India’s trade gap widens to record on costly imports

India’s trade deficit ballooned to a record high in July, as elevated commodity prices and a weak rupee inflated the country’s import bill.

The gap between exports and imports widened to $31.02 billion in July, from $26.18 billion in June, B.V.R Subrahmanyam, India’s trade secretary, told reporters at a briefing in New Delhi Tuesday, citing preliminary data. The trade deficit in June was a record before the latest numbers were released.

Imports jumped 43.59% in July from a year ago, while exports dropped 0.76%. Inbound shipments of petroleum products during the month stood at $21.13 billion, and gold imports came in at $2.37 billion. Coal imports stood at $5.17 billion.

July’s data comes after the federal government raised import duty on gold last month to discourage buyers in the world’s second-largest consumer and rein in the yawning trade deficit. Growing concerns about the gap and an exodus of foreign capital from Indian markets had pushed the rupee to a record low of 80.06 per dollar last month. The local unit has since rebounded amid a broad pick up in appetite for riskier assets and currencies.

Meanwhile, India’s export sector, one of the brighter spots in the economy in the aftermath of the Covid pandemic, is expected to come under strain amid fears of a slowdown in key markets such as US and the European Union.