India’s merchandise trade deficit widened to $23.5 billion in July compared with $21 billion in the previous month, according to data released by the ministry of commerce on August 14.
Country’s merchandise exports declined by 1.5 percent, and imports rose by 7.5 percent during July. The country exported $33.98 billion worth of goods, while it imported $57.48 billion.
"The wider deficit was driven by a sequential fall in exports (3.5 percent). The fall in exports was broad-based, and follows the trend of weaker-than-expected exports in July across EM Asia," said Shreya Sodhani, regional economist, Barclays.
In June, exports had risen 2.6 percent to $35.2 billion, while imports had expanded $5.1 percent to $56.8 billion.
"We will cross last year's numbers. We are doing everything to push our exports in different territories," said Sunil Barthwal, commerce secretary, expressing hope that India is set to witness growth in exports this year.
"There is scope to increase our exports to Africa," Barthwal added.
In the first four months of the year exports were up 4 percent to $144.12 billion, but imports expanded faster at 7.6 percent.
"There has been a widening of the trade deficit during this period compared with last year by around $10 billion," said Madan Sabnavis, chief economist, Bank of Baroda.
The government's performance on non-petroleum non-gems and jewellery exports was better as trade in this commodity rose 5.7 percent in July and 6.1 percent for the first four months of the fiscal.
"The sharp drop in crude, commodities and metal prices have also played their role in declining values of exports. Some of the exporters have diverted to the domestic market as profitability in exports have taken a hit with sharp rise in international freight (both ship and air)," said Ashwani Kumar, president, FIEO.
Electronic goods exports were up 37.3 percent between April and July, while meat, dairy and poultry trade rose 56 percent.
The commerce secretary noted that one of the reasons for falling exports has been diversion of goods to the domestic market.
"India is growing at 7 percent, while global economy is expanding at 3 percent, so naturally our consumption is higher. Rising imports in conjunction with consumption should not be a cause for concern," Barthwal said.
An earlier analysis by Moneycontrol shows that electronic exports have been booming in the country owing to burgeoning smartphone exports. In the first quarter of the year, India’s smartphone exports jumped 31.7 percent to $4.9 billion.
US, UAE and Netherlands were top smartphone export destinations for the country in FY24. These were also the top destinations for India's exports between April-July 2024, while China, Russia and UAE were top countries contributing to India's $229 billion imports.
Imports from China jumped 9.6 percent, while Russian imports were up 20.3 percent in April-July 2024.
Total exports for the country are expected to be 6.7 percent higher as services are doing better. India's service exports likely jumped 9.9 percent in the first four months.
"At present, we forecast the merchandise trade deficit at around US$11-13 billion in Q1 and US$13-15 billion in Q2 FY2025," said Aditi Nayar, chief economist, Icra.
" The lower duties after the Union Budget may raise the value of gold imports in the next few months," Nayar added.
India imported $3.13 billion worth of gold in July.
Economists, however, believe that India's current account deficit is likely to stay in 1-1.5 percent range for FY25.
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