India exported goods worth USD 37.29 billion in December 2021—the highest-ever in a month—posting a 37 percent year-on-year growth. The country’s imported goods also touched a fresh historical high as they rose 38 percent to USD 59.27 billion. With this, the trade deficit has increased to USD 22 billion from USD 22.9 billion in November.
The rise in exports was led by petroleum products, gems-jewellery, and engineering goods while that of imports was led by crude oil, gold, and electronic goods. The non-oil non-gold imports, which is a key indicator for domestic demand continues to accelerate, rising by over 34.2 percent YoY.
“The surge in exports remains a bright spot, supported by large stimulus in domestic markets and rise in commodity prices. The Omicron variant is expected to be less disruptive than delta and we could see strength persist in the remaining months,” an IDFC First Bank report said.
The trade deficit has risen to 7.5 percent of GDP in the third quarter of FY22 from 5.9 percent in second quarter. It will result in current account deficit (CAD) widening to 3.2 percent of GDP in the third quarter of FY22 from 1.3 percent in the second quarter. The wider CAD, combined with rising FPI outflows, has resulted in the Balance of Payment (BoP) surplus shrinking. This is also reflected in the fall in forex reserves in Q3 by USD 3.6 billion. The FX reserves had risen in Q2 to USD 30 billion.
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