Merchandise exports inched up marginally in August from a year before, reflecting a demand slowdown in key Western markets, but a sustained surge in imports kept trade deficit at an elevated level.
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According to the provisional data released by the Commerce Ministry on Wednesday, exports rose 1.6 per cent from a year earlier to $33.9 billion, while imports jumped 37.3 per cent to $61.9 billion. Consequently, trade deficit in August hit $28 billion, the second-highest on record and close to the monthly peak of $30 billion in July.
Interestingly, following a cut in the windfall tax, petroleum product exports rose almost 23 per cent to $5.7 billion, against a 9 per cent rise in the previous month. This somewhat propped up overall exports in August.
Meanwhile, high trade deficit will continue to pressure the current account deficit (CAD), already expected to have hit a nine-year high in the first quarter. Official sources, however, stressed the government has adequate heft to finance the CAD.
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Importantly, with global commodity prices moderating, export value will remain under pressure in the coming months. This will add to the woes of a demand slowdown in the US, EU, China and the UK. However, domestic exporters are pinning hopes on the diversion of a portion of western orders away from China, whose ability to ship out is somewhat undermined by the fresh Covid outbreak there.
Rising crude oil imports
Even as outbound shipments increased across several categories including electronics, petroleum, pharma, the expansion in crude oil imports significantly widened the trade deficit in August.
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Although imports still remain elevated, the pace of growth is slowing — from 43.6 per cent in July to 37.3 per cent in August. It suggests pent-up domestic demand, responsible for a spurt in purchases in the aftermath of the Omicron onslaught, is probably losing steam, some analysts said. However, some others suggest domestic manufacturers are probably selling their products in the local markets more aggressively, weighing down the growth on external trade.
The data showed exports in the first five months of this fiscal hit $193.5 billion, up almost 18 per cent from a year earlier. Imports, however, jumped about 46 per cent to $318 billion, leading to a record trade deficit of $131.5 billion.
Earlier this month, Commerce Secretary BVR Subrahmanyam exuded confidence that exports would pick up going ahead. He said that exports of both goods and services will exceed $750 billion in this fiscal from a record $676 billion in FY22. FE
