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May trade deficit widens since April, but remains lower by 42.02% on Y-o-Y basis

11 Jun 2014 Evaluate

Easing pressure on the current account balance, India’s trade deficit widened to $11.23 billion in May as compared to $10.01 billion in April, but was lower by 42.02% on Y-o-Y basis. The trade deficit stood at $19.37 billion in the corresponding month of the previous year.

Encouragingly, exports clocked a 12.4% jump year-on-year to $27.99 billion in May as compared to $24.91 exports in the corresponding month previous year, its first double digit growth since September 2011. Out of the total exports, while engineering exports grew 23% to 6.11 billion, petroleum exports rose 28.7% to $5.9 billion and gems and jewellery exports spiked up by 1.36% to $ 3.43 billion in May over same period last year.

Meanwhile, Imports in May stood at $ 39.23 billion, higher than $ 35.7 billion seen in April and $44.28 billion in the same month previous year. Of the total, gold imports fell 72% to $2.19 billion since May 2013, but jumped from $1.76 billion in April.

In cumulative terms, exports rising by 8.87% at $53.63 billion in the first two month of the 2014-15 fiscal, as compared to $49.26 billion in April-May, 2013 and imports falling by 13.16% in period under review at $ 74.95 billion as compared to $83.61 billion in corresponding months of the previous year, left trade deficit of $21.32 billion during first two months of new fiscal.

Thus, with gold imports falling, the commerce secretary underscored the ministry was looking to rationalize gold import duty and that the gold import regime should see a change as early as next month.

This is for the third successive month that trade deficit stayed in double digits as imports, especially oil, increased, nevertheless the trend is not worrying and the country remains comfortably within 2014/15 trade deficit forecast at $155 billion.  As a matter of fact, double-digit growth in exports is heartening. With better economic activity especially in the US and Europe, Indian exports are likely to stay on a reasonably better footing this time.

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