When the value of a country's imports of goods exceeds the value of its exports, it is called a:

The balance of trade is the difference between the value of a country's exports and imports of goods (visible items) during a given period. When the value of imports is greater than the value of exports, the country has a trade deficit, or an unfavourable balance of trade. When exports are greater than imports, it has a trade surplus, or a favourable balance of trade.

India has had a trade deficit in goods almost every year since Independence. In recent years, India's merchandise trade deficit has been large, roughly 240 to 280 billion US dollars a year. The main reasons are:

Large imports of crude oil and petroleum products, since India imports more than 85% of the crude oil it uses.

Imports of gold, electronics, coal, machinery, edible oils and fertilisers.

China is the country with which India has its largest bilateral trade deficit.

However, India usually earns a surplus in services trade, especially from software and IT-enabled services, and receives large remittances from Indians working abroad. These "invisibles" reduce the overall current account deficit (CAD). The current account deficit is the more complete measure, because it includes goods, services, income and transfers.

A persistent trade deficit can weaken the currency, increase foreign borrowing and drain foreign exchange reserves. Governments try to reduce it by promoting exports (through schemes such as Production Linked Incentive schemes and the Foreign Trade Policy), substituting imports with domestic production (Make in India and Atmanirbhar Bharat), and reducing dependence on imported oil through renewable energy.

Why not the other options?

• ✗Fiscal deficit is the gap between the government's total expenditure and its non-borrowed receipts.
• ✗Trade surplus is when exports exceed imports.
• ✗Revenue deficit is the excess of the government's revenue expenditure over revenue receipts.