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Last updated: 21 Jun, 2022  

Exports.9.Thmb.jpg Trade deficit

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Bikky Khosla | 21 Jun, 2022

Exports of merchandise goods and services grew over 24 percent Y-o-Y to $62.21 billion in May, as per official data released last week. Merchandise exports stood at $38.94 billion against $32.30 billion in the corresponding period last year, registering a growth of 24.03 percent while services exports stood at $23.28 billion against $17.86 billion, registering a growth of 20.55 percent Y-o-Y. Overall exports grew 25.90 percent Y-o-Y in April-May 2022 to $124.59 billion.

On the other hand, overall imports in May grew to $77.65 billion, which is 59.19 percent higher over the same period last year, while overall imports in April-May 2022 are estimated to be $151.89 billion, registering 45.44 percent y-o-y growth. Merchandise trade deficit in May 2022 and in April-May 2022 rose by 271.96 percent and 104.80 percent, respectively. The services exports sector, however, witnessed, trade balance, which rose 11.85 percent in May and 6.39 percent in April-May 2022.

These figures speak for themselves. Although exports are positive, the widening trade deficit is a concern, particularly when it comes to merchandise exports, as imports have shown rapid growth, driven by supply-chain disruptions and high oil and commodity prices, due to geopolitical tensions. In the background of this situation, India’s current account deficit may rise further in the coming quarters, which touched a 13-quarter high in October-December 2021.

Meanwhile, FIIs are on a selling spree, which is another concern for the Indian economy at this juncture. Over the last few months this year, they sold to the extent of Rs 2.67 lakh crore, and although this was offset by strong domestic DII inflows, it is equally important that FIIs return to Indian markets sooner rather than later. Also, the Rupee may depreciate further amid FII outflows, which needs to be reversed.

I invite your opinions.

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