India has a running trade deficit in goods: where it imports more goods than its exports. It is wrong to simplistically judge whether a trade deficit is good or bad – however, India does do ‘better’ when it comes to its services.
However, today this blogger learnt that the trade relationship that India has with the United States of America is quite different from that with many other big trading partners. India’s large software and services exports to the US are well-known, but India exports more goods to the US as well. Little wonder that American businesses lobby hard in Washington to be able to trade more and operate more in India.
In 2014, for the first time since 2006, India’s exports to the US are more than double its imports. It is currently unclear as to what to attribute this towards and pass judgement on whether this is a good or a bad thing. The broad trends in the two economies in the last 4 years has been one of revival and renewed growth in the United States, and faltering growth and investment in India.
The timeline of imports and exports from the 1980s onwards has a few points of interest from recent years. The most prominent of these is the dip in 2009 of both Indian exports and imports, with the former affected far more than the latter. This was preceded by a sharp rise in 2007 in Indian goods imports from the US.
While Indian exports to the US bounced back since 2010, Indian goods imports plateaued in 2011 and have dropped a little in real terms since then.
The USTR website on India-US trade relations says that India’s largest goods exports to the US are precious stones (diamonds), pharmaceuticals, mineral fuel, organic chemicals and others. India’s largest goods imports are again precious stones (diamonds and gold), aircraft, machinery and optical and medical instruments.
A closer examination of export and import trends in types of goods (using the US Census Bureau’s “end use” dataset) provides the following:
1. Since 2009, the largest growth in highly traded Indian goods exports to the US as of 2013 are:
– Petroleum products, other
– Tobacco, waxes, etc
– Fish and shellfish
– Fuel oil
2. Since 2009, the largest growth in highly traded Indian goods imports from the US as of 2013 are:
– Complete military aircraft
– Gem diamonds
– Nonmonetary gold
– Parts for military-type goods
3. Since 2009, the largest fall in highly traded Indian goods imports from the US as of 2013 are:
– Civilian aircraft, engines, equipment, and parts
– Steelmaking materials
– Drilling and oilfield equipment
I encourage readers to comment on the significance of some of these observed changes.
There’s a lot more information waiting to be unearthed from these datasets, including information on when Indian defence imports of US equipment really increased and to what extents. The defence angle is particularly interesting as the Indian ministry of defence is quite opaque in defence spending and is known to defer capital payments while making large announcements.
Readers are welcome to use the full rich XLS spreadsheet that I have compiled on all the data from the US Census Bureau relevant to the last couple of decades of India-US trade.
Addendum: The US$-Indian Rupee exchange rate has been steadily rising, making imports from the US less competitive. This could perhaps explain a part of the slump in US goods imports by India.
PS. All years used in this post are calendar years and not financial years.