From just 0.2 per cent before the Russia-Ukraine war to now accounting for 35-40 per cent of total crude imports, India's reliance on Russian oil has surged -- drawing fresh scrutiny with US President Donald Trump announcing a penalty on top of a 25 per cent tariff, or tax, on all goods going to the US.
The global demand recovery is likely to stay sluggish.
The CAD is a critical indicator of the macroeconomic health and represents the gap between the overall foreign exchange expended and received in the economy.
India's merchandise exports dipped marginally in March to $41.69 billion, and by 3.11 per cent during the last fiscal year to $437.06 billion mainly due to continued geopolitical turmoil, and depressed global trade. Imports, too, declined in March as well during the entire 2023-24. Trade deficit, or the gap between imports and exports, narrowed 17.74 per cent in March to $15.6 billion and came down 9.33 per cent to $240.17 billion in FY24.
US President Donald Trump announced a 26 per cent "discounted reciprocal tariff" on India, half of the 52 per cent levies imposed by India on American goods, as he described India as "very, very tough."
The protesting farmers' main demand to legalise the minimum support price (MSP) regime has divided opinion. One school of thought says it would lead to crop diversification and help India keep under check its burgeoning import bill on edible oils and pulses, while another says it would incentivise farmers to produce low-quality crops. Contrary to popular perception, India has a trade surplus in agriculture and allied activities, which stood at $18.65 billion during 2022-23 (FY23) against $15.92 billion in the previous year. However, the surplus was mainly on account of rice, wheat, sugar, spices, and buffalo meat.
'If you align your ambition with India's rise, the peak of your careers will unfold alongside the peak of India's power.'
Exports to China saw sustained double-digit growth for the fourth straight month in August, led by eightfold rise in iron and steel shipments.
'That way you're not hostage just to US sort of exports to India.'
While India's export to China stood at only $13.52 billion in 2012-13, its imports from that country aggregated $54.3 billion, leaving a trade deficit of $40.78 billion during the last fiscal.
India-China bilateral trade hit a record $73.9 billion last year.
The China-India bilateral trade in the first half of the year totalled $57.48 billion, up 62.7 per cent year on year, perhaps the highest in recent years amid the Ladakh impasse and the COVID-19 pandemic, according to data released by China's Customs. Though Indian exports to China picked up with 69.6 per cent year on year increase, the trade deficit, a structural problem for India for long, climbed to 55.6 per cent. According to data released by China's Customs, India's exports to China reached $14.724 billion, up 69.6 per cent year on year in the first six months and India's imports from China amounted to $42.755 billion, up 60.4 per cent.
Unless Donald Trump takes a major U turn, this is possibly the beginning of the end for Trumpian politics, argues Colonel Anil A Athale (retd). Unless President Trump takes a major U turn, this is possibly the 'beginning of the end' for Trumpian politics driven by TV trp's, points out Colonel Anil A Athale (retd).
Existing trade deals, especially the 2009 pact with the Asean bloc, have been panned by the Centre for not boosting exports but flooding the domestic market with cheap imports. Subsequently, New Delhi has called for reviewing FTAs with Japan and South Korea. Going by that, a trade deal with the US is unlikely to be beneficial, say experts.
The government is committed to restrict the fiscal deficit at 3.4 per cent of GDP as envisaged in the Budget.
The growth in world trade is expected to slow down to one per cent in 2023, due to global uncertainties, according to a WTO forecast. The World Trade Organization (WTO) has also projected a growth of 3.5 per cent in global trade this year, as against the April estimate of 3 per cent. World trade is expected to lose momentum in the second half of 2022 and remain subdued in 2023, as multiple shocks weigh on the global economy, the multi-lateral body has said in a statement.
Oct-Dec current account deficit narrows
The order would ensure that the US fully collects all duties imposed on foreign importers that "cheat".
'Trump administration wanted a positive tone at this summit, but there was still some anxiety that there could be some awkward moments -- and there were not.'
"I think very soon. We are doing very well. (US Trade Representative) Robert Lighthizer who is right here negotiating with India... I think, very soon we will have a trade deal," Trump told reporters when asked if there is any trade deal is expected between India and the US.
'In the Indian government there are no illusions about the United States reliability or the possibility of having any kind of preferential treatment from Washington when it comes to trade.'
Exports rose by a marginal 2.73 per cent to $28.9 billion in September, but trade deficit more than doubled to $14.2 billion in the month due to a surge in gold imports.
The recent depreciation of the rupee along with sharp fall in the country's foreign exchange (FX) reserves has sparked a debate whether stability of the exchange rate is necessary and desirable. The rupee was one of the least volatile currencies among peers for almost two years before the current downward pressure started in September after the US Federal Reserve lowered interest rate.
India's exports declined by 6.86 per cent to $34.48 billion in August this year as against $37.02 billion in the same month last year, government data showed on Friday. Imports too declined by 5.23 per cent to $58.64 billion as against $61.88 billion recorded in August 2022.
When India's Commerce and Industry Minister Anand Sharma met his counterpart in Beijing last year, he spoke mainly about India's yawning trade deficit and China agreed that this was a problem that needed fixing.
The Indian rupee is likely to depreciate further against the US dollar through the end of 2024. This is due to the continued strengthening of the greenback, combined with the weakening of the Chinese yuan, which is expected to keep pressure on the Indian currency.
Any downward revision from the current 'Baa3' rating means junk status for the country.
The India-United States relationship is set to expand under the Donald Trump administration, but there could be some unease on issues like imports, tariffs and immigration, strategic affairs experts said after the Republican leader won the fiercely contested presidential election.
Lead indicators suggest that domestic current account deficit (CAD) is likely to reduce in 2023, while macro-economic stability has received a boost from inflation being brought back to the official tolerance band, according to the Reserve Bank of India's (RBI's) January 2023 Bulletin. "With the merchandise trade deficit reaching an all-time high of $83.5 billion in a quarter, and a rise in net outgo from the income account, the current account deficit increased to 4.4 per cent of GDP in Q2FY23," the State of the Economy article in the bulletin said. "It is noteworthy, however, that the CAD for Q1 was revised down from 2.8 per cent to 2.2 per cent on account of downward adjustment in Customs data.
India's widening current account deficit (CAD), driven by the massive spike in commodity prices led by crude oil, is set to put pressure on the fragile recovery, warns a brokerage report that has revised upwards its CAD forecast to $45 billion or 1.4 per cent of GDP by March. According to a report by British brokerage Barclays, the worries arise from the fact that the trade deficit has been jumping continuously since July. From an average monthly trade deficit of $12 billion till June, it has jumped to $16.8 billion in July-October, with September showing the highest-ever trade deficit on record at $22.6 billion, the report said.
The US involvement in Ukraine and the Middle East is a distraction which has to end quickly so that the main business of China can be focussed on. China is America's only peer competitor, not Russia and not anybody else. Therefore it makes little sense to be diverted from the overall mission, explains Aakar Patel.
Fitch Ratings on Monday said India's pace of debt reduction is gradual, leaving room for a downside risk to sovereign rating in the eventuality of a significant economic shock. However, the rating agency expressed confidence in India's ability to stick to its medium-term fiscal framework, which aims to reduce debt and bring it on a downward trajectory over time.
'When Prime Minister Modi met President Trump, they agreed to initiate a bilateral trade dialogue.' 'It makes sense to give these negotiations a chance.'
India's extreme poverty rate declined sharply to 5.3 per cent over a decade from 27.1 per cent in 2011-12 even as the World Bank revised upwards its threshold poverty line to $3 per day.
'The touchstone is reciprocity which will be applied to friends and foes alike.' 'It will be a bitter pill to swallow.'
Reserve Bank on Friday decided to cut Cash Reserve Ratio (CRR) by a huge 1 per cent, which will unlock Rs 2.5 lakh crore liquidity to the banking system for lending to productive sectors of the economy. With the reduction in four equal tranches ending November 29, 2025, the CRR would come down to 3 per cent.
The banking system neared Rs 1.47 trillion of liquidity deficit on Monday, the highest since January 29, 2020, when the banking system liquidity deficit went up to Rs 3 trillion. The Reserve Bank of India (RBI) injected Rs 1.47 trillion on Monday and Rs 1.46 trillion on Tuesday. Market participants say that the disbursement of Rs 25,000 crore as the second tranche of incremental cash reserve ratio (I-CRR) will not be enough, and the liquidity might tighten further to Rs 2 trillion in short term due to tax outflows and arrival of the festival season.
India's exports dipped marginally by 0.76 per cent to $35.24 billion in July, though the trade deficit tripled to $31.02 billion during the month, according to official data revealed on Tuesday. The imports in July went up to $66.26 billion from $46.15 billion in the corresponding month last fiscal. "Exports of $156.41 billion in first four months of the fiscal puts us on track to achieve $470 billion in the current fiscal comfortably," commerce secretary B V R Subrahmanyam said while giving details about the trade data.
India recorded a current account surplus of $5.7 billion or 0.6 per cent of GDP in the March quarter, the Reserve Bank of India said on Monday. This is the first time in ten quarters that the crucial metric of the country's external strength has turned into surplus mode. In the year-ago period, the current account deficit stood at $1.3 billion or 0.2 per cent of GDP, and the same was $8.7 billion or 1 per cent of GDP in the preceding quarter ending December 2023.
