Trade Deficit Widens To Four-Month High In August

India’s trade deficit further widened in August as imports continued to rise and exports came off record highs.

Trade deficit widened to $13.9 billion in August, from $10.97 billion in July, the highest since April, according to preliminary estimates released by the government on Thursday.

• Merchandise exports dropped 6.4% month-on-month to $33.1 billion.

• Merchandise imports increased 1.4% over the preceding month to $47.1 billion.

• On an annual basis, exports rose 45.17% and imports increased 51.5% on a low base.

The strong export performance continued through August, said Rahul Bajoria, chief India economist at Barclays. However, imports have also risen on the back of the domestic demand recovery, and the trade deficit appears to have normalised, he said. Aditi Nayar, chief economist at ICRA said both oil and non-oil exports eased in August relative to the preceding month with growing apprehensions related to the spread of the Delta variant, as well as logistical challenges.

Despite rising mobility, net oil imports were largely stable, benefitting from a moderation in crude oil prices, Nayar said. However, gold imports surged further to a five-month high and accounted for 88% of the rise in merchandise trade deficit relative to July 2021, according to her estimates. Unless a weaker agriculture outlook restrains demand, gold imports may well touch $40 billion in FY22, she said.

Key Exports (MoM)

• Petroleum products declined 22% to $4.6 billion.

• Gems & jewellery fell 2.9% to $3.4 billion.

• Readymade garments declined 14.3% to $1.2 billion.

• Drugs and pharmaceuticals were down 4.8% at $2 billion.

• Engineering goods rose 1% to $9.6 billion.

• Electronic goods decreased 8.3% to $1.1 billion.

Key Imports (MoM)

• Gold imports rose 59.5% to $6.7 billion.

• Coal, coke and briquettes fell 5% to $1.9 billion.

• Petroleum, crude and and products dropped 10.1% to $11.6 billion.

• Machinery, electrical & non-electrical rose 3.6% to $2.9 billion.

• Electronic goods increased 11.3% to $5.9 billion.

• Pearls, precious and semi precious stones declined 15.4% to $2.2 billion.