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India’s merchandise trade deficit rose to a record $26.1 billion in June 2022, 172 percent higher than June 2021 as a continuing global commodity supercycle kept the prices of key energy and metal imports high. The latest figures are higher than the government’s initial estimates of $25.6 billion..
Data released by the Commerce and Industry Ministry on July 14 showed that while exports in June rose by 23.5 percent to $40.13 billion, imports shot up by 57.5 percent to $66.31 billion. The resultant $26.1 billion worth of trade deficit – the difference between total exports and imports – is expected to become a new headache for the Commerce Department.
The monthly trade deficit has been rising for the past few months. It had risen from $20.4 billion in April to $23.3 billion in May earlier.
Moneycontrol has reported that the issue has again caught the attention of the Prime Minister’s Office and efforts are on to quickly address it. With the Indian rupee depreciating against the US dollar and commodity prices remaining high, the government expects the trade deficit to widen in the near term, officials said.
All imports up
Higher crude oil prices meant that refined petroleum imports almost doubled to $21.3 billion in June, up from $10.6 billion a year back. Petroleum imports constitute the largest chunk of India’s imports bill. Despite a much higher share of discounted crude coming in from Russia, the impact of higher global petroleum prices owing to Russia’s invasion of Ukraine has continued to cost India.
Interestingly, the import of coal, coke and briquettes skyrocketed by an annual 260 percent to come to a staggering $6.47 billion in June. Imports in the category were $1.8 billion a year back in June 2021, showing the margin of increase in global prices. Most of the imports flowed in from Russia, the Commerce Department database shows.
Showing an annual increase of 26.8 percent, electronic goods remained the third-largest import category in June. Electronic imports rose to $6.1 billion, up from $4.6 billion in June 2021.
Another major expense for India, gold, saw imports rise by a huge 182 percent. Imports of the yellow metal rose to $2.7 billion in June, up from $969 million in the same month of the previous year.
In the current FY23 (2022-23), imports had risen by 62 percent in May and 26.6 percent in April. Cumulatively, merchandise imports stood at $189.7 billion in the first three months of FY23, as compared to the same period of FY22, witnessing a major growth of 49.7 percent.
India’s import bill hit a record high of $612 billion in FY22. The trade deficit shot up to $190.7 billion in FY22 from $102.6 billion in FY21 and $161.3 billion in FY20, before the pandemic.
Exports also rise
The latest month, however, continued to see a rise in exports. However, the rate of growth has continued to come down. Exports stood at $40.13 billion, registering a growth of 23.52 percent.
“This yet again indicates the strength of the export sector amidst challenging ongoing geo-political and rising global uncertainties,” A Sakthivel, President of the Federation of Indian Export Organisations (FIEO) said.
He added that though the government has announced a slew of measures to support exports, however, there is a need to further push value-added exports, augment container manufacturing and develop an Indian shipping line of global repute.
Among major sectors, engineering exports saw the biggest impact in June. “Engineering exports grew in low single-digit at 3 percent with total shipments value estimated at $9.57 billion in June 2022 as against $ 9.29 billion in June 2021. There are apprehensions of many advanced economies going into slowdown mode and in that case trade would certainly be impacted,” Engineering Export Promotion Council (EEPC) Chairman Mr Mahesh Desai said.
