(June 15): India’s trade deficit in May narrowed marginally from the previous month, though it was wider than estimated, with officials saying an interim US-Iran agreement to reopen the Strait of Hormuz has improved the outlook.
The gap between imports and exports narrowed to US$28.21 billion in May from US$28.38 billion a month earlier, according to data released by the Ministry of Commerce & Industry on Monday. The deficit was larger than the median forecast of US$27.2 billion in a Bloomberg survey of economists.
Imports rose 20.6% in May to US$73.41 billion from a year earlier, while exports rose 18% to US$45.20 billion.
Goods exports reached a record high, led by stronger shipments to the US, UK and Singapore, according to commerce ministry data. Officials said exporters were also able to sustain shipments in May to the Middle East despite disruptions by routing cargo through alternative hubs, primarily ports in Oman.
The narrower deficit could offer some relief to policymakers seeking to shore up the rupee amid volatile energy markets and global trade uncertainty. As the world’s third-largest oil importer, India remains highly exposed to developments in the Middle East. The country relies on the region for most of its crude oil, liquefied petroleum gas and fertiliser imports, much of which typically transits through the Strait of Hormuz. The planned reopening of the waterway on Friday is expected to ease pressure on India’s energy imports.
“Many of our problems will go away” with the newly announced peace deal, Commerce Secretary Rajesh Agrawal told reporters in New Delhi. “Hope this is a sustained deal that will bring peace in the region.”
See also: India cuts bond tax, eases access for global funds to lift rupee
Separately, New Delhi and Washington are expected to soon conclude an interim trade pact, a move that could provide an additional boost to exports. United States Trade Representative is scheduled to visit India on June 23-24, Agrawal added.
“It is a short visit but will be centred around giving final touches to the framework deal and on the larger bilateral trade agreement,” he said. “We will try to have clear answers on 301 probes when we sign the trade deal,” he added, referring to US investigations into countries including India over concerns about forced labour and excess production capacity.
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