Trade gap widens

The country's trade deficit has widened to a more than five-year high of $18.02 billion in July, driven largely by a surge in oil and gold imports.

By Our Special Correspondent
  • Published 15.08.18
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New Delhi: The country's trade deficit has widened to a more than five-year high of $18.02 billion in July, driven largely by a surge in oil and gold imports.

Though merchandise exports rose 14.32 per cent year-on-year in July, the trade deficit widened as oil imports surged 57.41 per cent to $12.35 billion and gold imports spiked for the first time in seven months by 40 per cent to $2.96 billion. In June, the trade deficit stood at $16.6 billion.

Exports rose to $25.77 billion in July compared with $22.54 billion in the year-ago month and imports were valued at $43.79 billion, a growth of 28.81 per cent over $33.99 billion in the year ago period, the commerce ministry said in a statement on Tuesday.

"Rising trade deficit is primarily on account of higher crude import bill...This is adding pressure on the Indian rupee coupled with huge withdrawal by FIIs from the Indian debt & equity market," Fieo president G.K. Gupta said.

"The rupee depreciation would definitely provide some edge to Indian exports though its impact will vary from sector to sector...However, the textile industry may be at a disadvantage with sharp depreciation in the Turkish lira as Turkey is one of the competitors," Gupta added

As regards exports, the outward shipments of petroleum products grew from $3 billion in July last year to $3.9 billion, showing a growth of about 30 per cent. Export of gems and jewellery was up 24.62 per cent to $3.18 billion

"Factors such as broader emerging market currency movement, dollar strength, and the trend in crude oil prices will drive the outlook for the rupee in the immediate term, which will have an impact on the landed cost of imports," Aditi Nayar, principal economist at Icra, said.

She said "while merchandise exports printed in line with expectations, it is higher than anticipated non-oil imports that have led to the merchandise trade deficit being well above our forecasts, reinforcing concerns regarding the size of the eventual current account deficit in FY2019."