TRADE DEFICIT - ECONOMY
News: India’s
imports from China reach record high in 2022, trade deficit surges beyond $100
billion
What's in the news?
● India’s
bilateral trade with China reached a record $135.98 billion in 2022, driven by
surging Indian imports of Chinese goods that were up by more than 21% last
year.
Key takeaways:
● India’s
exports to China, however, fell in 2022, driving an already significant trade
deficit beyond the $100 billion-mark for the first time.
● India’s
imports from China account for $118.5 billion, up from $97.5 billion.
● India’s
exports to China fell from $28.1 billion to $17.48 billion.
● The trade deficit reached
$101.02 billion, up by 45%, from $69.4 billion in 2021.
Issues:
● Increasing imports of
intermediate goods, and imports of new
categories of goods such as medical supplies for India.
● India's
continued dependence for a range of key goods to China.
● India’s
biggest imports from China included active
pharmaceutical ingredients (APIs), chemicals, electrical and mechanical
machinery, auto components, and medical supplies.
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.