India's trade deficit widened to more than five years of $16.6 billion in June, the trade ministry said on Friday, driven largely by a surge in oil prices and a weaker rupee.
The trade deficit widened to $16.6 billion from $14.62 billion in May, said the ministry.
However, the country’s merchandise exports rose 17.57 per cent year-on-year in June. Oil imports of the world’s third largest crude importer rose 56.61 per cent to $12.73 billion, reports Reuters.
The oil import bill of India rose sharply with global oil prices amid concerns that US sanctions against Iran would remove a substantial volume of crude oil from the world markets.
Washington, which had pulled out of the 2015 nuclear deal with Iran, is pushing countries to halt imports of Iranian oil from November.
India’s trade balance is further bruised by a weakening Indian rupee that hit an all-time low against the dollar last month.
The depreciating rupee and a widening trade deficit pose a challenge for Prime Minister Narendra Modi, who is aiming to boost economic growth ahead of national elections, due early next year.
Late last month, Subhash Chandra Garg, the economic affairs secretary in the finance ministry, had said the trade deficit was expected to widen but the outlook was unclear.
“We are not even certain what kind of a storm it is or even if it is a storm or whether it will turn out to be a storm,” Garg said.
Merchandise exports last month rose to $27.7 billion from a year ago, while imports rose 21.31 per cent year-on-year to $44.3 billion, the Ministry of Commerce and Industry said in a statement.
India’s gold imports fell 2.8 percent year-on-year to $2.39 billion in June, the statement said.