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NEW DELHI : India’s trade deficit widened to a record in June, adding further pressure on the Indian currency, which has hit new lows against the dollar in the past weeks.

The trade gap, the amount by which the value of a country’s imports exceeds its exports, rose to $25.63 billion in June, led by a surge in coal and oil imports amid soaring global prices, according to official data.

Widening gap
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Widening gap

Exports touched a four-month low in value terms. The rate of growth slowed sharply as inflation and recession fears in key markets, including the US and the European Union, dampened demand, with engineering goods, drugs and yarn reporting a decline in outbound shipments during last month.

Merchandise exports growth slowed for the third straight month in June to touch a four-month low of $37.94 billion, while imports surged by 51% to a record $63.58 billion from a year earlier, preliminary data released by the ministry of commerce and industry showed on Monday. The trade deficit was more than double the $9.37 billion in June last year.

The trade data comes days after the government hiked import duty on gold to rein in the widening current account deficit and arrest the rupee’s record decline against the dollar. It also imposed export tariffs on petrol, diesel, and jet fuel besides windfall taxes on crude production to improve domestic supplies and lower the import bill.

The rupee ended little changed against the dollar on Monday at 78.94.

Economists expect the trade deficit to remain elevated through the fiscal, with the current account deficit expected to widen to more than 3% of GDP in FY23 from 1.2% in the previous year. “With a steady uptick in the size of the merchandise trade deficit over the course of the quarter, we expect the current account deficit to more than double to $30 billion in the first quarter of FY23, from the modest $13 billion in the previous quarter," said Aditi Nayar, chief economist, ICRA. She added that the merchandise trade deficit is estimated to remain more than $20 billion in the remainder of 2022 and the current account deficit in the range of $100-105 billion, which is 3% of GDP in FY23. “However, robust services surpluses will partly absorb the shock," added Nayar.

Petroleum imports rose 94% in value in June to $20.73 billion from last year. The Centre imposed a cess or windfall tax of 23,250 per tonne on crude oil production and a special additional excise duty of 6, 13, and 6 per litre on export of petrol, diesel, and jet fuel, respectively, to ease domestic supplies.

Coal imports more than tripled in June to $6.4 billion, crossing the $5.4 billion import bill in May. Gold imports nearly tripled to $2.61 billion in June from a year earlier, even as it was sharply lower sequentially from $6 billion in May. The Centre on Friday hiked the import duty on gold to 15% from 10.75% amid a spike in yellow metal imports, with shipments exceeding 100 tonnes during these months.

The non-oil, non- gems and jewellery imports, which signify industrial activity in the economy, grew 31% to $36.7 billion in June, about half of the total imports.

Brent crude oil price has been volatile and stood at $111 per barrel on Monday. That compares with $113 in the same time last month, nearly $100 at the beginning of April and $139 in mid-March.

As for exports, engineering goods recorded a 1.57% decline in June to $9.19 billion from a year earlier. Drugs exports fell by 1.27% to $1.99 billion, while yarn and handloom exports declined 22.5% to $925 million.

Petroleum products, electronic goods, ready-made garments and gems and jewellery recorded a double-digit export growth in June at 98%, 51%, 45%, and 19.4%, respectively.

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