Chennai: India’s trade deficit with some of the trading blocs and economies in Asia is rising faster than its global deficit growth.
From 2007-09 to 2020-22, the trade deficit grew by 302.9 per cent with ASEAN, 164 per cent with South Korea, and 138 per cent with Japan, compared to 81.2 per cent increase in the global deficit.
Even in the past five years, the trade deficit with ASEAN, which includes Malaysia, Thailand, Cambodia, Singapore and Myanmar, increased 76 per cent, South Korea 22 per cent, Japan 58.5 per cent and China by 58.8 per cent. India’s deficit with China exceeded US$ 85 billion in FY2024. During this period, India’s overall trade deficit grew by 36 per cent.
According to Ajay Srivastava, founder of GTRI, India has Free Trade Agreements with the countries and trading bloc, except China and with China it has a limited trade pact under APTA.
“It has been 15 years since we had the FTAs with the economies and our experience has proved that FTAs exacerbate the trade balance. We already had a trade deficit with the countries and the FTAs have exacerbated it,” he said.
These Asian countries have strong manufacturing capabilities and while bringing 80 to 90 per cent of the trade categories under FTAs, most of the manufactured goods come in without duties.
In the past, India also had witnessed China routing its products through ASEAN countries, following which the government enforced production of Certificate of Origin for every imported item claiming free and preferential trade concessions.
While advocating that India should not be a part of Regional Comprehensive Economic Partnership (RCEP), GTRI finds that post-RCEP, ASEAN’s trade deficit with China grew sharply from $81.7 billion in 2020 to $135.6 billion in 2023. Japan’s deficit doubled, and for the first time, South Korea is projected to experience a trade deficit with China this year.
