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Current Affairs

Unfavourable trade balance

Date: 25 January 2022 Tags: Miscellaneous

Issue

Exports from India have risen by about 50% in the first nine months of this fiscal. This puts India firmly on the path to achieve $400 billion in exports.

 

Background

India has been eyeing higher share for its products across the globe by aggressively trying to increase its exports.

 

Details

  • The rise in exports has also been complemented by rise in imports, leading to a sharp uptick in India’s fiscal deficit. 

  • To expand opportunities for Indian exporters, the country is also negotiating a number of Free Trade Agreements (FTA).

 

Performance of exports

  • India’s exports have hit $301.4 billion, 49.7% more year-on-year basis. The petroleum products and gems and jewellery are the key components for growth.

  • The export numbers are being boosted by a worldwide increase in trade. Global trade in both goods and services has grown by 28%.

 

Other contributors

  • Engineering goods like iron and steel products, organic and inorganic chemicals and textile products such as cotton yarn and fabrics have been key contributors to export growth.

  • Exports of engineering goods grew 38.4 per cent, electronic goods rose 34 per cent and organic and inorganic chemicals grew by 27 per cent during this period.

 

Reasons for growth

  • Indian goods are receiving positive sentiment internationally. Indian products are being upgraded to cater to changing demands.

  • Covid-19 infection outbreaks in key competitors such as Vietnam have caused global supply chain disruptions, benefitting India.

 

Import of goods

  • Major contributors include machinery, electronic goods, vegetable oil, coal, chemicals along with gold and petroleum, two of the biggest contributors.

  • The trade deficit is expected to be around $142.4 billion in goods. The trade surplus in service sector has reduced to total deficit of around $40-45 billion.

 

Measures by government

Government is negotiating FTAs with countries like Israel, UK and Australia. However, domestic producers are vary of foreign players entering Indian market.