India's July trade deficit widens to record $31 bn; exports dip marginally

•  India’s trade deficit widened to a record $31 billion in July.
•  A sequential decline in exports and somewhat flat imports.
• According to released by the commerce ministry on Tuesday, it showed that merchandise exports declined to a five-month low at $35.2 billion in July while imports eased sequentially to $66 billion.
• Out of the top 10 export items 7 of them faced a decline. 
• They are engineering goods (2.5 per cent), petroleum products (7.1 per cent), gems and jewellery (5.2 per cent), pharmaceuticals (1.4 per cent), readymade garments (0.6 per cent), cotton yarn (28.3 per cent), and plastic (3.4 per cent).
• But some of them showed growth, They are chemicals (7.9 per cent), electronic goods (46.1 per cent), and rice (30.2 per cent).
• Gold is one the most imported item and it faced a decline. gold declined 43.6 per cent to $2.4 billion after the Centre raised import duty on the metal last month.
• However, imports of non-oil and non-gems and jewellery products grew 42.9 per cent, due to recovery in domestic economic activities as well as elevated price pressure.

Commerce Secretary B V R Subhramanyam said with fears of recession looming in some of India’s largest export markets — the US and Europe — India should be “worried”.

• “We will be able to compensate for the hit from these two regions. The recently signed trade deals with the United Arab Emirates and Australia (and the upcoming deal with the UK) will boost exports. There can be exports of $15-16 billion to these two nations,” he said.

• Expecting more trade deals with Russia and Sri Lanka, mostly huge opportunities in Russian tea, telecom, pharmaceutical products, leather.

• A $8-9 billion trade with Russia and Sri Lanka is expected.

• The exports could go above $500 billion this fiscal year, adding that restrictions on exports of wheat, iron and steel, and petroleum products had reined in growth in shipments.

• India had surpassed the $400-billion target in 2021-22, closing the last financial year at $421 billion.

• Aditi Nayar, chief economist at ICRA, said the sharp trade deficit in July did not augur well for the size of the current account deficit in Q2 FY23.

  “The current account deficit is likely to have crossed $30 billion in Q1 FY23, a fallout of higher commodity prices, equivalent to around 80 per cent of the full-year figure for FY22. Lower commodity prices should temper the trade deficit although the strength of merchandise and services exports in the face of the global slowdown fears remains crucial,” she added.