NEW DELHI: India’s economic liberalization policy boosted its foreign trade and it rose over 18 times since 1991, while the trade deficit widened by more than 22 times. The country’s foreign trade (export and import) has increased with an annual average growth rate of 13.42 per cent from USD 42 billion in 1990-91 to USD 765 billion in 2013-14.
However, trade deficit, the difference between imports and exports, jumped to USD 136 billion in 2013-14 from USD 6 billion in 1990-91, according to official data.
Experts attributed declining growth of manufacturing sector to the widening of trade deficit.
“The growth of India’s manufacturing sector’ declined continuously. From 23-24 per cent share in the GDP, it came down to about 15 per cent currently. This was the main reason for ballooning trade gap,” Ajay Sahai, Director General & CEO of the Federation of Indian Export Organisations (FIEO) said.
He said that free trade agreements too have impacted the country’s trade balance. Rise in imports, including oil, has contributed to rise in the country’s trade deficit.
India had trade deficit with as many as 80 countries, including China, Australia and Iraq in 2012-13.
In the last few years, global economic crisis, the sovereign debt crisis in Europe and the slowdown in developed economies have adversely impacted demand for India’s exports.
Further, the countries with which India has favourable trade balance in 2013-14 includes the US, Singapore, Bangladesh, Hong Kong, the Netherlands, Sri Lanka, UK, Kenya, Nepal and Vietnam.
Whereas in 1990-91, countries which have imported more from India than exported includes USSR, Hong Kong, Bangladesh, Thailand, Sri Lanka, Egypt, Mauritius, Spain, Afghanistan and Nigeria.
During April-November this fiscal, India’s imports were up 4.65 per cent to USD 316.37 billion, while exports were up 5.02 per cent to USD 215.75 billion.
Trade deficit during this period stood at USD 100.61 billion as against USD 96.89 billion in the same period last fiscal.
High trade deficit impacts exchange rate and foreign exchange reserve position.