Question 1 · 10 marks · 118 words written
The challenge of a high trade deficit haunts India. Analyze its impact on the Indian economy.
Opening · a figure
In FY2023-24, India exported goods and services worth $778 bn while imports were about $836 billion showing significant trade deficit.
Body · points and prose
Challenges of -> devaluation and depreciation
high trade of currency
deficit -> imported inflation
| -> Vulnerability to supply chain
-> less jobs and industries shocks
in India
Impact of high trade deficit:
- It leads to devaluation of currency making imports further expensive.
- India's credit rating is impacted.
- Dependence on imports for basic needs like palm oil and pulses leads to inflation.
- Cheap imports stifle innovation in Indian economy.
- Fiscal planning becomes difficult. Government can earn more by increasing exports.
Way Forward
- Primary Sector: Focus on food processing and tackling sanitary and phytosanitary measures
- Secondary Sector: Import substitution and become part of global value chains.
- Service Sector: Global capability centres to prevent shift of industry to other countries.
Close · a way forward
None written.