Bharat’s impressive trade surplus with 151 countries demonstrates its growing economic prowess, but the significant deficit with key partners, particularly China, necessitates strategic intervention. — Jaya Sharma

Bharat has achieved a remarkable trade surplusfrom 151 trade partners (countries and territories) vis-à-vis a trade deficit with 75. Bharat’s trade account shows a mixed picture, while this indicates some strength, it also highlights opportunities for growth and improvement, particularly in addressing the trade deficit and enhancing overall financial stability.

Bharat’s Impressive Trade Performance in H1 2024

Bharat’s trade performance in H1 2024 reflects its growing stature in the global economy, with a strong export base across key sectors. According to recent data from the Global Trade Research Initiative (GTRI), Bharat has achieved a trade surplus of USD 72.1 billion with 151 countries in the first half of the year, representing 55.8% of its exports and 16.5% of its imports. The USA and Netherlands emerged as key contributors, with trade surpluses of USD 21 billion and USD 11.6 billion, respectively. 

This rising trade strength is indicative of Bharat’s expanding influence in global markets, particularly in sectors like technology, pharmaceuticals, and agriculture, which are crucial to both its economic growth and soft power on the world stage. With the USA and Netherlands being key partners, Bharat is not only diversifying its trade relationships but also strengthening its strategic alliances with major global economies. However, despite of these achievements, Bharat faces a trade deficit of USD 185.4 billion with 75 countries as well, including China and Russia.

Why trade deficitis a matter ofconcern?

India’s Rupee has depreciated significantly from approximately 3.30 INR/USD in 1947 to 83.93 INR/USD in 2024, primarily due to the country’s persistent trade deficit. This deficit, driven by high imports and sluggish export growth, has reduced the Rupee’s value. A balanced trade account is crucial to stabilize the Rupee.

In the first half of 2024, India’s trade deficit stood at USD 185.4 billion, accounting for 44.2% of its exports and a staggering 83.5% of its imports. This indicates that while Bharat is exporting more to certain countries, it is increasingly reliant on imports as well, particularly industrial goods and energy resources.

The largest trade deficits were recorded with China (USD 41.88 billion), Russia (USD 31.98 billion), Iraq (USD 15.07 billion), Indonesia (USD 9.89 billion), and the UAE (USD 9.47 billion). These countries are major suppliers of products like machinery, chemicals, and oil, with China alone accounting for a substantial portion of Bharat’s trade deficit.

While importing energy resources is unavoidable, relying heavily on industrial goods from countries like China undermines nation’s economic sovereignty and national security.

Bharat’s Industrial Import Vulnerability

One key observation from the GTRI report is that country’s import of industrial goods, particularly from China, poses a risk to the economic sovereignty. The report suggests that while imports of crude oil and coalprimarily from countries like Saudi Arabia, Iraq, and Angolaare necessary for India’s energy security, the growing reliance on imports of industrial goods needs more scrutiny.

China is the biggest source of trade deficit, with Bharat importing a wide range of industrial products, from electronics to machinery, contributing significantly to the trade imbalance. The report emphasizes that Bharat must work towards reducing this dependency by ramping up domestic production and improving its manufacturing capabilities. This will help in facilitating long-term economic independence and reducing vulnerabilities to external shocks.

GTRI Report Finds Oil Deficit Manageable

India’s trade deficit with countries exporting oil, such as Saudi Arabia, Iraq, and Australia, is less of a concern, according to the GTRI. These countries are essential suppliers of crude oil and petroleum products, which are integral to India’s energy needs. The deficit in this area is considered manageable, as these imports are necessary for sustaining India’s energy infrastructure and meeting the growing demand for power, transport, and industrial activity.

Cutting Import Dependence

To tackle India’s growing trade deficit and create a more resilient economy, it’s crucial to focus on reducing dependence on imports, especially in sectors that are vital to the country’s long-term economic and strategic interests. By focusing on boosting domestic manufacturing, we can reduce our reliance on imports in critical sectors. A well-coordinated push toward self-reliancebacked by strong policy support will be essential for driving sustained growth and addressing the trade imbalance over the long term.

Countries like China and the USA, strategically retain their natural resources for domestic processing and economic growth. Bharat can reap greater benefits by adopting a similar approach; instead of exporting natural resources, prioritize processing it and using within our own industries. This strategic shift would boost domestic manufacturing, job creation, reduce dependence on foreign processed goods, optimize natural resource utilization for national benefit and enhance economic competitiveness globally. By minimizing exports of natural and mineral resources to other nations, wecan preserve them for future and strengthen our position in the global economy.

Regional Analysis

The GTRI report provided analysis, revealing varied trends in trade deficits. The report highlighted the widening trade gaps in emerging economies such as India, Brazil, and South Africa, primarily driven by rising import bills and sluggish export growth. In contrast, East Asian nations like China, Japan, and South Korea maintained their trade surpluses, underscoring their competitive manufacturing advantage. The report also pointed to a shift in trade dynamics within the European Union, where Germany’s and Italy’s trade surpluses narrowed, while Poland’s and Spain’s trade deficits expanded. Sector-wise, the report emphasized the significant impact of the global semiconductor shortage on trade balances, particularly affecting nations reliant on electronics imports. Further, the report predicted a moderate recovery in trade volumes for the Americas and Asia-Pacific regions, driven by resilient demand and easing supply chain bottlenecks.

Challenges and Strategic Focus

To address this issue of economic autonomy, primarily its reliance on foreign industrial goodswith key partners—particularly China. A multifaceted approach needs to be adopted—First, reducing dependency on Chinese imports, strengthening domestic manufacturing capabilities, promoting the “Made by India” initiative, can help decrease reliance on foreign industrial goods. Second, diversifying energy sources is imperative for energy security. This involves balancing traditional energy imports, such as crude oil and coal, with an accelerated push towards renewable energy investments, including solar, wind, and green hydrogen. Third, expanding export markets will be key to sustaining growth. Bharat should seek to diversify its export portfolio by targeting emerging markets in Africa, Southeast Asia, and Latin America, while boosting high-value exports like technology services, pharmaceuticals, etc. Lastly, strategic trade agreements and policy reforms are essential to enhance India’s global trade standing. Pursuing both bilateral and multilateral agreements will ensure better access to global markets, while domestic policy reforms focused on simplifying trade procedures and improving the ease of doing business will further strengthen India’s export competitiveness.

In conclusion,Bharat’s impressive trade surplus with 151 countries demonstrates its growing economic prowess, but the significant deficit with key partners, particularly China, necessitates strategic intervention.