India’s trade deficit widened to $23.78 billion, lower than economists’ expectation of $19.5 billion, according to a Reuters poll.
The country’s merchandise exports rose by 9 per cent to $38.13 billion in May from a year earlier, helped by an increase in shipments of engineering goods, commercial vehicles and smartphones, government data showed on Friday.
Merchandise imports in the same month rose 7.7% year-on-year to $61.91 billion.
Analysts say merchandise exports – which contracted 3.1% to $437 billion in the previous fiscal year – are likely to pick up helped by a projected rebound in global trade, government incentives for manufacturing and easing domestic inflation.
In April 2024, the country’s trade deficit stood at $19.1 billion while in May 2023, it was $22.1 billion.
India’s trade deficit had narrowed to an 11-month low of $15.6 billion in March.
Exports during April-May this fiscal rose by 5.1 per cent to $73.12 billion and imports rose by 8.89 per cent to $116 billion during April-May 2024-25.
Inflation has eased in developed economies, potentially leading to better demand, and a rise in imports from India, trade secretary Sunil Bharthwal said while releasing the figures.
“This will be a positive trend for Indian exports this fiscal year,” he said, noting exports of goods were helped by increased shipments to the United States.
According to trade experts, a deficit is not always bad, if a country is importing raw materials or intermediary products to boost manufacturing and exports. However, it puts pressure on the domestic currency.
Economic think tank Global Trade Research Initiative (GTRI) said that a bilateral trade deficit with a country isn’t a major issue unless it makes us overly reliant on that country’s critical supplies. However, a rising overall trade deficit is harmful to the economy.
The World Trade Organization forecasts a 2.6% increase in total goods trade for 2024, rebounding from a 1.2% decline in the previous year.
