India’s trade deficit widened to a four-month high in April, led largely by a surge in gold and oil imports. While exports saw a dismal 1.07 percent growth to $35 billion, imports jumped 10.25 percent to $54.1 billion, widening the deficit to $19.1 billion. If gold imports tripled to $3.11 billion, oil imports rose by a fifth over last year. Besides these two, a basket of 14 other imported commodities including pulses, fruits, vegetables and electronics saw an uptick.
At the same time, the export of as many as 17 of the top 30 items including engineering goods, gems and jewellery contracted. Analysts caution that the rupee and the current account deficit (CAD) could come under pressure if the export-import imbalance continues. According to initial estimates, the CAD may print upwards of 1 percent in 2024-25 from an estimated 0.8 percent in 2023-24 should oil and gold prices remain high. Add to this the volatile capital flows and uncertainty over US interest rate cuts, and the rupee could be pushed close to 84 against the dollar.
Indian exports, like for most other nations, are being impacted by the global slowdown, tightening of interest rates, and a slack in business, investment and trade. Complicating matters, geopolitical challenges like the West Asia and Ukraine conflicts and the Red Sea crisis are affecting global trade, particularly for emerging economies.
However, official data also showed India’s exports surged to as many as 115 countries—accounting for 46.5 percent of our export basket—out of the total 238 destinations in 2023-24. Exports to the top 10 destinations rose 13 percent, with the UAE emerging as the primary export hub. If exports to Singapore, China and the UK saw a healthy double-digit growth, others like Russia, Romania and Albania saw exponential growth, indicating scope to improve our competitiveness.
Strengthening trade relations will help sustain the export momentum despite the looming global uncertainties. Initiatives such as production-linked incentives and the Make in India campaign, which have seen remarkable growth, particularly in smartphone exports, should be extended to more products.
The government must continuously revise trade strategies, prioritise domestic production and actively pursue free-trade agreements to enhance exports. The recent pacts with the UAE and Australia expanded access to those markets. More such agreements should be forged to facilitate trade growth.