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The trade deficit of India expanded to $31.02 billion in July month with a contraction in exports and a huge surge in the import of goods for the first time in 20 months.
The merchandise exports in July month declined by 0.76% from the same period a year ago to $37.24 billion, while imports grew 44% to $66.26 billion during the month due to the weakening of the rupee and high commodity prices.
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As a result, the trade deficit—the gap between exports and imports—tripled from the $10.63 billion reported in July last year.
The widening deficit is likely to exert pressure on the rupee, which has been appreciating against the dollar in the past few days after touching a lifetime low of 80.16 two weeks ago. However, cooling commodity and energy prices on fears of a recession may temper any sharp depreciation of the rupee.
“While imports are expected to moderate on the back of easing commodity prices, a recession in the US and European markets may hurt exports,” some economists said.
In a press meet, on Tuesday, B.V.R. Subrahmanyam, secretary to the Commerce said “India’s exports are on course to touch $470-480 billion in the current fiscal and may reach $500 billion with a further push.”
Due to a reduction in the demands in western markets, key export sectors like engineering, gems and jewelry, petroleum, pharma, ready-made garments, and cotton yarn exports declined in July. The country’s restrictions on selling wheat, steel, iron, and petroleum products overseas could also be a factor influencing the exports.
Overall exports reported a decline of 12% in the month of July from $40.13 billion in June.
“Exports are down because the government made a conscious decision to constrain exports in some segments," Subrahmanyam said, adding that overseas companies restricted taking deliveries in anticipation of a drop in demand. “In textiles, some buyers have booked orders but not taken deliveries as they want to exhaust stocks," he said.
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