India's trade deficit faces limited near-term challenges from ongoing geopolitical uncertainties, though it remains an important area to monitor, says a recent outlook report by Crisil on India's trade deficit.
The report also suggests that, despite these potential disruptions, the forecast for better trade growth this year by key multilateral organizations offers encouraging news for Indian exports.
India's exports in April recorded positive growth in the face of ongoing disruptions in global trade routes and uneven global growth. Imports, meanwhile, saw steeper growth, leading to a wider trade deficit.
According to the report, overall, services exports of India have been growing well and the country is now the fourth largest exporter of digitally delivered services, after the US, UK, and Ireland.
The country now accounts for more than a fifth of international trade in services. India's digitally delivered service exports stood at USD 257 billion, up 17 percent year over year.
The report highlights that India's merchandise exports grew 1.1 per cent year-on-year to USD 34.99 billion from USD 34.62 billion in April last year, after registering a mild contraction of -0.7 per cent in the previous month.
While India's merchandise imports surged 10.3 per cent year-on-year to USD 54.09 billion from USD 49.06 billion in April last year,.The report says that lower gems and jewellery shipments were a drag on export growth. Meanwhile, core exports stayed positive but slowed to 1.3 per cent on-year compared with 9.1 per cent in March.
The high growth in merchandise imports was a result of a surge in both oil and gems & jewellery imports, while core import growth remained softer. Notably, during the April month, prices of crude oil and gold rose sharply, both on-year and on-month.
Oil prices rose to USD 90.1/bbl (Barrel) in April from USD 85.4/bbl in March, contributing to the import growth. Meanwhile, Gold imports doubled to USD 3.1 billion from USD 1.5 billion in March. Therefore, the merchandise trade deficit widened to USD 19.1 billion from USD 15.6 billion in March and USD 14.4 billion in April last year.
In March, India's services exports declined 1.4 per cent year-on-year, while imports softened to 2.1 per cent. As a result, the services trade surplus was largely stable at USD 13.42 billion, as against USD 13.48 billion a year ago
