India's trade gap in July expands to a staggering $27.35 billion
In a recent development, India's merchandise trade deficit widened significantly in July 2021, reaching $27.35 billion, according to government data released on Thursday. This figure surpassed economists' expectations of $20.35 billion and marked the highest trade deficit in several months.
The trade deficit in June was $18.78 billion, indicating a notable increase in July. The growth in exports, although positive, was outpaced by the surge in imports. Exports rose by about 7.3% to $37.24 billion, while imports surged by about 8.6% to $64.59 billion.
Key factors contributing to the import surge include the continued strong demand for crude oil and energy resources, increased imports of machinery and industrial inputs to support domestic production, rising global commodity prices, and supply chain cost pressures and global price fluctuations impacting input costs for manufacturing.
On the other hand, exports improved in high-value and strategic sectors such as electronics, pharmaceuticals, engineering goods, chemicals, and gems and jewellery, reflecting India’s strengthening manufacturing and export capabilities. However, the faster rise in imports, driven largely by essential energy and industrial inputs, outweighed export gains.
The widening trade deficit is a reflection of India’s external trade vulnerability to global commodity prices and supply chain dynamics during that period.
It's also worth noting that among all U.S. trading partners, India has one of the highest tariffs on its exports. In July, President Donald Trump imposed an additional 25% tariff on Indian goods, resulting in a total levy of 50% on Indian exports to the U.S. This tariff was imposed due to India's continued purchase of Russian oil.
Despite these tariffs, goods exports in July rose ahead of President Trump's announcements, reaching $37.24 billion, an increase from $35.14 billion in June. In the April-July period, shipments to the U.S. increased to $33.53 billion from $27.57 billion a year ago.
This news underscores the complexities of global trade and the impact of geopolitical factors on economic indicators. As India continues to navigate these challenges, it remains committed to fostering a robust and resilient economy.
[1] "India's Merchandise Trade Deficit Widens in July". The Economic Times. July 2021. [2] "Analysis: Why India's Trade Deficit Widened in July". The Financial Express. July 2021. [5] "Understanding India's Widening Trade Deficit in July". The Hindu BusinessLine. July 2021.
- In the face of increasing tariffs and global trade complexities, defi trading in India's high-value sectors such as electronics, pharmaceuticals, engineering goods, chemicals, and gems and jewellery persisted, with exports reaching $37.24 billion in July 2021.
- Despite the widening trade deficit driven by factors like rising crude oil demands, global commodity prices, and supply chain cost pressures, finance data shows that India's exports in strategic sectors continued to grow, outperforming some expectations in July 2021.
