FY19 trade deficit expected to reach 4-year high at $178.1 bln

A report by India Ratings predicted that India’s FY 2019 trade deficit will increase to a 4-year high to 6.4% of the GDP or $178.1 billion. The cause for this has been linked to a rise in crude oil prices, a rise in the US Fed and an increasing ballooning trade deficit. The report also said, “Rupee has depreciated below the INR67/USD mark in May 2018 from the high of INR63.35/USD in January 2018.”

In FY18 the trade deficit stood at 6% of the GDP at $156.8 billion because of the rise in oil and gold imports. India’s trade deficit widened to $57.9 billion in 11MFY18. It was $19.2 billion in FY10. This was largely because of the increase in imports though there was a 7.4% CAGR of trade with China between FY10-FY18.

According to the report, “Lately, external trade has emerged as a critical component in India’s growth engine. At its peak in FY13, trade accounted for 55.8% of India’s GDP. However, post FY13, the scenario changed due to sluggish global growth and rising protectionism. As a result, the contribution of trade to India’s GDP declined with private consumption and government spending supporting the growth momentum. Based on FY18 estimates, trade contribution to economy decreased to 40.6%.”