CDS (II) 2020 General Knowledge · Question 31 of 120

Correct — C, USA. The United States is the one large partner India sells more to than it buys from, and it has been so without a break through the period the question names. The US Census Bureau's country series records an American goods deficit with India in every single year from 2014 onward — the mirror image of an Indian surplus. In 2019, the last full year before this paper was written, American exports to India were about $34.2 billion against imports from India of about $57.9 billion, leaving India roughly $23.7 billion ahead. The pattern is structural rather than lucky: India sells the US software-linked services, pharmaceuticals, gems and jewellery, textiles and engineering goods, while what it buys back — aircraft, machinery, defence equipment, some crude and coal — has stayed smaller in value.

• (a)China — The opposite case, and by a wide margin. China is the single largest source of India's merchandise trade deficit — electronics, telecom equipment, machinery, organic chemicals and pharmaceutical intermediates flow in far faster than Indian iron ore, cotton and chemicals flow out.
• (b)Saudi Arabia — A crude-oil deficit. India imports the bulk of the petroleum it consumes, and Saudi Arabia has long been among its top two or three suppliers; nothing India exports there comes close to matching that bill.
• (d)Germany — Also a deficit. Germany sells India machinery, vehicles, electrical equipment and chemicals, which outweigh the textiles, leather goods and engineering items moving the other way.

Balance of trade is exports of goods minus imports of goods with a given partner. A surplus means the country sells more than it buys. India runs an overall merchandise deficit, financed largely by services exports and remittances, but the aggregate hides very different bilateral positions — a deep deficit with oil suppliers and with China, and a steady surplus with the United States and with several African and West Asian buyers.

The trick is to stop thinking about total trade volume and think about direction. China is India's biggest trade partner in several years and the obvious first guess, which is exactly why it is the wrong answer here. Saudi Arabia is crude oil, Germany is capital goods — both are things India buys. Only the US is a market where India is a net seller. Since the exam, that gap has widened rather than closed: the American goods deficit with India ran at about $23.9 billion in 2014 and about $45.7 billion in 2024, and it is the reason Indian exports to the US became a tariff issue in Washington.

• US Census Bureau data record an American goods trade deficit with India in every year from 2014 through the latest published year — that is, an Indian surplus throughout.
• For 2019: US exports to India about $34.2 billion, US imports from India about $57.9 billion.
• The gap has widened over time — about $23.9 billion in 2014, about $45.7 billion in 2024.
• India's largest bilateral goods deficits are with China and with its crude-oil suppliers, which is why neither can be the answer.
• India's overall merchandise account is in deficit; the surplus in question is bilateral, not national.

• Confusing 'largest trading partner' with 'partner we run a surplus with' — they are usually different countries.
• Assuming India's overall trade deficit means it runs a deficit with everyone.
• Reading a surplus in services trade as a surplus in merchandise trade.

Usually as a one-line factual pick on a bilateral trade position, or as a statements item mixing trade balance with the composition of exports.

• practice — not a real PYQ

  India's largest bilateral merchandise trade deficit in recent years has been with which one of the following countries?

  • (a)USA
  • (b)China
  • (c)Bangladesh
  • (d)Nepal

  Answer(b) China — imports of electronics, machinery and chemicals from China far exceed Indian exports to it, making China the single largest source of India's goods deficit.

• practice — not a real PYQ

  The balance of trade of a country refers to the difference between its

  • (a)exports and imports of goods
  • (b)exports and imports of goods and services
  • (c)total receipts and total payments on the capital account
  • (d)government revenue and government expenditure

  Answer(a) exports and imports of goods — services and transfers enter the wider current account, not the balance of trade.