<p>As India strides toward its ambitious goal of becoming a $5-trillion economy by 2027, one stubborn shadow looms large: our chronic trade deficit. In August, the merchandise trade gap narrowed to $26.5 billion, a welcome dip from the previous month’s $27.4 billion, thanks to a 6.7% surge in exports to $35.1 billion. Yet, this fleeting relief masks a deeper malaise. Imports, clocking in at $61.6 billion that month, continue to outpace our outbound shipments, draining foreign exchange reserves and pressuring the rupee. The culprit? Not just global headwinds or geopolitical tensions or even President Trump’s tariffs, but our own evolving consumption patterns.</p>.<p>India’s affinity for foreign gadgets, baubles, and industrial raw materials has kept the import tap wide open. A burgeoning middle class, now numbering over 400 million, has kept this surge alive in India’s malls and e-commerce sites. This isn’t mere indulgence; it signals a seismic shift in lifestyle. Over the past decade, India’s imports have ballooned by 7% annually, from $450 billion in 2013-14 to a staggering $716 billion in 2022-23, fuelled precisely by this domestic demand. Electrical machinery and equipment, including consumer electronics, rank as the second-largest import category in 2025, trailing only petroleum fuels. We’re not just buying convenience; we’re outsourcing our economic sovereignty.</p>.<p>But it’s not all about bling and bytes. India’s industrial engine, revving toward self-reliance under the banner of ‘Make in India’, guzzles raw materials from abroad like there’s no tomorrow. Crude oil and petroleum products top the import charts. They account for nearly a quarter of our total inflows annually, by conservative estimates. Why? Our refineries and factories depend on this black gold to power everything from our SUVs to the steel girders of our gleaming skyscrapers. Add to that gems and precious metals, and machinery for the assembly lines that still prioritise cheap foreign parts over homegrown innovation.</p>.<p>Critics might argue that trade deficits are a badge of a growing economy – after all, even the United States, the world’s largest importer, thrives on them. But for India, with its fragile balance of payments and a current account deficit that hovers around 2% of GDP, this is no luxury we can afford. Each billion-dollar shortfall erodes investor confidence, inflates import costs, and diverts resources from investments in critical sectors such as education and infrastructure. Worse, it perpetuates a vicious cycle: A weaker rupee makes those foreign oils and gadgets even pricier, squeezing household budgets and slowing domestic consumption further. Recent data shows domestic spending already softening due to stagnant wages and inflation, yet our import reliance shows no signs of abating.</p>.<p>Looking inward</p>.<p>The root lies in our consumption DNA. Urban India’s love affair with global brands isn’t accidental; it’s engineered by aggressive marketing and a colonial hangover that equates “foreign” with “superior”. Meanwhile, industries cite “cost efficiencies” for sourcing raw materials overseas, ignoring the long-term toll on local suppliers. China’s shadow looms here too – our imports from Beijing alone swelled to $126.96 billion in 2024, dominated by electronics and chemicals, ballooning the bilateral deficit to nearly $100 billion.</p>.<p>So, how do we break free? First, we must recalibrate our consumption. It is time to launch a national “buy local, build strong” campaign. This should go beyond slogans and come with teeth: Tax breaks for domestic electronics and luxury imports, coupled with subsidies for indigenous brands. Second, we must fast-track our raw material security. There is a need to accelerate green energy transitions – solar and wind could slash oil imports by 20% in five years – while investing in domestic mining for critical minerals. Third, exports need to be supercharged by targeting high-value niches. Pharma, IT services, and organic textiles already shine, but we must diversify beyond gems and textiles to match our import diversity.</p>.<p>India’s story is not one of deficit doom but of untapped potential. Our services surplus proves that we’re world-beaters when we play to our strengths. Yet, until we tame our import beast through mindful consumption and bold policy, the trade imbalance will remain a millstone around our neck. It is time for the policymakers to lead by example. Swadeshi cannot be a mere punchline; it must be an informed strategy. The middle class and its patterns of consumption will be integral to this transformational shift. In a world of finite resources, sustainable consumption isn’t optional; it’s our economic lifeline. It is time to consume smarter, not harder.</p>.<p>(The writer is an assistant professor of Economics at the Centre for Economic and Social Studies [CESS], Hyderabad)</p>.<p>Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.<br></p>
<p>As India strides toward its ambitious goal of becoming a $5-trillion economy by 2027, one stubborn shadow looms large: our chronic trade deficit. In August, the merchandise trade gap narrowed to $26.5 billion, a welcome dip from the previous month’s $27.4 billion, thanks to a 6.7% surge in exports to $35.1 billion. Yet, this fleeting relief masks a deeper malaise. Imports, clocking in at $61.6 billion that month, continue to outpace our outbound shipments, draining foreign exchange reserves and pressuring the rupee. The culprit? Not just global headwinds or geopolitical tensions or even President Trump’s tariffs, but our own evolving consumption patterns.</p>.<p>India’s affinity for foreign gadgets, baubles, and industrial raw materials has kept the import tap wide open. A burgeoning middle class, now numbering over 400 million, has kept this surge alive in India’s malls and e-commerce sites. This isn’t mere indulgence; it signals a seismic shift in lifestyle. Over the past decade, India’s imports have ballooned by 7% annually, from $450 billion in 2013-14 to a staggering $716 billion in 2022-23, fuelled precisely by this domestic demand. Electrical machinery and equipment, including consumer electronics, rank as the second-largest import category in 2025, trailing only petroleum fuels. We’re not just buying convenience; we’re outsourcing our economic sovereignty.</p>.<p>But it’s not all about bling and bytes. India’s industrial engine, revving toward self-reliance under the banner of ‘Make in India’, guzzles raw materials from abroad like there’s no tomorrow. Crude oil and petroleum products top the import charts. They account for nearly a quarter of our total inflows annually, by conservative estimates. Why? Our refineries and factories depend on this black gold to power everything from our SUVs to the steel girders of our gleaming skyscrapers. Add to that gems and precious metals, and machinery for the assembly lines that still prioritise cheap foreign parts over homegrown innovation.</p>.<p>Critics might argue that trade deficits are a badge of a growing economy – after all, even the United States, the world’s largest importer, thrives on them. But for India, with its fragile balance of payments and a current account deficit that hovers around 2% of GDP, this is no luxury we can afford. Each billion-dollar shortfall erodes investor confidence, inflates import costs, and diverts resources from investments in critical sectors such as education and infrastructure. Worse, it perpetuates a vicious cycle: A weaker rupee makes those foreign oils and gadgets even pricier, squeezing household budgets and slowing domestic consumption further. Recent data shows domestic spending already softening due to stagnant wages and inflation, yet our import reliance shows no signs of abating.</p>.<p>Looking inward</p>.<p>The root lies in our consumption DNA. Urban India’s love affair with global brands isn’t accidental; it’s engineered by aggressive marketing and a colonial hangover that equates “foreign” with “superior”. Meanwhile, industries cite “cost efficiencies” for sourcing raw materials overseas, ignoring the long-term toll on local suppliers. China’s shadow looms here too – our imports from Beijing alone swelled to $126.96 billion in 2024, dominated by electronics and chemicals, ballooning the bilateral deficit to nearly $100 billion.</p>.<p>So, how do we break free? First, we must recalibrate our consumption. It is time to launch a national “buy local, build strong” campaign. This should go beyond slogans and come with teeth: Tax breaks for domestic electronics and luxury imports, coupled with subsidies for indigenous brands. Second, we must fast-track our raw material security. There is a need to accelerate green energy transitions – solar and wind could slash oil imports by 20% in five years – while investing in domestic mining for critical minerals. Third, exports need to be supercharged by targeting high-value niches. Pharma, IT services, and organic textiles already shine, but we must diversify beyond gems and textiles to match our import diversity.</p>.<p>India’s story is not one of deficit doom but of untapped potential. Our services surplus proves that we’re world-beaters when we play to our strengths. Yet, until we tame our import beast through mindful consumption and bold policy, the trade imbalance will remain a millstone around our neck. It is time for the policymakers to lead by example. Swadeshi cannot be a mere punchline; it must be an informed strategy. The middle class and its patterns of consumption will be integral to this transformational shift. In a world of finite resources, sustainable consumption isn’t optional; it’s our economic lifeline. It is time to consume smarter, not harder.</p>.<p>(The writer is an assistant professor of Economics at the Centre for Economic and Social Studies [CESS], Hyderabad)</p>.<p>Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.<br></p>
