What can we learn from India, Europe and Indonesia's latest balance of trade figures?

The Eurozone, India and Indonesia all released their latest balance of trade figures today. While India and Indonesia’s were both on its December figures, the Euro area was only reporting its November figures.

What are balance of trade numbers?

Although much attention is placed on GDP figures for countries, and whether or not they’ve grown or shrunk, balance of trade figures can be just as illuminating.

When it comes to a region’s trade balance, having more exports than imports (i.e. a trade surplus) means having more trade income than expenditure.

The opposite is also true: a rise in importing costs and a reduction in exports (i.e. a trade deficit) means that the country is spending more than it’s earning when it comes to trade.

The trade balance numbers between India, Indonesia and Europe at a glance

• India’s balance of trade is roughly negative $21.89 billion
• Indonesia’s balance of trade in 2023: A surplus of $36.93 billion
• The Euro area’s balance of trade YoY in November 2023: A surplus of €20.3 billion

This means that, while the EU and Indonesia both have less impressive export figures than India, they’re both operating at a trade surplus, while India is at a trade deficit currently.

Are trade deficits bad or good?

This is where things get more nuanced. According to the IMF, a trade deficit is neither bad nor good – it all depends on the context.

While a trade deficit for a long period of time can be a sign of economic distress in a region, a temporary trade deficit can be a compelling sign that the area is growing economically. That’s because a negative balance of trade in the country or region may signify that there are suddenly not enough goods and services to go around, because the needs of the country have expanded.

Academics Blavasciunaite, Garsviene and Matuzeviciute, who in 2020 studied trade balance’s effects on economic growth in 28 different European countries, also found that whether or not a country was in trade deficit was immaterial compared to whether or not that state was worsening:

India’s November balance of trade in more detail

According to the Indian government, India’s balance of trade is roughly estimated to be negative $21.89 billion from April to December 2023 so far, compared to the previous year’s negative $13.64 billion.

But this is somewhat an apples for oranges comparison, as we’re comparing India’s December figures with Europe’s November ones. But, according to the Indian government, the country’s exports (consisting of both merchandise and services) grew 1.23 percent YoY in November 2023, compared to a 6.16 percent drop in overall imports.

Indonesia’s 2023 balance of trade in more detail

Indonesia, too, recorded a significant fall in exports (down 11.33 percent in 2023 YoY) compared with its less dramatic imports story, which was also down 6.55 percent in 2023 compared with 2022.

Europe’s November balance of trade in more detail 

According to the European commission’s Eurostat, the euro area exports of goods to the rest of the world in November 2023 decreased 4.7 percent compared with November 2022.

However, at the same time, its imports from the rest of the world also decreased by a substantial 16.7 percent, giving the region a €20.3 billion surplus in trade in goods with the rest of the world in November 2023, compared with a deficit of €13.8 billion in November 2022.

Europe's parliament: what these figures actually mean

According to the European parliament, “trade balances need to be considered as an integral part of a larger whole, the balance of payments of an economy”. In this way, they can represent “the degree of an economy's openness with the rest of the world”.

Perhaps then it is India, with its increased exports, yet also increased trade deficit, which is more open to the world than Indonesia and the EU, with their surplus, yet shrinking imports and exports.