India’s trade deficit with Saudi Arabia reaches record high: Here’s a comprehensive analysis

India’s trade relationship with Saudi Arabia has been a crucial component of its economic strategy for years, but recently, it has hit an all-time high trade deficit. A trade deficit occurs when a country imports more goods and services than it exports, leading to an imbalance in trade.

Analysing India-Saudi Arabia trade deficit

To understand the trade deficit between India and Saudi Arabia, we must analyse the data on imports and exports for various categories over the years. The most significant factor in India’s trade deficit with Saudi Arabia is its dependence on petroleum and crude products. In 2022-23, India imported petroleum and crude products worth a staggering USD 33,145.60 million, accounting for the major share of the trade deficit.

The manufactured goods have witnessed a substantial increase in imports from Saudi Arabia. In 2009-10, India imported manufactured goods worth USD 1,525.90 million, which increased to USD 8,771.40 million in 2022-23. This surge is driven by growing demand for Saudi Arabian manufactured products in the Indian market, significantly contributing to the trade deficit.

Looking at India’s exports to Saudi Arabia, it was characterized by a significant contribution from agricultural and allied products, accounting for USD 1,066 million. However, over the subsequent years, there was a noticeable increase in the export of manufactured goods, which surpassed agricultural exports in 2014-15 and continued to grow substantially, reaching USD 6,429.70 million in 2022-23. This surge in the export of manufactured goods indicates a diversification in India’s export portfolio to Saudi Arabia, reflecting the strengthening of its industrial capabilities.

Another critical aspect is the performance of petroleum and crude products, which experienced fluctuations over the years. In 2009-10, petroleum exports constituted a substantial portion of India’s exports to Saudi Arabia, amounting to USD 967.50 million. But, by 2014-15, these exports had soared to USD 5,522.10 million, suggesting a substantial increase in India’s energy exports. However, a significant drop in this category occurred in 2018-19 when exports plummeted to USD 429.20 million. This decrease can be attributed to global oil market dynamics and Saudi Arabia’s efforts to diversify its economy away from oil dependence. The latest data for 2022-23 shows a partial recovery to USD 1,927.10 million, indicating that petroleum exports still hold importance in the bilateral trade relationship.

India’s trade deficit with Saudi Arabia is primarily driven by its increasing imports of petroleum and manufactured goods. Additionally, enhancing exports in categories like agricultural products and ores and minerals can help balance the trade relationship with Saudi Arabia. Addressing this trade deficit will be crucial for India’s economic stability and growth in the long run.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.