Merchandise trade deficit scaled a 61-month peak of $16.6 billion in June, as a higher net oil import bill offset gains from a contraction in gold and precious stone imports, showed official data released on Friday. This could exert further pressure on current account deficit that touched 1.9 per cent of GDP in Q4FY18, slightly lower than 2.1 per cent in the previous quarter but much higher than 0.4 per cent a year earlier.
Imports grew 21.3 per cent in June, the fastest pace in five months. Exports growth slowed sequentially but still touched a decent 17.6 per cent in June, as a rise in oil prices helped boost outbound shipment value. Even engineering goods, chemicals and pharmaceutical products registered decent expansion. For the first three months of the current fiscal, non-petroleum and non-gems and jewellery exports grew 13.6 per cent from a year earlier, although overall goods exports rose 14.2 per cent during this period.
A weak rupee after the US Federal Reserve hiked the interest rate by 25 basis points last month might brighten export prospects. The rupee has been hovering around the 68-69-mark against the greenback. But analysts say the key to any improvement in export competitiveness will be how much the currencies of its peers depreciate against the dollar in such a scenario.
More importantly, with the US and China have targeted each other’s goods in a fresh escalation of a global trade war, India’s exports, like that of many others, could come under pressure. The World Trade Organisation (WTO) has forecast trade growth at 4.4 per cent for 2018, down from 4.7 per cent in 2017.
Merchandise exports rose to $27.70 billion and imports advanced to $44.30 billion in June. Garments exports continued to drop, although the textile segments witnessed a double-digit expansion.