India’s trade deficit more than doubled in June to $7.33 billion (Rs29,881 crore), on the back of a 52.3% jump in non-oil imports, while exports, under pressure of an appreciating rupee, rose at a much slower rate.
Data released by the commerce ministry showed exports grew only 14% in June to $11.87 billion, and averaged a growth of 18.1% during the first three months of the current financial year. Oil imports rose only by 4.2% in the month and all imports by 36.7%.
With the rupee having risen 6.75% against the dollar in the first quarter and with foreign inflows keeping up the pressure, analysts fear exports will slow further and end in a higher trade deficit.
An appreciating rupee has also made imports cheaper. While it may still be too early to ascertain this price effect, the latest data does reveal that non-oil imports have been surging in the quarter, growing on average by 50.36%.
“Strong import performance is commensurate with the booming economy,” said D.K. Joshi, director and principal economist, with Crisil said. Joshi added that the rupee’s rise “has given a further boost to imports, especially of capital goods and raw materials.”
The rupee has also affected exports. Against a growth target of 28%, exports rose 23% in April and 18% in May. Exporters are afraid that annual growth may even drop to 10%.
“Against a target of $160 million set by the ministry, we should be happy even if we get $135 million,” said Ajai Sahai, director general, Federation of Indian Export Organisations.
Joshi said that “exports, particularly of price-sensitive items like leather and textiles, have been hit.” But overall, “exports seem to be holding out because of good performance of commodities such as petroleum products.”
The government has already offered a $320 million relief package to exporters.