Recent Trends in India's Trade

 

India's trade landscape has undergone significant changes over the years, shaped by historical trade routes, economic reforms, and global dynamics. As of 2018, nearly half of India's GDP (48.8%) came from foreign trade, highlighting the critical role it plays in the nation's economic growth. Today, India exports around 7,500 commodities to approximately 190 countries and imports about 6,000 commodities from 140 countries. In FY 2024-25, India's trade began on a strong note, with a 6.88% increase in total merchandise and services exports in April 2024, reaching $64.56 billion, compared to $60.40 billion in April 2023.

Recent Data on India's Trade (FY25 Q1)

During the first quarter of FY25 (April-July 2024), India's merchandise exports totaled $144.12 billion, up from $138.39 billion in the same period in 2023. Imports also rose, reaching $229.70 billion compared to $213.53 billion in the previous year. In the services sector, exports were $117.35 billion, up from $106.79 billion, while imports increased to $62.95 billion from $59.19 billion. The total trade balance recorded a deficit of $31.17 billion, slightly higher than the deficit of $27.55 billion in the previous year.

Historical Overview of India's Foreign Trade (FY 2001 - FY 2024)

India's foreign trade has expanded significantly from FY 2001 to FY 2024, with exports growing from Rs 203,571 crore in 2000-2001 to Rs 3,619,291.86 crore in 2023-2024. Despite the growth, the trade deficit has also increased, reflecting India's higher import dependency over the years. For example, the trade deficit widened from Rs 27,301.75 crore in 2000-2001 to Rs 1,973,584.46 crore in 2023-2024, indicating persistent challenges in balancing trade.

Major Trading Partners

In FY 2023-24, China emerged as India's largest trading partner, surpassing the United States with a trade volume of $118.4 billion. India's exports to China rose by 8.7%, driven by products like iron ore, cotton yarn, and spices. The United States followed closely, with a trade volume of $118.3 billion, although both exports to and imports from the US experienced fluctuations. Other significant trading partners included the United Arab Emirates ($83.6 billion), Russia ($65.7 billion), and Saudi Arabia ($43.4 billion).

Key Trading Commodities

India's major trading commodities include energy resources, metals, and agricultural products:

·         Energy: Crude oil is crucial for India's economy, with a 7% increase in imports in April 2024. India is also the world's fourth-largest consumer of natural gas, with consumption expected to grow annually by 4.9% until 2050.

·         Metals: India is a significant consumer of gold, with imports increasing by 214% in April 2024 compared to the previous year. The country is also a major importer of silver and industrial metals like aluminum, copper, and zinc.

·         Agricultural Commodities: India is a leading global exporter of rice, wheat, cotton, soybeans, and spices. The country holds a dominant position in the global spice market, exporting a wide range of spices to over 180 countries.

Key Milestones in India’s Foreign Trade

India's foreign trade has seen several milestones over the last three decades, driving significant transformations:

1.      1991 Economic Liberalisation: India implemented key economic reforms, including reducing tariffs, devaluing the rupee, and opening up to foreign investments.

2.      Growth in Foreign Investment (1992-2005): Following liberalization, foreign investment surged by 316.9%, boosting economic growth.

3.      Comprehensive Economic Partnership Agreements (2022): India signed trade agreements with the UAE and Australia and initiated negotiations with the UK for an FTA, enhancing trade relations with key partners.

4.      Production Linked Incentive Scheme (2020): Launched to expand domestic production and reduce import dependency in key sectors.

5.      Gati Shakti National Master Plan (2021): Aimed at improving logistics efficiency to support trade growth.

6.      New Foreign Trade Policy (FTP) 2023: Introduced to increase exports to $2 trillion by 2030, focusing on pharmaceuticals, high-tech manufacturing, and e-commerce.

7.      India-EFTA Trade and Economic Partnership Agreement (TEPA) 2024: Signed to strengthen trade relations with the European Free Trade Association (EFTA).

India's trade continues to evolve, driven by strategic reforms, key trade agreements, and shifting global dynamics. While the country has expanded its trade footprint, challenges such as trade deficits, dependency on specific commodities, and fluctuating trade relationships remain. However, the government’s focus on increasing exports, promoting sustainability, and enhancing infrastructure indicates a commitment to leveraging trade for sustained economic growth.