India’s merchandise trade deficit in August more than doubled to $ 28.68 billion from the same period a year ago. This has quite a few reasons. There was a sharp increase in imports while exports shrunk.
However, the gap narrowed from the record-high $ 30 billion recorded in July, government data showed on 3 September. The data for August is provisional.
The deficit stood at $ 11.71 billion in August 2021.
Why widening trade deficit should not worry India
Merchandise exports last month were at $ 33 billion, down 1.15% from the year-ago period. This was amid export restrictions and higher duties, said Commerce Secretary BVR Subrahmanyam, while adding that the country is facing headwinds from global economic uncertainties.
Meanwhile, merchandise imports in August stood at $ 61.68 billion, up 37% on year. Petroleum, coal imports rose amid price inflation and stocking up, said the official. However, gold imports dipped by 47% in the same time period.
Merchandise exports had stood at $ 36.27 billion in July while imports were $ 66.27 billion.
Despite the grim global outlook, India’s total exports this year will surpass $ 750 billion comfortably, Subrahmanyam told reporters. Exports are being buffeted by strong global headwinds, including war, and interest rates, he said.
Subrahmanyam said that a rise in imports was not a concern and the country should end the year with an overall trade deficit at $ 160-180 billion and a current account deficit of around 3% of GDP.
The Commerce Secretary said that the Australian free trade agreement (FTA) should be cleared this month and the trade pact with the UK by Diwali.
India aims to sign an FTA and an investment treaty with Canada by December 2022 and the FTA with EU should likely conclude by June-July next year, he said.
Meanwhile, India's exports to China were down 35% in the April-August period while exports to US, Canada, Mexico were in line with full-year targets.
Countries are keen to sign FTAs with India amid the need to reduce dependency on China, he added and said that agriculture and dairy will be protected while signing FTAs.
The Ministry of Commerce will announce the new foreign trade policy at September-end, which will kick in from 1 October, he said.