Despite sustained growth in engineering and pharmaceutical products that boosted exports by 17.57 per cent, a sharp rise in crude oil bill led to India’s trade deficit widening to a 61-month high in June.
The trade deficit increased to $16.61 billion, up from the $14.62 billion gap in May. This was primarily fuelled by a jump in crude oil imports, which rose more than 56 per cent to $12.72 billion in June, up from $11.5 billion a month back, media reports said.
The overall imports rose at a five-month high pace of 21.31 per cent as compared to the 14.85 per cent rise seen in May. Total imports stood at $44.3 billion in June as compared to $ 43.48 billion in May, reported PTI.
This is set to put pressure on the current account deficit in the first quarter of the current financial year, after it stood at 1.9 per cent of GDP in the fourth quarter of 2017-18 compared to 2.1 per cent in the third quarter, the report said.
“The monthly merchandise trade deficit is likely to print at an uncomfortably high average of $15.5-16 billion over the remainder of FY2019. Crude oil imports accounted for 57 per cent of the YoY rise in merchandise imports in June 2018, in line with the spike in crude oil prices,” Aditi Nayar, principal economist at ICRA, reportedly said.
The cost of the overall oil imports is expected to grow in the coming months. Experts predict that India’s oil bill will continue to rise in the current financial year as external pressures, such as the fallout of the Iran deal and a possible cut in production by oil producers, might heat up prices, the PTI report pointed out.
The growth of non-oil non-gold merchandise imports also remained in double-digit in June, driven by inputs such as machinery, coal, chemicals, fertilisers, iron and steel, and non-ferrous metals, as well as electronic goods, it added.