India’s Top Trade Partner and Trade Deficit Concerns

Context: In FY24, China overtook the US to become India’s largest trading partner, with bilateral trade totalling $118.4 billion.

Comparison with the United States

• US Trade: India-US bilateral trade stood at $118.3 billion in FY24. Indian exports to the US slightly decreased by 1.32% to $77.5 billion, and imports from the US dropped by 20% to $40.8 billion.
• Growth Over Five Years: Trade with the US exhibited growth, with Indian exports to the US increasing by 47.9% from $52.41 billion to $77.52 billion, and imports from the US growing by 14.7% from $35.55 billion to $40.78 billion.

India’s Dependency on Chinese Imports

• Import and Export Dynamics: Imports from China rose by 3.24% to $101.7 billion, while exports to China increased by 8.7% to $16.67 billion in FY24.
• Critical Sectors: India heavily relies on imports from China for sectors like telecom, smartphones, and advanced technology components.
• Import Statistics: India imported $4.2 billion worth of telecom and smartphone parts from China, constituting 44% of total category imports. Laptop and PC imports from China amounted to $3.8 billion, 77.7% of total imports in this sector.
• EV Sector: Imports of lithium-ion batteries for EVs from China were valued at $2.2 billion, making up 75% of such imports.

Trade Deficit Concerns

• With China: The trade deficit with China has widened significantly from $53.57 billion in FY19 to $85.09 billion in FY24, despite near-stagnant exports and a 45% surge in imports.
• With Russia: Russian trade has also seen dramatic changes, with exports growing by 78.3% and imports increasing by 952%, leading to a widened trade deficit from $3.45 billion to $57.18 billion.
• With Saudi Arabia and UAE: Saudi Arabia’s trade deficit slightly decreased from $22.92 billion to $20.25 billion, while UAE’s trade shifted from a small surplus to a deficit of $12.39 billion due to a 61.2% increase in imports.

Measures to Reduce Dependency

India is actively working to decrease its dependency on Chinese imports through initiatives like production-linked incentive schemes (PLI), anti-dumping duties, and quality control orders.

Conclusion

The dynamics of India’s trade relationships, particularly with China and the US, reflect significant shifts in trade policies and economic strategies. India’s growing trade deficit with key partners like China underscores the challenges and the need for strategic diversification and enhanced domestic capabilities.

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