India’s trade deficit widens to $28.68 bn in August as imports rise sharply

India’s trade deficit widened to $28.68 bn during August as imports climbed sharply by 37% to $61.68 billion but exports decline marginally to $33 billion, official data released by the commerce and industry ministry released late on Saturday showed.

Amid fears of demand slowdown in large export markets such as the US and EU and a prolonged lockdown in China, India’s exports in August declined to $33 billion compared to $36.27 billion in July.

“Imports of petroleum products form a large share of import and its been rising as coal and petroleum are being stocked to ensure energy security. Ports are chocked with coal at the moment. Rising imports are not a concern as it is feeding into exports. We need to focus on boosting exports.

After hitting $420 bn merchandise exports in FY21, our exports could surge to $450 bn in FY22. This is a conservative estimate, we expect the exports to hit $470 bn. Besides services exports are expected to do well this year. The over exports is estimated to hit $750 bn,” Commerce Secretary BVR Subrahmanyam said at a press conference on Saturday.

Meanwhile, oil imports jumped by 86.44% to $17.6 billion while gold imports declined by 47.54% to $3.51 billion after the government increased the customs duty on gold from 7.5 per cent to 12.5 per cent on July 1 this year.

Economists pointed out that crude and coal dominated the increase in imports, in line with the trend in recent months and that the non-oil deficit accounted for nearly 60% of the total trade deficit in august 2022, even though gold imports halved on a YoY basis.

“The y-o-y dip in exports, led by sectors such as engineering goods, gems and jewellery and yarns and textiles suggests a cautious outlook for external demand going ahead,” Aditi Nayar, chief economist, ICRA said.

A high increase in import values in August 2022 has been witnessed in the following major commodity groups Coal, Coke & Briquettes, etc.(133.64%), Petroleum, Crude & products (86.44%), Organic & Inorganic Chemicals (42.73%), Vegetable Oil (41.55%), commerce and industry ministry said.

“For a number of global factors, growth in engineering goods exports has come down in the last few months. The decline in demand from China and recessionary trends in major economies in the West have contributed to the slowdown in exports. The pace of growth also slackened due to export duty on certain steel products including stainless steel products,” EEPC India Chairman Mahesh Desai said.

Amongst the major products, exports of Electronic goods (50.68%), Rice (42.32%), and Organic and Inorganic chemicals (13.35%) registered impressive growth during August 2022, the ministry added.

Desai further said that a fair amount of uncertainty remains due to the looming recession in major economies in the wake of the ongoing Russia-Ukraine conflict and depending on the extent of the recession, Indian engineering exporters would be impacted but it is likely to be more hit the MSMEs which have grappled with back-to-back challenges such as covid-19 crisis and the subsequent spike in raw material prices.