Lately, external trade has emerged as a critical component in India's growth engine. At its peak in FY13, trade accounted 55.8% of India's GDP. However, post FY13, scenario changed due to sluggish global growth and rising protectionism. As a result, contribution of trade to India's GDP declined with private consumption and government spending supporting the growth momentum. Based on FY18 estimates, trade contribution to economy decreased to 40.6%.
On the import side, a 25.7% surge in petroleum/petroleum product imports coupled with a 32.1% rise in gold, silver and precious stones imports, led to the overall import registering a growth of 19.7% to USD459.7 billion in FY18. The proportion of these two commodities in total import during FY14-FY18 was 41.4%.
Organic/inorganic chemicals and engineering goods exports registered a 10.0% yoy growth to USD302.8 billion in FY18 led by the surge in petroleum products. Despite this double-digit growth, exports in FY18 were lower than FY15. India's trade relations have increased significantly with Asian peers over the years driven by the Look East policy. Trade with China witnessed a CAGR of 7.4% over FY10-FY18, largely driven by imports. As a result, trade deficit with China widened to USD57.9 billion in 11MFY18 (FY10: USD19.2 billion). On the other hand, demand from Asian countries such as Bangladesh, Vietnam and Nepal contributed to the increase in exports.
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