Trade deficit widens to 7-month high at $23.78 billion
NEW DELHI: India’s merchandise exports rose by 9.1 per cent to $38.13 billion in May even as the trade deficit widened to a seven-month high of $23.78 billion during the month, according to government data.
Healthy growth in sectors, such as engineering, electronics, pharmaceuticals, textiles and plastics helped register growth in exports despite global economic uncertainties.
Imports also increased by 7.7 per cent to $61.91 billion in the month under review from $57.48 billion in May 2023 due to an increase in crude oil imports.
Oil imports rose by 28 per cent to $20 billion in May. It was up by 24.4 per cent during April-May 2024-25 to $36.4 billion.
However, gold imports dipped marginally to $3.33 billion in May this year from $3.69 billion in the same month of FY24.
The previous high in the deficit was recorded in October 2023 at $31.46 billion.
In April 2024, the outbound shipments dipped to $41.68 billion from $ 41.96 billion a year ago.
Cumulatively, exports during April-May this fiscal rose by 5.1 per cent to $73.12 billion and imports rose by 8.89 per cent to $116 billion.
Briefing media on the data, Commerce Secretary Sunil Barthwal said May has been an excellent month in terms of exports and “I hope that this trend will continue”.
He said that inflation in advanced economies is slowing and it would help further push purchasing power that will raise demand for imports.
“I feel that this positive trend will continue. Things are looking better and optimistic for the trade sector,” Barthwal said.
Asked whether he is concerned about the widening trade deficit, the secretary said as India is registering higher economic growth than the world, it will lead to an increase in domestic demand for imports and a dip in exportable surplus.
“Trade deficit per se I do not consider it as bad as long as you have FDI flowing in, foreign exchange coming in and if you are balancing it through other means. And secondly, we should also look at the growing services exports…then we should not unnecessarily be worried about the trade deficit in merchandise,” Barthwal added.
According to the commerce ministry data released on Wednesday, the estimated value of services exported in May is $30.16 billion as compared to $26.99 billion in May 2023.
Imports of services are estimated to have increased to $17.28 billion during the month as compared to $15.88 billion in May 2023.
India’s shipment to the top five export destinations – the US, the Netherlands, UAE, Malaysia, and the UK – recorded healthy growth in May.
Easwaran, Partner and Supply Chain Leader, Deloitte India, said that with a positive outlook for global trade, combined with India’s focus on FTAs and PLIs, India is likely to see a significant boost in India’s merchandise exports.
“Going forward, this will have a positive impact on India’s global value chain participation,” he said.
Sharing similar views, Federation of Indian Export Organisations (FIEO) President Ashwani Kumar said continuing with positive growth momentum for the second month in a row during 2024-25 on the back of buoyant order bookings goes to show the resilience of the exports sector and Indian exporting community.
The ongoing Russia-Ukraine war coupled with various major geo-political tensions, including the Red Sea crisis and the Israel-Hamas conflict, has also made the international trade scenario much tougher for the Indian exporters, Kumar said.
“We further expect exports to show better growth numbers with improved demand coming in from the European Union, the UK, West Asia and the US, which has given a boost to the order bookings by over 10 per cent and has come as a sign of recovery for labour-intensive sectors of exports,” Kumar added.
