InvestorQ : Is it true that the trade deficit for December 2020 could have widened sharply compared to previous months?
sarah Leo made post

Is it true that the trade deficit for December 2020 could have widened sharply compared to previous months?

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Rashi Mehra answered.
2 months ago
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Normally, the government releases the provisional trade figures on the first of every month although the detailed trade report is issued by the Commerce Ministry only around the middle of the month. However, you are right that the provisional figures issued by the government about trade performance in Dec-20 indicate a sharp widening of trade deficit.

As per provisional figures, the exports for Dec-20 may have fallen marginally by 0.8% to $26.89 billion due to weakness in exports of leather goods, marine products and petroleum products. However, the sharp spurt in imports to $42.6 billion means that the trade deficit would have widened to $15.71 billion for the month of Dec-20 on a YOY basis.

To an extend the higher trade deficit was driven by a surge in oil import volumes coupled with the sharp spike in crude prices closer to $52/bbl. However, there has also been a sharp rise in gold imports to support the robust demand for jewellery during the festival season in the last quarter. Other heavy machinery imports have also gone up in December 2020.

If you look at the nine months cumulative period from April to December 2020, merchandise exports fell by 15.8% $200.55 billion. During the same period, the total imports stood at $258.29 billion resulting in a cumulative 9-months trade deficit of $57.74 billion. The trade in services is expected to compensate for this spurt in trade deficit.

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