ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Explaining the Persistently High Trade Deficit in India

Growth, Imports and Inequality

One of the striking features of the Indian economy in recent years has been a sharp rise in the share of the trade deficit in the gross domestic product. While the period of high GDP growth was characterised by an even faster widening of the trade deficit, the subsequent slowdown has not reduced the deficit proportionately. The widening of the trade deficit in GDP has been primarily due to a similar rise in the import-GDP ratio. One of the main reasons for the rise in the import-GDP ratio, and the persistence of a high trade deficit is rising inequality in the economy.

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