INDIA’S SOARING TRADE DEFICIT

In a hyper-competitive export market dominated by China and fast-emerging players such as Vietnam, Indonesia, Malaysia, and Mexico, India risks being squeezed from all sides

- Shivaji Sarkar

India has been living with chronic trade deficits for nearly half a century.

The last time the country recorded an overall annual trade surplus was in 1976-77 that was only the second time in its history, the first being in 1972-73. Since then, the red ink has flowed year after year. India has consistently imported far more than it has exported, with China leading the pack of deficit partners, followed by Russia, Saudi Arabia, the UAE, and Indonesia. The inability to build an export-oriented manufacturing base while allowing low-tech imports to flood the market has locked India into a cycle of rising deficits and shrinking competitiveness.

For decades, successive governments have offered the same explanation: petroleum imports. India is indeed 85-90% dependent on imported crude, and last year’s petroleum bill stood at around $180 billion. But the argument is misleading. Petroleum is only part of the problem. Once petroleum exports are netted out, the effective share of crude and products in the total import bill falls marginally around 10 to 14%. The real issue is the explosion of non-petroleum imports—ranging from electronics and chemicals to plastics, fertilizers, and even mundane household items like cotton swabs and kitchenware. These are products that India could manufacture at home, yet they are imported in bulk, often rebranded and sold at premium prices.