Economy News

China pips US to be India’s largest trade partner in FY24

Goods imports from neighbour crosses $100-billion.

While China emerged as India’s largest goods trading partner, outdoing the US by a modest $ 116 million in the last financial year, it is the US that has delivered consistent trade surpluses for India year on year.

Merchandise trade with China stood at $ 118.4 billion in FY 24 on the back of 4.04% growth while with the US there was a contraction of 8.59% to $ 118.2 billion. India’s exports to the US had dropped 1.3% to $ 77.5 billion while imports were down 19.8% to 40.7 billion. In China’s case the exports grew 8.8% to $ 16.6 billion and imports were up 3.29% to $ 101.7 billion. That is, trade deficit with China crossed the $85 billion mark.

India’s exports suffered from the economic slowdown in the US as the biggest fall was seen in exports of gems and jewellery, apparel and even chemicals though some of the loss was covered by smartphones. India’s imports from the US were down largely due to a drop in petroleum trade. A lower interest rate environment and return of demand in the US could tilt the balance in favour of the US again. Already in April the US is ahead of China with total trade of $ 11.8 billion as against $ 8.8 billion with the northern neighbour. In the US trade in April balance is in India’s favour.

With the US, India also has a consistent services trade surplus.

From China the biggest item of import in FY 24 was machinery of all kinds accounting for almost 50% of total imports. Other major items of imports from China were plastics and its articles, chemicals, steel and steel products and fertilisers.

The pursuit of greater trade integration with the West is what would aid India’s ambitions as only with countries in Europe and the US does it enjoy trade surpluses while with the east the closer ties have only delivered deficits that widen with each passing year.

A closer study of merchandise trade trends with top 25 trade partners in 2023-24 shows that only with seven countries does India enjoy a surplus and one of those countries is Bangladesh where the surplus is $ 9.2 billion..

Bangladesh is a special case as it depends a lot on India for cotton yarn and its petroleum and electricity needs. After the US, the Netherlands offers a surplus of $ 17.3 billion on the back of being a hub of India’s petroleum trade with Europe. It is also a promising market for smartphones and telecom instruments and pharma. Other countries with which there is a trade surplus are the UK ($ 4.5 billion), Italy ($ 2.9 billion), France ($ 902 million) and Belgium ($ 598 million).

Last few years have seen a change in India’s approach to the FTAs and geographical focus has moved from East to West. While FTAs with most of the bog traders in the East have been in place for more than a decade, the efforts are on to get the trade deals with UK and European Union concluded at the earliest. The discussions on FTA with Canada were scuttled by political developments and in the US there have been discussions of and on for a limited trade agreement.

In South America the discussions are on to expand the preferential trade agreement with MERCOSUR which includes Argentina, Brazil, Paraguay and Uruguay. Negotiations are on with Peru and Chile in the region.

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