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Understanding the all-time high in India’s trade deficit
Context
Having crossed a record $400 billion mark in 2021-22, India’s exports have moderated in the first quarter of this year, with May and June clocking upticks of 20.6% and 16.8%, respectively, slowing from a 30.7% rise in April. Sequentially too, overall goods exports declined for the third month in a row in June, even as imports continued to rise sharply, triggering fresh peaks for India’s monthly trade deficit.
How has the merchandise trade balance changed in recent months?
- Trend in Exports- Total goods exports in 2021-22 amounted to $422 billion, up sharply from the pre-COVID levels of $313 billion in 2019-20. This was the highest ever export number, and marked the first time in years that an official export target ($400 billion) was not only met, but surpassed.
- Trend in Imports- Imports hit a fresh high of $613 billion, compared to $394 billion in the pandemic affected previous year and $475 billion before that.
- Trade Deficit- The trade deficit thus stood at $191 billion, nearly double of 2020-21.The chasm between exports and imports has widened in the first quarter of this year, with the cumulative trade deficit already hitting $70 billion, translating into an average of $23.3 billion a month.
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