Trade deficit at 6-month high of $15.4 bn over increasing oil, gold imports

Exports recover to 3.9% in May, up from 0.64% in April

The continuing of high crude and gold imports pushed India’s trade deficit to a six-month high of $15.36 billion in May, even as export growth managed to recover from the rock bottom it had hit in April. 

Higher exports in key sectors, such as engineering goods and textiles, helped overall export growth recover in May to 3.93 per cent, from just 0.64 per cent in April. 

According to data released by the commerce and industry ministry on Friday, exports stood at $29.99 billion in May. Interestingly, hot global crude prices have not led to higher realisations from petroleum receipts, which fell by 1.4 per cent in May. Cumulative exports in FY20 stood at $56.07 billion. 

Outbound trade has remained volatile with export growth reaching double digits for the first time in five months in March. 

Shipments rise in April 

Of the 30 major product groups, 17 recorded a growth in May, up from 14 in April. 

After being one of the growth pullers in the previous financial year, engineering goods rose by 4.4 per cent in May, as compared to the 7 per cent contraction in April. The sector had shown signs of recovery in the past few months and growth had been 16.2 per cent in March. The sector accounts for nearly one-fourth of the total foreign exchange earned through exports. 

Elsewhere, readymade garments, the sector in which India’s export competitiveness has steadily fallen over the past financial year, showed signs of steady recovery with $1.52 billion worth of merchandise exported in May. Growth jumped to more than 14 per cent, up from the 4.42 per cent in April. 
 

The case was similar to drugs and pharmaceuticals exports which also managed to rise by 10.98 per cent in May. Growth in the sector has swung wildly in 2019 with a 4 per cent rise in April, and 13.59 per cent growth in March. 

For gems and jewellery, contraction that had gripped the sector periodically since November, continued in May when the sector contracted by 7.38 per cent, to ship out $3.41 billion worth of goods. Gem exports had retreated by 13.38 per cent in the previous month of April. The pace of exports has been hit in the sector, as fund availability dried up in the aftermath of the Nirav Modi fraud. 

Receipts from the volatile processed petroleum exports however, fell steeply from April when growth had exploded by more than 30 per cent growth. 

Imports stay strong

Import growth reached a six-month high, registering 4.4 per cent growth. This resulted in the consequent trade deficit, worrying commerce department officials who expect deficit to go up unabated in 2019-20. 

As a result, the largest component of the import bill — crude oil — saw the cost of inbound shipments rise by 8.23 per cent, up from 1.86 per cent 

in April.

Gold, which accounts for the second-largest cost in the import bill, saw a sharp rise of 37 per cent in May to $4.7 billion, albeit down from the 56 per cent in April. Imports of the metal had continued to see an uptick in 2019 and had risen by 31.2 per cent in March. The industry continues to see volatility as imports had risen in July after remaining in negative territory for six months.

Non-oil, non-gold imports, a sign of domestic industrial demand, remained depressed in May, contracting 1.73 per cent. This was, however, lower than 2.19 per cent contraction in April.