It would be best to be cautious about the 20% year-on-year growth in exports in May.

The growth is mainly on account of a spurt in the export of petroleum products, which are up 104% from a year ago. As a note by Edelweiss Securities Pvt. Ltd points out, perhaps the bunching up of oil exports in May led to this extraordinary rise.

Non-oil export growth was 10.1%, but that was due to the base effect. Indeed, non-oil exports in May 2018 were lower than in March 2018, December 2017, September 2017 and also March 2017.

What about imports? To be sure, the higher oil price led to a 49.5% year-on-year rise in the oil import bill for May 2018. But even non-oil, non-gold imports went up 13.3% year-on-year, although here too, there was a substantial base effect involved.

Lower oil prices in June will bring some relief, but the headwinds to export growth on account of rising protectionism and an increase in capital goods imports as investment demand comes back will continue to pose risks to the trade deficit.

Says the Edelweiss note, “We expect the trade deficit to remain elevated. This along with moderating FDI, tightening global liquidity, mounting trade war concerns, and slowing global growth make INR susceptible to further depreciation." FDI stands for foreign direct investment and INR is the Indian rupee.