India’s trade deficit is continuously increasing. A trade deficit means you are buying more of what you need, but not making something that other countries want to buy. India’s trade deficit widened to a record $25.63 billion in June, driven by imports and slower exports of petroleum, coal and gold, raising concerns about a further depreciation in the rupee and a larger current account deficit (CAD).
According to preliminary data released by the commerce ministry on Monday, exports stood at $37.94 billion in June, a record for the third month in any fiscal year. However, sequentially, growth was slower than the 20.6% recorded in May, when in the full period, outbound shipments rose to $38.9 billion.
However, imports rose to $63.6 billion in June from $42.1 billion a year ago. While a rise in imports indicates an improvement in domestic demand (even non-oil and non-gems and jewelery imports rose 31.7% in June), it will put pressure on the current account deficit (CAD), which is estimated It is projected to double in FY23 by Fitch Ratings about 3.1% of GDP.
Last month, India’s exports increased by about $ 38 billion. India’s coal imports have more than tripled. At the same time, there has been an increase of 169% in the import of gold and this figure has crossed $ 2.6 billion. Petroleum imports have also increased by 94.2%.
The share of non-petroleum imports stood at $42.84 billion in June, an increase of 36.4%. At the same time, the import of silver and other expensive metals has also increased by 31.7%.
ICRA Chief Economist Aditi Nair said, “Despite the expected reduction in gold imports, the trade deficit remains dismal. The current account deficit doubled to $30 billion in the first quarter of 2022-23. The loss in the previous quarter was $13 billion. “India’s top 10 export products have declined.
Last year, engineering goods were the major contributor to exports and declined by 1.6%. Exports of medicines and pharma products also declined by 1.3%. Exports of cotton and handloom products declined by 22.5%. Along with this, the export of plastic and linoleum also declined by 23.2%.
ICRA chief economist Aditi Nayar, the chief economist at rating firm ICRA, told The Hindu, “Gold import growth in 2021 was driven by suppressed demand in 2020. We expect it to be capped at $30-35 billion in this calendar year. The shortfall was due to the third wave of corona and related sanctions for gold. Due to the reduction in gold imports, the trade deficit has hit the lowest level of $17.4 billion in the last five months. But now the demand for gold is increasing again.
Fresh challenges in global supply chains, restrictions on exports of wheat and supply of iron ore and select steel products are also going to affect the country’s export performance in June.
The import bill was propelled by a massive 242% year-on-year jump in coal imports to $6.4 billion and a steady increase in purchases of crude oil and petroleum products (94%) and gold (169%). The jump in the prices of crude oil and coal acted to increase the import bill of a pure commodity importer like India.
Among the high-value segments, export growth in June was led by petroleum products (98%), followed by electronics (51%) and clothing (45%). At $26.8 billion, growth in core exports (excluding petroleum and gems and jewellery) slowed to 4% in June, from 8.6% in the previous month. A Sakthivel, president of apex exporters’ body FIEO, said while the growth in exports is a good sign despite external constraints, the huge increase in imports is a matter of concern.
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