According to official data from Union Ministry of Commerce and Industry, in the FY 2023-24, India recorded trade deficit with 9 out of its top 10 trading partners.

Current Status of India's External trade (FY 2023-24)

Trade deficit (also known as negative trade balance) occurs when country's value of imports are more than that of exports.
China, USA, UAE, Russia, and Saudi Arabia are India's largest trading partners. (in descending order)
India's trade deficit with China, Russia, South Korea, and Hong Kong increased as compared to 2022-23, while it narrowed with UAE, Saudi Arabia, Indonesia, and Iraq.
USA, Netherlands, UK, Belgium, and Italy are top 5 trading partners with which India has trade surplus.

Impact of higher trade deficit on Economy

Negative
- Depletion of Forex reserves due to the need to pay for excess imports, raising concerns of depreciation of domestic currency.
- Widening current account deficit which may adversely affect credit rating of the country and raise borrowing costs.
- Strategic implications due to sustained trade deficit, particularly for essential products or critical sectors.

Positive
- Access to wider range of goods, increased domestic investment if deficit is driven by imports of capital goods, etc.

Reasons behind India's higher trade deficit

Reliance on imported inputs, including crude oil and pharmaceutical ingredients.
Changing consumption patterns, including increased demand for consumer durables, luxury goods etc.
Structural factors such as sub-optimal growth of manufacturing sector, higher logistics cost, infrastructure bottlenecks etc.
Domestic policies such as inverted duty structure, frequent bans on exports of commodities etc.
Others – Sub-optimal utilization of FTAs, imposition of non-tariff barriers by developed countries etc.