India has had an overall trade deficit, since 1990. However, in 2020, India witnessed a trade surplus and is likely to post a Current Account Surplus of 2% of GDP.
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Trade Balance in india |
What is Trade Balance?
- · It is the part of the current account of a country’s Balance of Payments (BoP) – net value of exports and imports over a period of time.
- · It excludes financial transfers and investment flows.
- · Trade surplus occurs when country’s exports is higher than the import and Trade deficit when the vice-versa happens.
Trade Balance in India
- · India has been experiencing predominantly a Trade Deficit – which gets compensated through a positive Capital Account in BoP.
- · Trade deficit is majorly from merchandise goods trade and trade surplus is majorly due to trade in services (India is trade surplus in services).
- · On account of COVID, India experienced a trade surplus – majorly due to decline in crude oil prices and sharp reduction in demand for imported goods.
- Certain imports like crude oil, raw materials, technology are what keeps Indian economy progressing – hence a fall in imports of these is of concern.
- · US (15% of total India’s exports), UAE (11%), Hong Kong (5%), China (4%), Singapore (4%) and UK (3%) are India’s main export destinations.
- · Increase in demand of these countries, a weaker domestic currency, tax-sops for exportoriented sectors (like recent PLI Scheme), interest subvention schemes, free trade deals, skilled labour can boost competitiveness of Indian exports – thereby boost exports and create a favorable trade balance.
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Economy