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India’s merchandise trade deficit widened to $20.11 billion in April compared to $15.29 billion in the year-ago period, driven by a higher cost of importing oil amid continued geopolitical concerns globally. Meanwhile, exports during April surged past the $40 billion mark, commerce ministry data showed on Friday.

Economists feared further widening of the trade deficit and current account deficit, which could weaken the rupee. The Indian rupee plunged to a record low of 77.63 against the dollar last week amid a broader decline in Asian currencies. However, a healthy forex reserve would contain further depreciation, they said.

“We expect the trade deficit to widen to an all-time high of $250-255 billion during the ongoing financial year. However, a robust services trade surplus is expected to temper the worsening in the current account deficit to $95-100 billion in FY23, 2.7% of gross domestic product (GDP), from $41.5-43.5 billion, 1.3% of GDP, in FY22," said Aditi Nayar, chief economist, ICRA.

Former chief statistician Pronab Sen said the export number looks good but much of it reflects high commodity prices globally. He added volumes need to pick up.

“The widening of the trade deficit will put pressure on the rupee and it will depreciate further. RBI will have to react as they have allowed things to go too far. Going forward, growth and employment could get hurt. Both fiscal and monetary policy have been expansionary but given the global scenario this wont work," Sen added.

Elevated commodity prices following the outbreak of the Russia-Ukraine conflict led merchandise imports to stay above $60 billion for the second month in a row. India’s imports last month jumped by nearly 31% to $60.30 billion against $46.04 billion during April 2021, largely driven by the higher import cost of silver, fertilizers, crude, coal, and petroleum products.

Official data showed that merchandise exports in April 2022 stood at $40.19 billion, compared to $30.75 billion in April 2021, logging a growth of 30.70%. Exports of petroleum products, electronic goods, cereals, and coffee drove the exports in April .

N.R. Bhanumurthy, vice-chancellor, Dr. B.R. Ambedkar School of Economics University, said a lot of lumpy payments related to capital goods tend to arrive in April which could have also resulted in higher import numbers. 

Oil prices may not have had a large impact on imports as prices were not as high as they were in March, he added.

“A sharp reduction in gold imports is a positive sign. Gold imports coming down indicates that economic risks are coming down. It means that we are shifting our focus to other investments," he added.

The ministry of commerce and industry said non-petroleum and non-gems and jewellery exports in April 2022 stood at $28.46 billion, up 19.89% against $23.74 billion in April 2021, while imports in the same category were $35.68 billion last month, up 34.37% over $26.55 billion in April 2021.

Services exports jumped 52.87% in April to $27.60 billion against $18.06 billion a year ago. Imports jumped at a faster pace to $15.57 billion, up 61.87% leaving a trade balance of $12.03 billion.

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