Trade Surplus

Reviewed by Anjaneyulu | Updated on Sep 28, 2020

Introduction

A trade surplus is an economic indicator of a positive trade balance in which the exports of a nation outweigh its imports. Trade balance can be arrived by reducing the total value of imports from the total value of exports.

If the value of the trade balance is positive, the trade surplus exists. A trade surplus reflects a net foreign-market inflow of domestic currency. The trade surplus is the opposite of a trade deficit, which is the net outflow, and it happens when the trade balance is negative.

Importance of Trade Surplus

A trade surplus can create employment and economic growth, but within an economy, it can also lead to higher prices and interest rates. The trade balance of a nation can also affect the value of its currency on global markets, as it allows a country to export most of its currency through trade.

In many situations, a trade surplus tends to boost the currency of a country relative to other currencies, influencing currency exchange rates. However, this depends on the proportion of a country's goods and services as compared to other countries, as well as other market factors.

Trade Surplus in India

The Ministry of Commerce and Industry issues trade balance in US dollars. The trade balance is derived from the International Monetary Fund before April 1990. India's trade balance registered a USD 11.3 billion deficit in December 2019, compared with a USD 12.2 billion deficit in the previous month.

India's Trade Balance data is updated monthly, with an average value of USD -369.7 million available from January 1957 to December 2019. The statistics hit an all-time high of USD 258.9 million in Mar 1977 and a record low of USD -20.2 billion in October 2012.

In the latest reports, India's total exports reached USD 27.4 billion in Dec 2019, a decrease of 1.6 % year on year. Total Imports recorded USD 38.6 billion in Dec 2019, a decrease of 8.8 % year on year.