India’s foreign trade in merchandise goods rose sharply in 2021-22 with exports growing 44.6 percent and imports by 55.3 percent. The total value of merchandise trade crossed the $1 trillion mark for the first time as exports rose to $422 billion and imports to $613 billion. Trade grew even though it was beset with multiple challenges including broken supply chains, shortage of containers and delays at ports.
The rise in trade, with imports outpacing exports, also led to a deterioration in India’s trade balance. The trade deficit climbed, inching past the 2012-13 peak by a tiny margin. The deterioration in the trade balance in that year was led by a jump in petroleum crude and gold imports bills. In FY 2022, the growth in exports and imports was led by a sharp rise in commodity prices as demand shot up when economies emerged after months of lockdown.
Here we look at trade data for 2021-22 published by the commerce ministry to visualise the flow of India’s imports and exports for key trade partners.
India exports to 240 nations and jurisdictions and imports from 229. But trade flows with the US and China are the most significant.
Over a fifth of India’s external merchandise trade in 2021-22 was with the US and China. The US wrestled back the top slot that it had lost to China the previous year, but the difference was just about $4 billion. India’s export to the US and imports from there grew about 50 percent from a year ago, while imports from China grew about 45 percent, notwithstanding some anti-China sentiments. Exports to China stayed flat.
Among the top trading partners, bilateral trade in goods with Australia experienced the sharpest growth, both exports and imports doubled during the year. Yet, Australia accounts for just 2.4 percent of the value of goods traded between the two countries.
India’s imports from oil-exporting countries also reported a sharp jump due to the elevated prices of crude petroleum. Imports from Saudi Arabia, Kuwait, Oman and Iraq more than doubled, while those from the United Arab Emirates and Qatar climbed nearly 70 percent.
Jump in the trade deficit
India's trade deficit jumped about 85.8 percent to $190 billion in 2021-22. The largest trade deficit was with China, estimated at $72.9 billion. That was equivalent to 40 percent of the trade deficit for the year. India's imports from China include electronic components, computer hardware, telecom instrument (mostly mobile phones), organic and other chemicals and machinery.
The trade deficit with six oil-exporting countries—Iraq, Saudi Arabia, United Arab Emirates, Qatar, Kuwait and Oman—was equivalent to half of the total deficit.
Is the rising trade deficit worrisome? India’s current account deficit is expected to rise to a three-year high of more than $40 billion in 2021-22, given the sharp rise in the merchandise trade deficit. India had reported a current account surplus in the pandemic year as the value of imports fell, helped in part by the decline in crude oil prices. The merchandise trade deficit is one of the key components of the current account balance. Other components include net earnings from trade in services, net income on investments and net of workers' remittances. As long as earnings from trade in services and workers' remittances are robust, it will offset some part of the merchandise trade deficit. However, soaring prices of crude oil and other commodities can further widen the trade deficit and pressure the rupee to depreciate further.
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