Article Title: India’s goods trade deficit at 42 month low, following dip in gold and crude oil imports
17-03-2025
Economy Prelims Plus
Context
India’s goods trade deficit was down to a 42-month low of $14.05 billion as imports of gold, silver and crude dipped in February, show data from the Commerce and Industries Ministry. The difference between import and export of goods was $22.9 billion in January. In February 2024, the merchandise trade deficit stood at $19.5 billion
Trade Deficit
A nation’s trade deficit occurs when the value of its imports of goods and services exceeds the value of its exports over a specific period.
In other words, a country experiences a trade deficit when it buys more from other countries than it sells to them. This is also referred to as a negative balance of trade.
While a trade deficit can pose challenges, strategic measures to boost exports, reduce import dependence, and diversify the economy can help manage and mitigate its impacts.
Causes of India’s Trade Deficit
High Import Dependence:
1Energy Needs: Heavy reliance on imported crude oil and coal.
2Consumer Goods: Rising demand for imported consumer electronics, machinery, and luxury goods.
Export Constraints:
1Limited Product Diversification: Dependence on a narrow range of export commodities.
2Global Market Access: Trade barriers and competition in global markets can limit export growth.
Economic Growth:
1High Domestic Consumption: Rapid economic growth and urbanization increase demand for imported goods.
Currency Valuation:
1. Rupee Depreciation: A weaker rupee can make imports more expensive, worsening the trade deficit.
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