NEWS

Trade Deficit of India is expected to increase

TRADE DEFICIT

WHAT –

• Negative Balance of Trade
• Refers to the amount of international trade that takes place between countries throughout the world
• When a country’s imports surpass its exports in a fiscal year, it is considered to be a trade deficit

CAUSES –

• When a country cannot produce what it requires and must import things from other countries while paying import taxes
• When businesses are involved in the production of goods in another country. The raw resources used in manufacturing are exported, whilst the final commodities brought into the country are imported.

IMPACT-

• Raises the standard of living at first because residents have access to a wider range of things.
• If the trade imbalance remains, the government will have to obtain additional foreign exchange to close the gap, causing the local currency to fall.
• To close the import-export imbalance, a larger trade deficit necessitates the recruitment of foreign investors.
• Because more imports mean fewer job prospects, a bigger trade imbalance causes jobs to be outsourced to other countries.
• Demand for imported items leads to a decrease in demand for locally produced goods, resulting in factory closures and job losses.