India’s Trade Deficit Nearly Doubles To $87.2 Billion In FY18

India's trade deficit almost doubled in 2017-18 from the previous fiscal as the country's import bill continued to inflate.

The gap between exports and imports, widened 28.5 percent from a year ago to $13.7 billion in the month of March, taking the annual deficit to $87.2 billion, according to data released by the commerce ministry today. The deficit was at $47.7 billion in the year-ended March 2017.

Imports in March rose 7.2 percent to $42.8 billion. For the full fiscal, imports rose nearly 20 percent to $459.6 billion. Petroleum and crude oil imports continued to be the largest contributor to India's import bill with an increase in shipments of electronic goods and machinery as well. Brent crude oil prices have risen to $67 a barrel this year from nearly $46 a barrel in June last year. Gold imports declined for the third straight month, while pearls and jewellery imports moderated.

Import Highlights

• Gold imports declined 40.31 percent year-on-year to $2.5 billion.
• Petroleum and crude imports increased 13.92 percent to $11.1 billion from last year.
• Import of pearls, precious and semi-precious stones marginally increased 0.78 percent to $3.03 billion.
• Organic and inorganic chemical imports went up 28.04 percent $2.04 billion.
• Import of coal, coke and briquettes jumped 44.67 percent to $2.4 billion.
• Inbound shipments of machinery, both electrical and non-electrical, rose 33.41 percent to $3.4 billion.

The value of India's exports declined 0.66 percent over last year to $29.11 billion in March. Exports for the full fiscal were 9.8 percent higher at $302.8 billion. The decline in exports in March was largely due to a higher base in the same month last year. Sluggish non oil exports combined with an unexpected resurgence in the growth of non-oil, non-gold led to a sharp widening in the trade deficit, said Aditi Nayar, principal economist at ICRA.

In its April monetary policy review, the Reserve Bank of India noted that net exports bounced back in November and December after coming under pressure in the second half of financial year 2018. “In Q4, however, there has been a sequential loss of pace in net exports, pointing to underlying weaknesses in the domestic supply response to rising external demand, especially in labour-intensive categories,” the central bank said.

Outbound shipments of petroleum products declined, while organic, inorganic chemicals' exports increased. “In spite of higher prices, a sharp dip in export volumes resulted in a contraction of exports of petroleum products, dampening the performance of overall merchandise exports,” said Nayar in a note. Exports of gems and jewellery, which is typically the second major contributor to the bill, declined 16.57 percent year-on-year.

Export Highlights

• Gems and jewellery exports fell 16.57 percent to $3.4 billion.
• Export of engineering goods increased 2.62 percent over last year to $8.1 billion.
• Export of organic and inorganic chemicals rose 31.75 percent to $1.9 billion.
• Outbound shipments of petroleum products fell 13.22 percent to $3.2 billion in March.
• Drugs and pharmaceuticals exports climbed 8.4 percent to $1.7 billion.