Home / Economy / Trade deficit at record $30 billion amid higher commodity prices
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India’s trade deficit swelled to a record $30 billion in July, as imports of goods surged despite curbs and merchandise exports contracted for the first time in 20 months to $36.27 billion amid fears of demand slowdown in large export markets such as US and EU.

The widening deficit is likely to exert pressure on rupee, which has appreciated slightly against the dollar after touching a lifetime low of 80.16. Moreover, economists said that easing commodity prices could ease the pressure on India’s import bill going forward.

Key export sectors, including engineering, gems and jewellery, petroleum, pharma, ready-made garments, and cotton yarn, recorded a decline in July because of dampening demand in western markets. Other factors that may affect exports include India’s restrictions on selling wheat, steel, iron and petroleum products overseas.

“Signs of a likely slowdown in exports can been seen as global inventories are pretty high and the merchandise exports is facing the triple whammy as there is again a shift in consumption from goods to the services with opening up of economies after Covid-19 pandemic and the inflation affecting all economies reducing the purchasing power. Besides, many economies entering the recession while some advanced ones already in recession.

The reduction in voyage time, with normalization of Covid disruptions, have also added to the inventory hike as goods which used to reach the West Coast of US in 150 days now reach in 60 days. The export figures have also been affected as the prices of most of the metal and commodities are falling, which has resulted in value-wise export realization," FIEO President, A Sakthivel said.

Experts said that the imports growth during is of concern and has been mainly on account of petroleum products; electronic goods, coal, coke and briquettes; Machinery, electrical & non-electrical among others.

Gold imports declined by 43.60% to $2.37 billion in July and were also lower than the $2.74 billion in June. The Centre hiked the import duty on gold from 10.75% to 15% 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, stood at $38.44 billion in July, growing 42.91% from a year earlier.

As for exports, engineering goods declined by 2.08% in July to $9.3 billion. Drugs and pharmaceuticals exports declined by 1.05% during the month to $2.12 billion.

Gems and jewellery and ready-made garments exports also reported a 5.21% and 0.60% contraction, respectively.

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