New Delhi: India’s trade deficit grew by 45% in May to $6.21 billion compared with last year as imports leapt due to a rapidly growing economy, according to data released on 2 July.
The deficit, which was swelled by non-oil goods, was up from $4.26 billion in the same month in 2006.
Imports climbed by 26.4% to $18.07 billion in May from a year earlier while exports jumped 18% to $11.86 billion, data showed. Imports have been climbing on the back of a fast-expanding economy.
India’s economy posted 9.4% growth in the last financial year to March, the fastest pace in nearly two decades.
The trade deficit stood at $7.06 billion the previous month after rising from $3.8 billion in March, the Ministry of Commerce and Industry said
Export growth was slower in May compared to the 23.06% year-on-year growth achieved last month.
“The export performance in May reflects execution of old orders by exporters. The rupee rise impact may be visible from July onward,” Commerce and Industry Minister Kamal Nath said.
The rupee has risen nearly nine percent against the dollar so far this year as investors pump money into the South Asian economy.
Fuelled by fast economic growth, non-oil imports jumped by a strong 41.58% to $13.33 billion in May compared with $9.42 billion in the same month last year.
Cumulatively for April-May in the current fiscal, exports rose 20.37% to $22.43 billion. Imports for this period climbed by 33.05% to $35.71 billion.
The value of oil imports dropped by 2.99% to $4.74 billion in May from $4.88 billion in the same month of the previous year.
“We expect the current account to worsen in full year 2008 due to the recent large appreciation in the rupee,” said brokerage Goldman Sachs in a research note.
“The rupee has appreciated by 8.8% in the year to date, which is expected to widen the trade deficit significantly,” it said.
“The May trade data emphasizes that trend,” it said.
“Outsized capital inflows will maintain pressure on the rupee to appreciate,” Rajeev Malik, senior economist at JP Morgan Chase in Singapore, added.