At $16.6bn, India's trade deficit soars to 5-year high in bad news for rupee

The June trade deficit was the widest since the $19.1bn gap reported in May 2013.

Jul 13, 2018 01:07 IST India Infoline News Service

India’s trade deficit widened the most in five years as oil prices jumped, setting the stage for renewed pressure on the rupee, Asia’s worst-performing currency.

Government data on Friday showed trade deficit at $16.6bn in June, well above Bloomberg forecast of $14.4bn and higher than the $14.6bn gap in May. The June trade deficit was the widest since the $19.1bn gap reported in May 2013.

Oil imports in June were at $12.73bn, up 57% from a year ago. Overall imports rose 21.3% to $44.3bn while exports lagged, growing at 17.6% to $27.7bn.

The data will have an adverse impact on India’s current-account deficit, already strained by slowing foreign inflows and high oil prices, and will add to weakness in the rupee. The rupee plunged to a record 69.0925 against the dollar last month. The currency has since gained and was at 68.53 as of Friday.

“It is the import bill that’s worrisome,” said NR Bhanumurthy, an economist at the Delhi-based National Institute for Public Finance and Policy, adding, “It is only going to rise further as oil prices climb and the markets continue to realign thanks to the US trade wars. So the expectation is that the rupee will only weaken further.”

The nation’s current account gap is expected to widen to 2.4% of gross domestic product (GDP) in the financial year to March 2019 from 1.9% in the October-December period.

Source: Bloomberg

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