India's Trade Deficit Widens To A Record High In June

India's trade deficit widened in June as exports moderated and imports continued to rise sequentially, led by oil and coal.

The trade deficit rose to $25.6 billion in June, a record high, compared with $24.3 billion in the preceding month, according to preliminary data by the Ministry of Commerce and Industry on Monday.

• Exports rose 16.8% year-on-year to $37.9 billion. On a month-on-month basis, exports fell 2.6%.

• Imports rose 51% year-on-year to $63.6 billion. They rose by 0.6% over the previous month.

• Non-petroleum and non-gems & jewellery exports in June were at $26.75 billion, a growth of 4% year-on-year.

• Non-petroleum, non-gems & jewellery imports were at $36.70 billion, a growth of 31.7% year-on-year.

Despite an expected fall in the gold imports, the merchandise trade deficit widened further to a worrying $25.6 billion in June 2022, with a sequential dip in exports and a rise in the non-gold imports relative to May 2022, Aditi Nayar, chief economist at ICRA Ltd., said. "With a steady uptick in the size of the merchandise trade deficit over the course of the quarter, we expect the current account deficit to more than double to $30 billion in Q1 FY23, from the modest $13 billion in the previous quarter."

For the full fiscal, current account deficit is expected to print in the range of $100-105 billion in FY23, according to Nayar's estimates.

Key Export Items

• Engineering goods exports stood at $9.1 billion, down 1.6% year-on-year.

• Petroleum product exports were at $9.1 billion, 98% higher than a year earlier.

• Gems and jewellery exports were at $3.4 billion, 19.4% higher on an annual basis.

• Organic and inorganic chemical exports were at $2.8 billion, 5% higher on an annual basis.

• Drugs and pharmaceutical exports were at $2 billion, 1.3% lower over a year earlier.

“In general, exports have remained resilient, driven by strong shipments of electronic goods, petroleum products and ready-made textiles,” said Madhavi Arora, lead economist at Emkay Global.

Key Import Items

• Petroleum, crude and product imports were up 94.2% over a year earlier at $20.7 billion.

• Imports of coal, coke and briquettes were 241.8% higher than a year ago at $6.4 billion.

• Electronic goods imports were at $5.8 billion, up 26.9% over a year earlier.

• Machinery, electrical and non-electrical goods were at $3.6 billion, up 14.1% over a year ago.

• Gold imports stood at $2.6 billion, 169.5% lower than a year ago.

Core imports rose by 6% MoM, reflecting growing demand in the domestic economy, said Arora. With oil imports climbing further and coal imports surging to $ 6.4 billion in June from an average of $ 2.6 billion per month in FY22, the energy crunch was once again evident, evoking memories of the energy shock of 2011,” said Arora.