Wednesday, 07 December 2022

India's Trade deficit expands by 87.5% to a record $192

India's Trade deficit expands by 87.5% to a record $192

India's trade deficit rose by 87.5% to a record ₹192 billion in 2021-22 from ₹102 billion in the previous financial year, and government data showed on Monday. The increase was primarily due to the sharp rise in petroleum imports due to the surge in global crude oil prices.

While merchandise exports for FY22 were at a record high of $418 billion, imports rose 43.18% to $610 billion, leaving a trade gap of $192 billion. With this, India's merchandise trade crossed the $1 trillion milestones in FY22.

While merchandise exports grew by 43.18% in FY22, growth in outbound shipments for March slowed to a 13-month low of 14.53% to $40.38 billion, data released by the commerce and industry showed. Non-petroleum exports grew by a mere 4.28% year-on-year to $33 billion compared to the 18.93% growth reported in February at $29.92 billion.

While inbound shipments touched a three-month high of $59.07 billion in March, a trade deficit of $18.69 billion against $20.88 billion in the previous month, non-oil and non-gems and jewelry imports grew 31.2% to $36.18 billion.

India Trade deficit expands 1pixabay image

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Aditi Nayar, chief economist, ICRA said 

"The crash in gold imports in March 2022 amid robust exports helped to curtail the merchandise trade deficit to $18.7 billion, below our expectation of at least $20 billion. We anticipate the current account deficit to recede under $19 billion in Q4 FY22,"

The trade deficit for non-oil non-gold-jewelry items stood at $55 billion or 1.7% of GDP (gross domestic product) in FY22, accounting for around one-quarter of the total merchandise trade deficit," Nayar added.

Economists cautioned that the rising economic uncertainty amid the Russia-Ukraine conflict could deteriorate the trade deficit further and widen the current account deficit as international oil prices remain volatile. Besides, supply-side disruptions, including the rise in freight costs, could hurt exports.

Motilal Oswal Financial Services said in a note.

"The widening of the stock trade deficit in the fourth quarter of FY22 could take the current account deficits to 1.5% of GDP in FY22 as against the surplus of 0.9% in FY21," 

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