GOODS
TRADE DEFICIT - ECONOMY
News:
India’s goods trade
deficit hits a 10-month high
What's
in the news?
● India’s
foreign trade hit a fresh trough in August, with goods exports shrinking for
the seventh successive month, services exports estimated to have dropped for
the first time in well over a year, and the goods trade deficit hitting a
10-month high.
Key
takeaways from the data:
● The extent of decline in outbound shipments eased to
6.86% in August from double-digit contractions in recent months, to hit a
three-month high worth $34.5 billion.
● Services exports,
after growing at a sharp 26.7% rate in 2022-23 and holding up so far amid
slowing world demand, were reckoned to have shrunk 0.4% in August to $26.39
billion, stoking fears about a widening current account deficit in this
quarter.
● The
merchandise import bill for August
dropped 5.23% year-on-year to $58.64 billion, but was 10.85% higher than July’s
$52.9 billion import tally, lifting the goods trade deficit for August to
$24.16 billion, just 2.8% below August 2022 numbers and almost 17% over July’s
$20.67 billion gap.
Trade
Deficit:
● Trade
deficit or negative balance of trade (BOT) is the gap between exports and
imports.
● When
money spent on imports exceeds that spent on exports in a country, a trade
deficit occurs.
● A
trade deficit represents an outflow of domestic currency to foreign markets.
● Trade Deficit = Imports – Exports.
What
causes a trade deficit?
There are multiple factors that can be responsible.
● Import of goods
as some goods not being produced domestically.
● A
weak currency can also be a cause as
it makes trade expensive.
Issues
of trade deficit:
● If
the trade deficit increases, a country’s
GDP decreases.
● A
higher trade deficit can decrease the
local currency’s value.
● It
impacts the jobs market and leads to an increase in unemployment.