Merchandise exports grew 16.8% in June from a year before even on a high base but a 51% surge in imports, thanks to high prices of oil and other commodities, drove up trade deficit to a fresh monthly peak of $25.6 billion.
According to the preliminary data released by the commerce ministry on Monday, exports hit $37.94 billion in June, a record of the third month of any fiscal. However, sequentially, the growth was slower than the 20.6% recorded in May, when, in absolute term, the outbound shipment had scaled $38.9 billion.
Imports, however, surged to $63.6 billion in June, against $42.1 billion a year before. While the spike in imports signals improving domestic demand (even non-oil and non-gems and jewellery imports rose by 31.7% in June), it will pressure the current account deficit (CAD), which is estimated by Fitch Ratings to double in FY23 to about 3.1% of GDP.
ICRA chief economist Aditi Nayar expected the CAD to more than double to $30 billion in the June quarter from $13 billion the fourth quarter of FY22. Of course, senior government officials have assuaged concerns about financing the CAD. An unfavourable base and growth slowdown in advanced economies that had contributed substantially to India’s export resurgence last fiscal weighed on the current export momentum.
Fresh challenges in the global supply chains, the ban on the export of wheat and curbs on the supplies of iron ore and select steel products, etc, too, are going to weigh on the country’s export performance in June.The import bill was driven substantially by a massive 242% year-on-year jump in coal imports to $6.4 billion and persistent surge in purchases of crude oil & petroleum products (94%) and gold (169%). A spurt in prices of crude oil and coal just served to inflate the import bill of a net commodity importer like India.
Among high-value segments, the rise in exports in June was led by petroleum products (98%), followed by electronics (51%) and garments (45%). At $26.8 billion, core exports (excluding petroleum and gems and jewellery) growth slowed down to 4% in June from 8.6% in the previous month. A Sakthivel, president of the apex exporters’ body FIEO, said while the export growth despite external headwinds is a good sign, the massive growth in imports is a matter of concern.