India's July trade deficit widens to $31 bn on costly imports, weak rupee

India’s trade deficit ballooned to a record high in July, as elevated commodity prices and a weak rupee inflated the country’s import bill.

The gap between exports and imports widened to $31.02 billion in July, from $26.18 billion in June, B V R Subrahmanyam, commerce secretary, told reporters at a briefing in New Delhi Tuesday, citing preliminary data. The trade deficit in June was a record before the latest numbers were released. The trade deficit was $10.63 in July 2021.

"Exports of $156.41 billion in first four months of the fiscal puts us on track to achieve $470 billion in the current fiscal comfortably," commerce secretary said while giving details about the trade data.

July’s data comes after the Centre raised import duty on gold last month to discourage buyers in the world’s second-largest consumer and rein in the yawning trade deficit. Growing concerns about the gap and an exodus of foreign capital from Indian markets had pushed the rupee to a new low of 80.06 per dollar last month. The local unit has since rebounded amid a broad pick up in appetite for riskier assets and currencies.

Meanwhile, India’s export sector, one of the brighter spots in the economy in the aftermath of the Covid pandemic, is expected to come under strain amid fears of a slowdown in key markets such as US and the European Union. 

India has achieved merchandise export of $35.24 billion in July 2022, almost at similar levels of $35.51 billion in July 2021. "This has been achieved despite measures to control inflation (iron ore & pellets, iron and steel, petroleum products, etc.) and the continued disruptions of supply chains due to Covid and Russia-Ukraine conflict," said Ministry of Commerce & Industry on Tuesday.

India’s merchandise import in July 2022 was $66.26 billion, an increase of 43.59% over $46.15 billion in July 2021. India’s merchandise imports in April -July 2022-23 was $256.43 billion with an increase of 48.12% over $173.12 billion in April -July 2021-22. As per the data, the gold imports almost halved to $2.37 billion in July compared to $4.2 billion a year ago.