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regular-article-logo Friday, 19 July 2024

Trade deficit widens to $23.7 billion in May due to rising imports, slow exports

Export growth was attributed to strong performance in sectors such as engineering, electronics, pharmaceuticals, textiles, and plastics. This resilience comes despite global economic uncertainties

Our Special Correspondent New Delhi Published 15.06.24, 10:56 AM
Merchandise exports grew for the second consecutive month in May, reaching $38.13 billion

Merchandise exports grew for the second consecutive month in May, reaching $38.13 billion File picture

India’s trade deficit in May rose to $23.78 billion, a seven-month high, surpassing the previous peak of $31.46 billion recorded in October 2023. The combined effect of rising imports and healthy but slower export growth resulted in a widening trade deficit.

Merchandise exports grew for the second consecutive month in May, reaching $38.13 billion, a 9.1 per cent increase year-on-year, according to government data. However, this positive export performance was overshadowed by a significant import rise, leading to a widening trade deficit.

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Export growth was attributed to strong performance in sectors such as engineering, electronics, pharmaceuticals, textiles, and plastics. This resilience comes despite global economic uncertainties.

Commerce secretary Sunil Barthwal expressed optimism for a sustained upward trend, citing easing inflation in developed economies.

Imports jumped 7.7 per cent to $61.91 billion in May compared with the same month last year. This surge was primarily driven by a 28 per cent increase in crude oil imports, which reached $20 billion.

The rising cost of oil imports has been a consistent trend, with a 24.4 per cent increase recorded in the April-May period.

Despite the widening gap, Barthwal downplayed concerns, emphasising India’s strong economic growth compared with the global average.

He argued that this growth naturally leads to higher domestic demand for imports, potentially reducing exportable surplus.

FIEO president Ashwani Kumar emphasised the need for continued growth projections to ensure the sector’s sustained health.

Easwaran Subramanian, partner and supply chain leader, Deloitte India, said: “With a positive outlook for global trade, we are likely to see a boost in India’s merchandise exports. This will have a positive impact on India’s global value chain participation. Key sectors to watch include mechanical and electrical equipment/machinery, electronics including mobile devices, apparel and textiles.”

Aditi Nayar, chief economist at Icra, expressed concern about the rising trade deficit in May.

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