India May trade gap widens as weaker global demand drags

India’s trade deficit widened last month after shrinking to a near two-year low in April as exports declined on weakening demand for goods in most parts of the world.

The gap between exports and imports rose to $22.12 billion in May, the widest in five months, the Trade Ministry said on Thursday. The reading is higher than a deficit of $16.5 billion seen by economists in a Bloomberg survey, and compares with a $15.24 billion gap in April.

Exports fell 10.3% from a year earlier to $34.98 billion in May due to sluggish demand from major buyers overseas, while imports stood at $57.10 billion, down 6.6%. 

We plan to push exports in countries that are seeing a revival in demand, Trade Secretary Sunil Barthwal said at a news conference in New Delhi.

The wider trade gap highlights the challenges for the economy trying to recover from the scars of the pandemic and higher borrowing costs. It is a risk for the nation’s current account deficit, which can affect investor sentiment and hurt appeal of the local currency. 

The services sector is providing some reprieve for now. India’s services exports are booming owing to a sharp jump in information technology and business consulting work. It is estimated to rise to $25.3 billion in May.