TRADE DEFICIT

• A Trade Deficit, also known as a negative trade balance, occurs when the value of a country’s imports exceeds the value of its exports over a given period.

• It is a significant component of the Current Account Deficit (CAD).

Impacts of Higher Trade Deficit on the Economy

Negative Impacts

• Depletion of Forex Reserves
  • More foreign currency is spent on imports, weakening reserves.
• Currency Depreciation
  • Rupee weakens due to rising demand for foreign currencies like USD.
• Widening Current Account Deficit
  • May affect India’s sovereign credit rating and increase external borrowing costs.
• Pressure on Domestic Industries
  • Cheap imports hurt domestic production and employment.

Positive Impacts

• Access to Global Technology & Capital Goods
  • Essential for domestic production and industrialization.
• Wider Consumer Choices 
  • Improves standard of living and market competition.
• Signals Strong Domestic Demand
  • Especially during high-growth phases.

Factors Driving India’s Trade Deficit

Government Initiatives to Reduce Trade Deficit and Promote Exports

RoDTEP Scheme

• Full Form: Remission of Duties and Taxes on Exported Products
• Replaced: Merchandise Exports from India Scheme (MEIS)
• Purpose: Refunds all taxes and duties (central, state, local) embedded in the cost of exported products.

Trade Connect e-Platform

• Launched By: Ministry of Commerce & Industry
• Objective:
  • Single-window digital platform for real-time trade-related information
  • Helps MSMEs access foreign markets
  • Collaboration: Ministry of MSME, EXIM Bank, Ministry of External Affairs, Department of Financial Services.

Indian Institute of Foreign Trade (IIFT)

• Established: 1963 under the Ministry of Commerce
• Status: Deemed University (since 2002)
• Function:
  • Training, research, and education in international business and foreign trade
  • Supports policy-making with data and expert advice.

Way Forward