The RBI releases data on foreign trade which is captured by the Directorate General of Commercial Intelligence and Statistics (DGCIS) of the Ministry of Commerce & Industry based on flows/movements of goods across the customs frontiers of India. As per the latest data, India‘s Trade Deficit touched a record high in 2021-22 in rupee terms.
In its latest World Economic Outlook report, the International Monetary Fund (IMF) highlighted that the global economy continues to face steep challenges because of the lingering effects of three powerful forces- the Russian invasion of Ukraine, a cost-of-living crisis caused by persistent and broadening inflation pressures, and the slowdown in China. The lingering effects of the COVID-19 pandemic are also weighing the projections. Adding that a growing share of economies is in a growth slowdown or outright contraction, IMF has forecasted that global growth to slow from 6% in 2021 to 3.2% in 2022 and 2.7% in 2023. This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic said the report.
For India, IMF has projected the growth to be 6.8% in the ongoing fiscal year (2022-23) while the growth was 8.7% in 2021-22. As per the previous World Economic Outlook Report from July 2022, India’s growth was estimated at 7.4% in 2022-23, which has been downgraded by 60 basis points to 6.8% in the latest forecast. India’s projected growth for 2023-24 is 6.1%. Not only IMF but the growth projections were also revised downward by other agencies including the World Bank and the Reserve Bank of India (RBI).
Since trade balance plays a key role in a country’s GDP, we look at India’s trade balance over the years in this story.
The trade balance is the difference between the value of exports and that of a country’s imports for a given period. If the trade balance is positive, it means more goods are exported than that is imported, which indicates that the country has a trade surplus. If it is negative, it indicates that the country has a trade deficit, or the money spent on imports is more than that spent on exports. A trade deficit can be a result of lesser production because of which the country is dependent on imports, or companies produce outside the country and import the finished goods, or due to weaker currency.
India’s trade deficit for Goods is highest with 14.2 lakh crore rupees in 2021-22
The RBI releases data on foreign trade which is captured by the Directorate General of Commercial Intelligence and Statistics (DGCIS) of the Ministry of Commerce & Industry based on flows/movements of goods across the customs frontiers of India. It must be noted that this data pertains to only goods trade & does not include services.
India’s provisional trade deficit in 2021-22 was Rs. 14.2 lakh crore, the highest ever. Compared to 2020-21, the trade deficit has increased by 88.3%. India’s trade deficit crossed Rs. 10 lakh crores in 2012-13, 2017-18, 2018-19, 2019-20, and 2021-22. Since 2017-18, the trade deficit has been above Rs. 10 lakh crores in each of the years, except in 2020-21 since the exports and imports were comparatively lower due to the COVID-19 pandemic-related restrictions. In 2020-21, the trade deficit had reduced to Rs. 7.57 lakh crores from Rs. 11.4 lakh crores in 2019-20. Since 2000-01, the trade deficit of the country has increased by more than 50 times in rupee terms.
Trade deficit for both oil and non-oil products touched Rs. 7 lakh crores in 2021-22
India is the third largest consumer of oil globally accounting for 5% of global consumption and with less than 1% of global production. India is a net importer of oil which explains the deficit in trade balance with respect to oil products. However, the trade balance for non-oil products was positive in the period from 1991-92 to 1997-98 and 2000-01 to 2003-04. Until 2014-15, oil products were the drivers of the trade deficit. However, in 2015-16, 2017-18, and 2021-22, the contribution of non-oil products toward the deficit was more. The trade deficit of both oil and non-oil products touched Rs. 7 lakh crores for the first time in 2021-22. Both, the imports and exports of oil and non-oil products were the highest in the same year.
In the 22 years between 2000-01 and 2021-22, the trade balance of oil products has widened 11 times from a deficit of Rs. 62,955 crores to Rs. 7.04 lakh crores. In 2020-21, the trade deficit of oil products was Rs. 4.2 lakh crores which had narrowed by 33.5% from Rs. 6.33 lakh crores in 2019-20, and again widened by 67% in 2021-22.
On the other hand, the trade balance of non-oil products was a surplus of Rs. 35,653 crores in 2000-01 which dropped to a deficit of Rs. 23,035 crores in 2004-05. The deficit has now widened to Rs. 7.22 lakh crores in 2021-22, an expansion of 31 times in 18 years. The trade deficit of non-oil products was Rs. 5.08 lakh crore in 2019-20, which narrowed by 33.8% to Rs. 3.36 lakh crores in 2020-21. In 2021-22, the trade deficit of non-oil products had more than doubled.
Oil imports touched a record Rs. 1.68 lakh crores in July 2022
The RBI also releases monthly data on imports and exports of oil and non-oil products. Between August 2019 and February 2020, prior to the pandemic, the average monthly export of oil products was about Rs. 24,597 crores while the average import was Rs.76,775 crores. The monthly import was the highest in January 2020 with Rs. 92,773 crores and exports were the highest in November 2019 with Rs. 27,688 crores. In April 2020, the exports of oil products dropped to Rs. 9,393 crores while the imports dropped to Rs. 27,042 crores in May 2020. However, since then, the imports and exports have improved considerably.
Between May 2020 and February 2021, the average export was Rs. 15,510 crores. Except for a considerable dip in January 2022, the exports increased to an all-time high of Rs. 83,170 crores in June 2022, following which it declined to the lowest in 7 months in August 2022.
With respect to imports, while there has been overall growth, it is fluctuating across months. In September 2021, the import of oil products crossed Rs. one lakh crores, and has been in that range since then, except in the months of October 2021 and January 2022. In July 2022, the imports touched 1.68 lakh crore rupees. This could be because of discounts Russia is offering on oil. India’s import of Russian oil has increased significantly in the last few months.
Average monthly imports and exports of non-oil products has been the highest in 2022
For non-Oil products, there was a trade surplus in June 2020. The gap between imports and exports was about Rs. 4000 to 5000 crores, in July 2020 and October 2020. However, the gap then widened to an average of Rs. 54,780 crores between December 2020 and April 2021, before reducing during the second wave of the COVID-19 pandemic. Since August 2021, the gap has widened. The gap increased to more than Rs. one lakh crores since May 2022.
Since March 2021, the exports of non-Oil products have been around Rs. 2 lakh crores. In March 2022, the exports touched Rs. 2.65 lakh crores and dropped to Rs. 2.24 lakh crores in August 2022. Meanwhile, the imports crossed Rs. 3 lakh crores in October 2021 and touched the highest of Rs. 3.59 lakh crores in July 2022.
With the US dollar strengthening and the increasing inflation, the trade deficit might further increase in rupee terms in the coming months.