New delhi: India’s trade deficit widened in May to a record $10.77 billion as the pace of export growth slowed and oil costs surged, official data showed on Tuesday, helping the rupee ease to a 15-month low.
Analysts said the relentless surge in global oil prices would keep pressure on the deficit and rupee in months ahead with demand for oil products in Asia’s third-largest economy seen remaining robust despite a hike in fuel prices.
“The rise in the oil import bill was expected as global prices have surged. The market was anticipating a high trade deficit and current account deficit,” said D.K. Joshi, principal economist at domestic rating agency CRISIL.
Data released by the Commerce and Industry Ministry showed India’s export growth slowed to a 14-month low of 12.9% in May, sharply down from expansion of 36.6% in April due in part to slowing sales in key markets like the United States.
Exports in the month stood at $13.78 billion, up slightly from $12.21 billion a year ago.
Imports grew by an annual 27.1% to $24.55 billion in May, driven mainly by oil purchases, which surged by 50.8% to $8.47 billion.
Global crude oil prices rose almost 16% in May to $130 a barrel at the end of the month. On Tuesday, oil was trading at just over $142 a barrel.
The trade deficit in May widened from $7.1 billion in the same month a year ago, and was up from $9.87 in April 2008.
For the first two months of the 2008/09 fiscal year, the deficit stood at $20.64 billion, higher than $13.92 billion in the same period of last year.
Analysts said the depreciating rupee would help revive export growth and improve profit margins of software exporting firms.
India raised retail fuel prices by about 10% in early June, sending annual inflation soaring to 13-year highs above 11%.