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India recorded the highest so far trade deficit of $25.63 billion in the month of June driven by an increase in imports of petroleum, coal, and gold and slow exports.
The stats released by the Ministry of Commerce and Industry showed that Indian exports for the month of June rose by 20.5% from May while they rose by 16.8% on a Y-o-Y basis, while the imports rose at a faster rate of 51% to $63.58 billion.
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"Given the global headwinds and dollar strength, coupled with the rising trade deficits, the INR may well weaken to 80-81/USD in Q2," according to Aditi Nayar, the chief economist at ICRA.
"As recession in the developed world is reducing demand for global goods exports, the WTO has already reduced its forecast and that is being reflected in Indian exports. Because of the high dependence of India on oil imports, it has led to a rising trade deficit, we expect the CAD at 3% of GDP but more worrying is the balance of payments deficit at $45-50 billion," said India Ratings and Research chief economist DK Pant.
“Export growth moderated due to the base effect, some correction in commodity prices, and global growth concerns. Imports exceeded expectations, led by crude and coal, underscoring India's import dependence and vulnerability to fuel price movements” Nayar said.
With the Rupee falling day by day, implying a weakened currency will lead to costlier imports, and with the rising inflation, the trade deficit could worsen further.
-by Gautam
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