India’s merchandise trade deficit widened to a monthly record of $23.33 billion in May, as exports grew 15.5% to $37.3 billion while imports jumped 56.1% to $60.62 billion, as per preliminary data from the Commerce and Industry Ministry. The previous highest monthly trade deficit was last November’s $22.91 billion.
Goods exports shrank 7.2% from April’s $40.19 billion of outbound trade, resulting in the merchandise trade deficit for the first two months of 2022-23 widening to $41.73 billion. The figure for April-May 2021 was $21.82 billion.
While petroleum exports, which surged 52.7% from May 2021, electronics (41.5%) and readymade textile garments (22.9%), led the exports growth last month, the overall growth rate almost halved to an 8.1% pace if petroleum exports were excluded. May’s overall export growth was the slowest in 15 months.
This is the third month in a row that India’s merchandise imports have crossed $60 billion, thanks to elevated commodity and oil prices amid the festering Russia-Ukraine conflict. Gold imports shot up almost ninefold year-on-year to cross $5.8 billion, and was more than triple April’s $1.7 billion.
“With base effects catching up, the pace of growth of goods exports and then later, imports, is likely to moderate, while remaining high in absolute terms as commodity prices are seeing a renewed uptick,” ICRA chief economist Aditi Nayar told The Hindu. “We believe the merchandise trade deficit will print between $20 billion to $25 billion for most months of 2022-23,” she added.
Petroleum imports almost doubled to $18.1 billion, but were 10.3% lower than April’s bill of over $20 billion. Coal imports more than doubled from May 2021 levels to $5.33 billion, and were also 8% higher sequentially.
Excluding petroleum, imports stood at $42.48 billion, reflecting a lower growth rate of 44.7%. If gold, silver and precious metal imports were also excluded, imports grew at a slower 27.2% rate to $33.6 billion.
“In the short and medium term, there are fears of demand slowdown in advanced economies which could potentially dent the exports momentum,” said Mahesh Desai, chairman of the Engineering Export Promotion Council (EEPC) of India.
Last month, rating agency ICRA had projected a record merchandise trade deficit of $250-255 billion for 2022-23, with exports growth slowing to about 9% during the year and imports expected to rise 16% as domestic demand is anticipated to outpace external demand.
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