Source-This post on Boost to Indias Export has been created based on the article “A comprehensive approach could boost India’s exports “published in “Live Mint” on 7 June 2024.
UPSC Syllabus-GS Paper-3- Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.
Context-India registered trade deficits with 9 out of its top 10 trading partners in 2023-24, except for a trade surplus with the US ($36.7 billion). The top 10 trading partners account for around 52% of India’s total trade.
The trade deficit indicates the necessity of a deeper analysis beyond surface observations. To find sustainable solutions, it’s important to understand the underlying structural, policy, and market factors contributing to it.
What are the issues associated with trade deficits?
1) The trade deficit is often oversimplified. The World Economic Forum advises against solely focusing on trade balances, as deficits have diverse causes. It can result from various causes, such as importing more raw materials for production, increased domestic income, or cheaper foreign products.
2) Trade deficits aren’t good because they can stress the currency, but their reasons and impacts change depending on the economy. More imports could mean higher domestic earnings or problems with competitiveness. They can also pressure a country’s currency. The reasons for trade imbalances differ based on the economy.
3) Trade deficits persist due to various reasons, including tariff structures and asymmetric tariff rates that may hinder domestic manufacturing.
What should be the way forward?
1) India must assess its manufacturing capabilities to identify products that can be efficiently produced domestically and traded globally. For ex- India’s exports to the US in electrical machinery and equipment
2)There is a need to boost manufacturing efficiency and productivity, diversify the export basket, invest in research and development, and improve infrastructure.
3) Targeted support and investment will facilitate India’s transition to a high-value commodity exporter and enhance its competitiveness in international markets.
Read more- Strategies for India’s new government to boost economic growth
4) Trade balance is an important indicator but provides only a partial picture of the real scenario.Thus,there is a need to adopt a comprehensive approach that includes understanding trade partners’ competitive advantages, boosting manufacturing, and investing in technology and innovation.
Question for practice
What are the issues associated with trade deficits? What steps can be taken to address it?
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