Trade deficit close to all-time high, thanks to record imports
Wed Sep 18 2024
India's trade deficit neared record level in Aug as a surge
in gold shipments pushed up monthly imports by 3.4% to an
all-time high of $64.4 billion, while exports fell 9.4% to
$34.7 billion.
As gold imports more than doubled to a new high of over $10 billion, the
commerce department on Tuesday said total imports rose to $64.36 billion in
August, marginally higher than the previous record of $64.35 billion in June
2022.
Commerce secretary Sunil Barthwal attributed the increase to
higher prices, a reduction in customs duty, stocking ahead of the festival
season. The numbers indicate that some of the gold that was smuggled due to
high tariffs are now coming via legal channels. As a result, the trade deficit
widened to $29.7 billion, just a shade lower than the $30.4 billion gap between
exports and imports recorded in last Oct.
"It is not a matter of concern for an emerging market economy. There is huge consumption demand coming from an economy that is growing at double the rate of the world economy. As exports grow and you join the global value chain, you have to import certain things to export. To the extent that there is foreign exchange (reserves), these are perfectly normal numbers," Barthwal said.
He said that exports had dropped largely due to a fall in oil prices (resulting
in lower value realisation for petrol and diesel) as well as due to low demand
for gems and jewellery and rice exports being checked by govt. The fall in
exports is the sharpest since July 2023, when it had shrunk 9.9%.
Lower crude oil prices meant that imports fell over 32% to $11
billion, while petroleum product exports were almost 38% lower at around $6
billion. "There is a huge challenge for exports in the current global
situation... Despite the dark clouds globally, India is a bright spot,"
Barthwal said.
Barthwal said several countries had seen a decline in
imports, which was impacting exports and demand remained weak in the US and
Europe, while China was in the midst of a slowdown. Fieo president Ashwani
Kumar said trade disruptions - led by logistical challenges, such as lack of
shipping space, irregular shipping schedule, ships skipping Indian ports - and
declining commodity prices have hit exports.
Govt is drawing comfort from the services side, where exports rose 7% to $30.7
billion, while imports grew under 4% to $15.7 billion. "Tech-intensive
sectors, including electronics, pharma, and engineering goods, continue to demonstrate
resilience as key contributors to export growth. In terms of destinations,
exports to non-traditional markets, such as Kenya and Brazil registered strong
growth," said India Exim Bank MD Deepali Agrawal.
Source: https://timesofindia.indiatimes.com