

• China: Emerged as India's largest trading partner, surpassing the U.S., with $118.4 billion in two-way commerce in 2023-24.
• U.S.: Bilateral trade with the U.S. stood at $118.28 billion during the same period.
• Free Trade Agreements: India has free trade agreements with several top trading partners, including Singapore, the UAE, Korea, and Indonesia.

Trade Surplus

• India maintained a trade surplus of $36.74 billion with the U.S. in 2023-24, along with other countries like the U.K., Belgium, Italy, France, and Bangladesh.

Total Trade Deficit

• India's total trade deficit narrowed to $238.3 billion in the fiscal year 2023-24, compared to $264.9 billion in the previous fiscal year.

Analysis by Trade Experts

• Trade Deficit Not Always Negative: Trade experts suggest that a deficit isn't inherently bad if it involves importing raw materials to boost manufacturing and exports.
• Impact on Currency: However, a trade deficit can put pressure on the domestic currency, leading to depreciation.
• Economic Stability Concerns: Rising deficits can signal economic instability, affecting foreign investment and necessitating increased borrowing, which may deplete foreign exchange reserves. 

Measures for Deficit Reduction

• Export Boost: Experts emphasize the need to boost exports, reduce unnecessary imports, develop domestic industries, and manage currency and debt levels effectively to address trade deficits effectively.

READ ALL ABOUT TRADE DEFICIT: https://www.iasgyan.in/daily-current-affairs/trade-deficit-33#:~:text=A%20trade%20deficit%20is%20an,a%20negative%20balance%20of%20trade.

PRACTICE QUESTION Q. Discuss India's recent trade trends, focusing on its trade deficit with top partners. Evaluate the implications of widening and narrowing deficits on India's economic stability. Propose concise policy measures to address trade deficits while fostering sustainable economic growth.

SOURCE: ECONOMIC TIMES