BackIndia's May trade deficit widens to 5-month high of $22 billion; exports at $34.9 billion; check details
Trade deficit data in May 2023: Merchandise exports fell 10.3 per cent to $34.98 billion from a year earlier in May, while imports declined 6.6 per cent annually to $57.10 billion.
PremiumThe country's merchandise trade deficit in good rose to a five-month high of $22.12 billion in May 2023, according to government data released on June 15. Merchandise exports fell 10.3 per cent to $34.98 billion from a year earlier in May, while imports declined 6.6 per cent annually to $57.10 billion, showed foreign trade data released by the Ministry of Commerce.
Exports dropped last month due to sluggish demand from major buyers overseas. Services exports were $25.30 billion and imports $13.53 billion, according to the data. However, the country's overall trade deficit has narrowed to $10.35 billion in May 2023, as compared to $12.20 billion in the year-ago period.
Also Read: India's exports fall 12.7% to $34.66 billion in April
The wider trade gap highlights the challenges for the economy trying to recover from the scars of the pandemic and higher borrowing costs. It is a risk for the nation’s current account deficit, which can affect investor sentiment and hurt appeal of the local currency.
The services sector is providing some reprieve for now. India’s services exports are booming owing to a sharp jump in information technology and business consulting work. It is estimated to rise to $25.3 billion in May.
The exports in the services category came in at $25.30 billion in May, which is similar to $25.13 billion recorded in the year-ago period. The imports in this category dropped to $13.53 billion, which is nearly 11 per cent lower as against $15.20 billion reported in May 2022.
In the last two years, India's exports jumped from $500 billion to $767 billion in 2022-23. Commerce Secretary Sunil Barthwal earlier said that headwinds still continue on the global trade front.
"There's a slowdown in many developed countries and there is a fall in their GDP growth rates also, consequent to that their import demand ... is quite low," said Barthwal. The Department of Commerce and Department for Promotion of Industry and Internal Trade are working on an exports strategy and focusing on 40 countries, Barthwal added.
Economists foresee India's current account deficit (CAD) to widen in the first quarter of current fiscal after trade deficit data print for May 2023.
"While lower commodity prices led to a 6.6 per cent YoY contraction in merchandise imports in May 2023, some key items such as iron and steel, machine tools, machinery, electronic goods, fertilisers and pharma witnessed a YoY expansion, which led to a sequential rise in overall imports,'' said Aditi Nayar, Chief Economist and Head Research and Outreach, ICRA Ltd.
‘’The month of May typically tends to see higher imports of several items such as fertiliser, gold, fuels, etc vis-a-vis April. The available trade data for April-May 2023 suggests that the CAD is likely to widen to ~$10-12 billion in Q1 FY2024 from ~$2 billion expected in Q4 FY2023, while remaining manageable at ~1.2 per cent of GDP,'' added Nayar.
Meanwhile, the Indian rupee halted a four-day winning streak against the U.S. dollar on Thursday, as domestic trade deficit widened to a five-month high and the US Federal Reserve signalled more rate hikes. The rupee ended at 82.1750 to the dollar against previous close of 82.0950. The currency had hit a five-week high of 82.03 on the back of dollar inflows, according to news agency Reuters.
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