Vivek Mukherji
India’s overall trade deficit—merchandise and services—witnessed an exponential jump of a whopping 250% at $87 billion in the first half of the current fiscal compared to the same period last year when it amounted to $24.86 billion. Net gains of the services sector of $61.30 billion provided some bit cushion against the negative balance of $148.46 billion from merchandise trade for the period between April and September 2022.
With India’s foreign exchange reserves already down by almost $100 billion in the first six months of this fiscal, the widening trade deficit will put additional pressure on country’s money managers, who are fighting battles on multiple fronts to contain galloping inflation, rapidly declining value of the rupee against the dollar, and erratic international crude prices.
The latest foreign trade data released by Ministry of Commerce and Industry paints a grim economic picture despite the display of bravado by the political class and their appointed—and non-appointed—spinmeisters.
India’s merchandise exports for the April to September period stood at $231 billion, registering a 16.96% growth, compared to $198.25 billion during the corresponding period last year. However, merchandise imports shot up from $274.50 billion last year to $380.34 billion in the first six months, representing a 38.55% increase in the inflow of goods.
Mirroring the trend of previous years, the services sector remained as the bulwark against widening trade deficit. In the first half of 2022, India exported services worth $150.43 billion compared to $117.63 billion, which translates into a healthy growth of 27.88%, while imports accounted from $89.13 billion compared to $66.25 billion last year. As a result, net of services contributed to $61.30 billion to the country’s foreign exchange earnings.
The non-petroleum and non-gems category of exports saw a growth of 6.41% valued at $160 billion during the first half of the current fiscal over $150.37 billion last year. However, imports under this category also ballooned from $165.70 billion to $223.99 billion. Though this might be considered as an indication of improved industrial activity in the first half of the fiscal year, the deficit of $73.99 billion contributed to the overall increase in trade deficit of merchandise goods.
Petroleum products ($7,429.84 million), gems and jewellery ($3,793.85 million), electronic good ($2999.07 million) were the top three contributors to India’s export earnings between April to September 2022. Export of major commodities such as iron ore, engineering goods, man-made yarns, textiles, and meat, dairy and poultry products witnessed a sharp decline during this period.
