Analysis of India’s foreign trade in the recent past

Introduction:
Before 1947, when India was a colony of the British, India was a supplier
of foodstuffs and raw materials to the industrialised nations particularly
England and an importer of manufactured goods. This dependence hindered
the industrialisation in India. Upon Independence, a developing economy
needs to extend productive capacity at a fast rate.
Imports which either help to create new capacity in some lines of
production or enlarge capacity in the other lines of production are called
developmental imports. Imports which are made in order to make a full use of
the productive capacity are called maintenance imports. For a developing
economy, the developmental and maintenance imports set limits to the extent
of industrialisation which can be carried out in a given period.
During the early days, imports are inevitable, as the consumer goods can
itself be in shortage and imports can aid the developing economy despite
having detrimental effects. But the foreign trade policy must focus towards
enlargement of exports, aiding the country’s GDP, Balance of Payments, and
the value of currency in the global market.
Around 7 decades have been passed since Independence of the country
and India has progressed a long way to become one of the fastest and largest
economies in the world. It has attracted foreign investments from various
countries and has established trade relations across the globe. By analysing the
India’s foreign trade in the recent months, suggestions and criticisms can be
presented to improve policies contributing to foreign trade.
Articles:
January 8, 2025 – The Hindu
Kandla port to get ship building facility, cargo terminal at ₹57,000 Cr.
Summary of Article - The Ministry of Ports, Shipping and Waterways
announced two major investments at the Kandla Port – a mega ship building
and repair project at an investment of ₹30,000 crore, and a new cargo terminal
outside Kandla Creek for ₹27000 crore, which will add 135 million tonnes per
annum to the port’s capacity. This facility can produce 32 new ships and repair
50 ships every year and can manufacture large capacity vessels.
Analysis – Since 95 percent of the India’s foreign trade by volume and 70
percent by value moves through ocean routes, ports are critical hubs for the
nation’s economy, serving as vital links to support growth and drive economic
development. By establishing several ports, the trade volume can be increased
as the infrastructure is well-equipped. The new port can allow industries to
expand nearby and allowing them to explore foreign trade, thus contributing to
exports and GDP. Further, it can spur a lot of economic activities around it
leading to better revenue for the state and raised standard of living.
January 16, 2025 – The Hindu
Exports dip 1 percent in December, trade gap eases.
Summary of Article – Petroleum imports rose 2.2 percent to $15.3 billion last
month, but petroleum product exports tanked a sharp 28.6 percent to just $4.9
billion. Excluding petroleum trade, India’s exports were up 5.05 percent in
December, and 7.05 percent higher through the April to December 2024
period. Exporters were not sanguine owing to volatile commodity and metal
prices, as well as currency fluctuations and logistical challenges affecting export
flows to other markets.
Analysis – Trade gap is a situation in which a country buys more from other
countries than it sells to other countries. Persistent presence of trade gap can
result in weakening of currency, increased foreign debt, increased reliance on
foreign capital, and reduced global competitiveness by the local industries.
Even though the exports of petroleum-based products have reduced, the fall in
petroleum prices have led to reduced import value, thus easing trade gap.
Increasing petrol imports signify the rise in demand, thus raising environmental
concerns. Government must take steps to shift to electric mobility to reduce
petroleum imports, thus reducing the trade gap further. Also, since petroleum-
based products indicate value addition, it implies a good manufacturing sector.
Further, value added products can be exported at a higher price than raw
materials resulting in diminished trade gap.
January 22, 2025 – The Hindu
Export hit, job losses spur fresh scheme to revive diamond trade
Summary of Article – The Commerce Ministry introduced a new Diamond
Imprest Authorisation scheme to allow duty-free import of natural cut and
polished diamonds for export purposes, acknowledging that India’s diamond
industry is witnessing a steep decline in exports and job losses. This scheme is
brought to compete with other countries offering beneficiary policies for
diamond mining.
Analysis – The newly introduced policy aims to export value-added goods by
importing raw materials. Value-added goods commend higher prices in the
international markets compared to raw materials, thus leading to considerable
increase in export value, thus reducing trade gaps and nullifying the import
burden. Also, it can be a source of job creation for the economies, and can
generate revenue for the state as it can give rise to lot of allied economical
activities around it. Even though the scheme is introduced with an intent to
boost exports, global demand is crucial to ensure exports. The goods must be
produced to cater to the needs of the people in the target market to ensure
success of this scheme.
February 10, 2025 – The Hindu
Gold smuggling has reduced after import duty cut: CBIC Chief
Summary of Article – In July, 2024, the government reduced customs duty on
gold to 6 percent from 15 percent. Since then, the number of gold seizures has
reduced considerably from previous levels and the amount of gold seized have
considerably reduced. In April to June, officers have seized 847kg of gold while
in 2023-24, 1319kg of gold has been seized. This has been informed by the
Directorate of Revenue Intelligence, under CBIC, who is the apex agency of the
Indian customs in the field of anti-smuggling in India.
Analysis – The reduction of gold smuggling can be viewed in a positive
connotation as it signifies that people bringing in gold to India from various
countries abide with the law and pay customs tax, thus increasing revenue for
government. Legitimate trade can be performed with the gold being brought
which can result in reduction of black money and can also reduce illicit
activities. Legitimate accounting of gold can add to the foreign exchange
reserves of the country, thus influencing the balance of payments resulting in
better confidence for investors in the country’s financial power.
February 14, 2025 – The Economic Times
India’s machinery, components export to Germany quadruples to USD
4.134bn in 2024.
Summary of Article – India’s export of machinery and components to Germany
jumped over four-fold to USD 4.13 billion in 2024 and is expected to maintain
double-digit growth in coming years, according to the VDMA India. The year
2024 witnessed the export crossing the USD 4.13 billion mark. Indo-German
trade has been developing very well, with an annual growth of nearly 8 to 10
per cent. Currently, this trade amounts to approximately 30 billion euros.
Recently, both nations signed a Memorandum of Arrangement to facilitate
mutual logistics support and exchange between their armed forces.
Analysis – Exporting of machinery and engineering goods could signify that the
manufacturing in India has developed to a level of standard where it can
compete with international standards of quality but at a sustainable cost.
Quality manufacturing could attract investors potentially developing our
economy. This can potentially provide jobs in the manufacturing sector, and
can contribute to fixing the trade deficits and improve the GDP of the country.
Domestic demand could also be fulfilled by these quality goods aiding
development. This can be attributed to world class facilities provided to
industries at industrial parks and Special Economic Zones.
February 17, 2025 – The Economic Times
India’s exports to US up 39 percent to $8.44 billion
Summary of Article - India's exports to the US rose by 39 per cent year-on-year
to USD 8.44 billion in January, while imports grew by 33.46 per cent to USD
3.57 billion, according to the commerce ministry data. During 2021-24, America
was the largest trading partner of India. The US is one of the few countries with
which India has a trade surplus.
Analysis – Maintaining trade surplus signify that the demand for Indian
products is high in the United States. This growing demand can stimulate
economic growth in India as exports lead to job creation, revenue for the
government, and better balance of payments and foreign exchange reserves.
Despite trade surplus, India must still focus on exporting more by exporting
products to mete out consumer demand.
February 18, 2025 – The Hindu
January Trade Deficit Widens to $23bn as exports dip by 2.38 percent on year
Summary of Article – India’s trade deficit widened to $22.99 billion in January
2025, up from $16.56 billion in the corresponding month last year, as goods
exports dipped 2.38% year on year to $36.43 billion. The decline in exports
were largely owing to fall in petroleum products exports. Imports increased by
10.28% to $59.42 billion in January 2025 with a rise in inbound shipments of
electronic goods, gold silver, and other chemicals.
Analysis – The widening trade deficit can be due to two reasons. One is the
increase in import bills owing to weaking of Indian Rupee against Dollar and
the decreasing exports which can be caused by various factors like weakening
global demand, inflation, etc. To stimulate exports, local industries, particularly
MSMEs, must be given special impetus so that they can increase their
production as well as productivity. Further, creating a good business
environment for startups could fuel the economic growth. This can help reduce
trade deficit as in the long run, it could be detrimental to economy as it could
result in job losses, inflation, and reduced competitiveness among local
industries.
February 23, 2025 – The Hindu
India’s machinery imports from Germany grew 2.2 percent in 2024
Summary of Article – India’s import of machinery and equipment from
Germany in 2024 increased 2.6 percent to Euro 4298 million, according to
VDMA, an organisation for machinery and equipment manufacturing industry
in Europe and Germany. However, export of machinery from India to Germany
fell 4.9 percent in 2024 compared with the previous year.
Analysis – India has a potent manpower enriched with ample skills and
knowledge. Instead of importing machinery and equipment, India must give
impetus to creating indigenous technology to replace the imports. Or, the
quality in manufacturing must be finetuned to meet the global standards in the
sector by various reforms. By these measures, imports can reduce and exports
can be carried out to other countries, thus consolidating global presence.
Transfer of manpower is concomitant with transfer of technology and its allied
goods.
February 25, 2025 – The Hindu
India, UK resume FTA negotiations
Summary of Article – India and the United Kingdom have agreed to resume
negotiations toward a balanced, mutually beneficial and a forward-looking deal
that delivers mutual growth and builds on the strengths of the two
complementary economies. The announcement was made by Piyush Goyal,
Ministry of Commerce and Industry, and Trade Secretary of UK, Jonathan
Reynolds.
Analysis – Free Trade Agreement would mean better trade relations between
the nations. It can lead to better access to markets to the other country as
regulations for imports are loosened and import duties are reduced. This can
also contribute to better transfer of technology and increased competitiveness.
March 7, 2025 – The Times of India
Trade deal with India key to Trump’s bid to boost exports
Summary of Article – A bilateral trade deal by US with India would result in
India lowering tariffs across sectors, resulting in a boost for US exports into
India. But this can result in increased imports by carmakers, bourbon producers
and handset manufacturers to ship goods directly from China or other east
Asian country to India, rather the American factory. While Harley is importing
its bikes from its manufacturing setup in Thailand, Tesla may import
technologies from Germany.
Analysis – Lowering tariffs levied by India on US imports can be detrimental to
India but beneficial for United States. Because, this could result in loss of
revenue. Even further, the main problem is that the goods may not be
imported from US directly but from various other industrial nations. Also,
technology also will be sourced from other nations under the name of US
company imports. Since, India itself is a developing country which advocates
for boosting manufacturing sector and technological advancement through
various schemes, this can lead to detrimental effects like lack of job creation,
huge import bill, and weakening of local currency.
March 11, 2025 – The Times of India
Ukraine pips India as world’s largest weapons importer
Summary of Article – Ukraine has displaced India as the World’s largest arms
importer in the 2020–2024-time frame, owing to the war with Russia since
2022. Among top arms importers, Ukraine contributes 8.8 percent of global
arms imports, while India accounts for 8.3 percent of the import, ranking
second. Among top global arms exporter, US has contributed to 43 percent of
arms exports with France ranking second, at 9.6 percent.
Analysis – India being ranked second in the top global arms importers can be
viewed in two connotations. On one hand, India having state of the art defence
armament would denote that India’s defence is strengthened and can protect
its citizens from external forces. On the other hand, instead of importing
armament, India can use it potent human resources in developing armaments
that compete with global standards and produce in the country. This not only
reduces a huge import bill, but also improves the integrity and security of the
nation. Self-reliance can be crucial in India emerging as a Superpower.
March 11, 2025 – The Economic Times
Steel companies may go slow on capacity expansion as imports hit margins:
Analysts
Summary of Article - Steel companies may hold back investments to expand
capacity as increasing imports shrink profit margins and eat into their market
share, said analysts. India aims to achieve the target of 300 million tonne crude
steel capacity by 2030 under its National Steel Policy. There is a growing
discomfort about domestic demand being served by steel from China or South
Korea. The latest tariff war has added to the uncertainty.
Analysis – In order for India to pursue its objectives under the National Steel
Policy, it is necessary for India to impose tariffs to reduce the imports of steel.
By concrete policies that comfort domestic steel producers, expansion may be
carried out by the steel producers. Even though the global demand has slowed,
the domestic demand is still high and growing, thus helping the domestic steel
producers with their expansionist policies.
March 16, 2025 – The Economic Times
India's merchandise trade deficit will be under pressure in fiscal 2026,
services sector to provide respite: Crisil
Summary of Article - India's merchandise trade deficit will be under pressure in
the fiscal year 2026, as domestic private consumption is expected to remain
strong, maintaining imports up, the rating agency Crisil said in its recent report.
According to the rating agency, India's exports could also come under pressure
due to the slowing economy and tariff related conditions in the United States.
However, as per the report, the service trade, which has proven to be more
resilient and where India runs a surplus, will provide some cushion.
Analysis – Merchandise trade refers to the international exchange of physical
goods, encompassing both exports (goods leaving a country) and imports
(goods entering a country), excluding services. They are agricultural products,
raw materials, etc. Service trade refers to the sale and delivery of an intangible
product, called a service, between a producer and consumer, who can be even
in different countries. Since India has a strong tertiary sector compared to the
secondary sector, it is more resilient even during global uncertainty. Also,
tertiary sector contributes to most of GDP owing to availability of huge
manpower in India. Due to these reasons, it has the ability to offset the trade
deficit of other sectors.
March 16, 2025 – The Economic Times
India, New Zealand announce resumption of FTA talks
Summary of Article - After a gap of about ten years, India and New Zealand on
Sunday announced resumption of negotiations for a proposed free trade
agreement to boost economic ties. India's key goods exports to New Zealand
include clothing, fabrics, and home textiles; medicines and medical supplies;
refined petrol; agricultural equipment and machinery such as tractors and
irrigation tools; auto; iron and steel; paper products; electronics; shrimps;
diamonds; and basmati rice. The main imports are agricultural goods, minerals,
apples, kiwifruit, meat products such as lamb, mutton, milk albumin, lactose
syrup, coking coal, logs and sawn timber, wool, and scrap metals.
Analysis – India is very keen on protecting the agricultural sector and the tricky
point in the talks would duty concessions and imports of agricultural products
like apple, kiwi, dairy, and wine. India has not yet given any significant
concession in dairy to any of its other FTA partners, including Singapore, Japan,
South Korea, and the ASEAN. Allowing imports of agricultural goods during
crop failure to stabilise the prices can be viable instead of allowing imports all
the time.
March 16, 2025 – The Economic Times
India – EU FTA: Think tank points out one sector where India must demand
reciprocity
Summary of Article - India needs to aim for reciprocal concessions from the
European Union (EU) in the proposed free trade agreement (FTA) concerning
medical devices to enhance its export potential. While the EU seeks zero tariffs
on medical devices imported from India, it enforces high regulatory barriers
that complicate Indian exports to EU markets. The new certification and
regulatory costs can range from 60,000 to 300,000 euros annually for market
access valued between 100,000 and 3.75 million euros. The time required for
certification approval has surged from the previous 4-8 months to now 2-3
years, exacerbated by a shortage of notified bodies and auditors in the EU,
which has resulted in elevated certification expenses.
Analysis - India imposes tariffs ranging from zero to 10 per cent on most
medical devices, and a unilateral reduction of tariffs by India without
addressing the EU's regulatory hurdles would likely lead to decreased exports
and increased imports from the EU.
March 20, 2025 – The Economic Times
Safeguard measures to cut India's steel imports by 50% in FY26: Experts
Summary of Article - India’s steel imports could reduce by 50 per cent in FY26
while domestic manufacturers' profitability is expected to improve, if the
government levies a safeguard duty on inbound shipments, experts have said.
The Directorate General of Trade Remedies (DGTR), the investigation arm of
the commerce ministry, has recommended imposition of a 12 per cent
provisional safeguard duty for 200 days on certain steel products with an aim
to protect domestic players from surge in imports. The final decision taken by
the finance ministry.
Analysis – The imposition of the safeguard duty is likely to reduce import
volumes, creating opportunities for domestic mills to enhance profitability in
the upcoming days. This also helps the domestic mills to achieve the objective
laid out under the National Steel Policy. Reduction in import volumes can help
ease the trade gap.
India moves WTO against EU’s new steel safeguards, fears trade impact
Summary of Article - India has sought consultations with the European Union
at the World Trade Organization (WTO) on the bloc's proposed changes to its
safeguard measures on imports of certain steel products, fearing an impact on
its domestic industry. India, China, Turkiye, Korea, Egypt and Vietnam are the
key exporting countries of steel products to the EU. In FY24, India exported iron
and steel and their products worth $6.64 billion to the EU, up from $6.1 billion
in FY23.
Analysis – When a country pursues a safeguard action, other countries can
seek consultation under the Agreement on Safeguards and agree on a trade
compensation which maintains the level of tariff concessions at the WTO or
reserve the right to retaliate. Imposition of safeguard duty can slow demand
for steel from India in the European Union thus affecting the domestic steel
producers. This can also increase the trade deficit as export of steel falls and
weaken the local currency.