India’s imports are growing faster than exports; The current account deficit is expected to worsen

India’s merchandise exports in June rose 23.52% to $40.13 billion, but a sharper 57.55% rise in imports widened the trade deficit to a record 26.18 billions of dollars.

Data released by the Department of Commerce and Industry on Thursday showed imports of $66.31 billion in June, led by silver, oil, coal and gold.

The deficit was $8.1 billion in January-March 2021.

In percentage terms, the CAD in January-March 2022 was 1.5% of GDP, compared to 2.6% of GDP in the previous quarter.

The trade deficit was $9.6 billion in June and economists expect it to hit a record $250 billion or 7.3% of GDP this fiscal year.

Likely to expand further

According to a report, the country’s current account deficit is expected to reach $105 billion or 3% of GDP this fiscal year, mainly due to the continued widening of the trade deficit.

In Tuesday’s report, Bank of America (BofA) Securities revised its current account deficit (CAD) forecast upward by 0.4 percentage points for this fiscal year.

The trade deficit in June widened to a record high of $25.6 billion from $24.3 billion in May. On a quarterly basis, the spread increased 122.8% in the June quarter to $70.33 billion from $31.43 billion a year ago.

The ever-increasing trade deficit warrants a review of BofA’s CAD estimate, according to the report.

“While we continue to see Brent at $105 a barrel in 2022, higher non-oil and non-gold imports and lower exports are now expected to push the CAD up 3% to $105 billion from 2.6% of GDP or $90 billion expected earlier,” BofA Securities analysts said in the report.

Although the delta wave led to an unusually small trade deficit in the first quarter of FY22, in FY23 rising gold and oil imports have so far led to a sharp increase in the deficit. commercial, they noted.

(with contributions from agencies)