Trade deficit widens to 10-month high of $29.7 billion in August; commerce secretary says not a concern

Trade data for August

India’s merchandise trade deficit widened to a 10-month high of $29.7 billion in August from $23.6 billion in the previous month, data released by the ministry of commerce on September 17 shows, however, commerce secretary Sunil Barthwal dismissed any concerns of rising deficit calling it a sign of growing consumption.

"Trade deficit is not a matter of concern for emerging economies. China maintained larger trade deficit. There is a huge consumption demand coming from the economy, which is growing at double the rate of other countries," said Barthwal.

While exports rose to $34.7 billion in August from $33.89 billion, imports increased to $62.6 billion from $57.5 billion in July.

The exports were 9.4 percent lower than the previous year, while imports were 2.8 percent higher.

For the financial year 2024-25 (till August), exports at $178 billion were up 1.1 percent, while imports rose at a faster rate of 7.1 percent widening the trade deficit to $116.7 billion.

While export growth has been muted, electronic goods and electrical machinery exports have soared, with smartphone manufacturing picking up. Drugs and pharmaceutical exports have also witnessed an 8 percent increase over the previous year.

In July, smartphones overtook cereals as India’s eighth largest export item.

Non gems and jewellery and non oil trade expanded 5.3 percent in the first five months of the FY25 compared with similar period last fiscal.

In terms of imports, petroleum products were the largest imports in the country followed by electronic goods.

USA was India's top export destination, while China accounted for largest share of imports in the country, followed by Russia and the UAE.

Although gold imports were over $10 billion, the secretary noted that reduction in tariff rates, fall in global gold prices and jewellers building inventory were reasons for higher imports.

India's services exports remained strong, with data indicating 7 percent increase in exports in August compared with the previous year.

Economists contend that lower oil prices — the benchmark Brent crude hovering near a three-year low of $70 — could help contain current account deficit.

Current account deficit (CAD) reduced to 0.7 percent of the GDP in FY24, compared with 2 percent the previous year.

This year, CAD is expected to be higher at 1.4 percent, the International Monetary Fund has said.

The Reserve Bank of India will release CAD data for the first quarter of FY25 by the end of September.