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India’s Trade Deficit : Reasons

India’s Trade Deficit:

Preliminary data released by the government showed that India’s trade deficit in goods widened to USD 14.11 billion in March 2021 from USD 9.98 billion during March 2020.

  • Merchandise Exports: India’s merchandise exports in March 2021 were USD 34.0 billion as compared to USD 21.49 billion in March 2020, an increase of 58.23%.
  • For the first time ever in a month, Indian exports crossed USD 34 billion in March 2021.
  • Merchandise Imports: India’s merchandise imports were USD 48.12 billion as compared to USD 31.47 billion in March 2020, an increase of 52.89%.
  • India is thus a net importer in March 2021, with a trade deficit of USD 14.11 billion.

Reasons for Increased Imports:

  • Relaxation in lockdown policy and the start of economic activities are the main reasons for the increase in demand for the goods and the import.
  • Also, the rise in global trade has made the global supply chain activities and commerce is taking place.
  • Oil import has increased due to the opening up of the transportation sector.
  • Trade Deficit: A trade deficit is an amount by which the cost of a country’s imports exceeds its exports.
  • The trade deficit in goods shows a rise in demand in the economy.
  • It is a part of the Current Account Deficit.
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