New Delhi [India], October 30 (ANI): India's trade deficit is likely to persist as long as the country remains dependent on oil imports, although rising exports of value-added petroleum products are helping narrow the gap, K. Rangarajan, Vice-Chancellor of the Indian Institute of Foreign Trade (IIFT), said on Friday.

"Trade deficit will continue to be there till the time we have more and more dependence on oil. It cannot be reduced, but it is getting somewhat reduced because of those value addition," Rangarajan told ANI in an exclusive interview.

Explaining the factors behind India's trade deficit, he said the country's dependence on imported oil remained a structural challenge.

However, India has emerged as an important destination for refining and exporting value-added petroleum products, particularly following disruptions caused by the war and the Middle East crisis. Refining activities and subsequent exports were helping partly offset the impact of oil imports, he added.

On India's foreign trade outlook for FY27, Rangarajan expressed optimism about the country's ability to surpass the USD 1 trillion export milestone, citing a more conducive environment for external engagements.

"I am also very optimistic about it. We will be able to surpass that $1 trillion as well. So, it should not be a surprise," he said, adding that his optimism was based on the emerging global trade landscape.

On the broader economic outlook, he estimated that India's growth rate could reach around 6-7 per cent, supported by expanding external engagements and changing geopolitical dynamics.

Highlighting the challenges facing the manufacturing sector, Rangarajan said government policy announcements and industry-friendly interventions alone would not be sufficient to improve competitiveness.

Their effective implementation at the ground level, including by state governments, and the industry's ability to adapt to changing trade conditions would be equally important, he said.

He said businesses needed to understand the implications of free trade agreements (FTAs), including product-specific tariff concessions, tariff lines and rules of origin, rather than leaving such assessments entirely to policymakers.

Describing India's new-generation FTAs as more comprehensive, he said they were no longer limited to tariff reductions but also covered supply chains and services. The industry needed to adapt to these integrated arrangements to translate market access into higher exports.

Citing the India-UAE trade agreement, he said exports had started increasing following its implementation. He expressed optimism about the benefits of other agreements, including the India-New Zealand FTA, while indicating that the European Union agreement could also be implemented and an arrangement with the United States was on the horizon.

On concerns over US President Donald Trump's tariff policies, Rangarajan said frequent changes, additional conditions and uncertainty surrounding tariffs could eventually put pressure on the US market itself.

"The market and its tolerance make a difference," he said, pointing out that China continued to emerge as a major exporter to the US despite the imposition of tariffs as high as 100 per cent.

On foreign investment, he said India needed greater inflows into technology and digital sectors to strengthen its ambition of becoming a global manufacturing hub.

At the same time, overseas investments by Indian companies were increasingly becoming strategic, allowing businesses to explore alternative production and export destinations amid tariff-related uncertainties.

Addressing geopolitical disruptions in West Asia, including concerns surrounding the Strait of Hormuz and the Red Sea, he said India was relatively better positioned because of its diplomatic relationships with various countries.

He noted that global trade was estimated to grow by around 1 per cent, while growth in the ASEAN region and India was projected to exceed 2 per cent.

Rangarajan said India's diplomatic engagement had helped it navigate disruptions during the Russia-Ukraine conflict and other international crises. He also expressed confidence that India could contribute to rebuilding countries affected by wars and infrastructure destruction.

"Whenever there are problems in other countries, India is the first country to help, be it in our neighbour Nepal or somewhere in Africa," he said, adding that India could play a significant role in supporting reconstruction efforts while strengthening its own trade prospects. (ANI)