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View: Ten reasons why India's record trade deficit is worrying

India's merchandise trade deficit grew to a record $25.63 billion in June from $9.61 billion during the same period last year, stated the data released by the commerce ministry.

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By Latha Venkatesh  July 5, 2022, 12:09:56 AM IST (Updated)

2 Min Read
View: Ten reasons why India's record trade deficit is worrying
India's merchandise exports in June rose by 16.78 percent year-on-year to $37.94 billion while the trade deficit ballooned to a record $25.63 billion on account of a steep increase in gold and crude oil imports, according to the government's preliminary data released on Monday.


The export growth in June moderated from 20.55 percent in May and 48.34 percent in June 2021.

During the month under review, exports of engineering, pharmaceutical and plastic products recorded negative growth. Imports expanded by 51 percent to $63.58 billion in June compared to the year-ago month, the data showed.

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The trade deficit stood at $9.61 billion in June 2021. Cumulative exports in April-June 2022-23 rose by about 22.22 percent to $116.77 billion while imports increased 47.31 percent to $187.02 billion during the period.

The trade deficit during the first three months of this fiscal widened to $70.25 billion from $31.42 billion in the year-ago period.

Here are ten reasons why India's record trade deficit is worrying

1. India's June exports grew by 16.8 percent, but imports have grown three times faster at 51 percent.

2. India's April-June exports have grown 22 percent, but imports have grown 47 percent.

3. Yes, higher crude is a big culprit, but non-crude imports are also worryingly high. Non-crude exports are up 5.5 percent; non- crude imports are up 36 percent.

4. Latest duties and controls will hit petroleum product exports and May push up the trade deficit.

5. Gold imports are up 3x in June over year-ago; not sure they will fall because of the increased import tariffs.

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6. Big import items - crude, coal, electronics (chips), and chemicals not falling anytime soon.

7. At $70 billion trade deficit in Q1, the FY23 trade deficit can be $280-290 billion against $189 billion last year.

8. Current account inflows were $150 billion last year due to high software exports. Even assuming $160 billion of current inflows this year, the current account deficit (CAD) looks set to surpass three percent this year.

9. On the positive side, India has forex reserves of $600 billion; and globally many commodity prices are receding, though India benefits only when crude prices fall.

10. CAD not alarming yet; the rupee depreciating to Rs 80/$, should ensure a natural reduction in the trade deficit.
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