The government needs to monitor imports especially since the US has announced tariff hikes on Chinese imports, which could potentially lead to some dumping by China in the larger Asian market, including India, according to rating agency Crisil.
“…Growth in imports so far has surpassed exports, thus widening the trade deficit. This will remain a key monitorable,….,” it said in a note Wednesday.
That said, it pointed out, the expected moderation in domestic growth should keep a tab on growth in imports and, thereby, on trade deficit.
“At the same time, the surplus in services trade and robust remittances flow suggests the current account is expected to remain in a safe zone,” it said.
The government’s increased focus on foreign-trade agreements (FTA) should also provide a thrust to exports, it observed.
The agency noted that the fiscal had started on a good note, with merchandise exports registering positive growth in the first quarter and this along with key multilateral organisations’ forecasts of better on-year trade growth are encouraging.
Exports remained resilient in the first quarter of the current fiscal (FY25), as core export goods such as drugs and pharmaceuticals, engineering goods, organic and inorganic chemicals and readymade garments exhibited positive growth.
The overall export growth eased to 2.6% on-year in June, primarily due to an 18.2% contraction in oil exports. In contrast, merchandise imports grew at a faster pace of 7.7%, reaching $172.4 billion, up from $160 billion last year. Non-oil exports have maintained a steady momentum, with a growth rate of 7.7% in June, slightly down from 7.8% in May, it showed. This imbalance has resulted in a widened trade deficit of $62.44 billion, compared to $56.1 billion previously.