Finance Minister Nirmala Sitharaman.

NEW DELHI– India’s exports have kept rising for quite some time giving much-needed support to Indian economy in the aftermath of the COVID-19 pandemic.

Meanwhile, the widening international trade deficit on account of an even greater rise in imports remains a major concern.

One of the other major concerns at present is the declining value of the Indian rupee (INR).

India’s trade deficit widened to a record $25.63 billion in  the month of June, pushed by a rise in crude oil and coal imports, from $9.61 billion a year earlier, which added to fears of further pressure on the INR. 

In March the trade deficit was 18.69 billion U.S. dollars, and stood at $192.41 billion for the financial year 2021-22.

In the first quarter of the current financial year, the merchandise trade deficit more than doubled to $70.25 billion, compared to $31.42 billion a year earlier or in April-June 2021.

In response to the increasing trade deficit, Federation of Indian Export Organizations (FIEO) President A. Sakthivel said, “Imports growth of over 57 percent in June 2022 is of concern and has been mainly on account of petroleum products, coal, coke and briquettes, gold, electronic goods, organic and inorganic chemicals and artificial resins, plastic materials, etc. which may be looked into.”

The FIEO president said though the government has announced a slew of measures to support exports, there was a need to further push value-added exports, augment container manufacturing, and develop an Indian shipping line of global repute.

The INR is reported to have fallen to a record low versus the U.S. dollar on Tuesday when it breached the 80-mark and stood once at 80.05 against a U.S. dollar, though later during the day it recovered to 79.92.

On Monday, the Indian government admitted that the INR had depreciated by more than 25 percent since December 2014.

The INR’s value declined from 63.33 against a U.S. dollar on Dec. 31, 2014, to 79.41 on July 11, 2022, it said in a statement.

Finance Minister Nirmala Sitharaman attributed the flight of foreign investors to funds from emerging markets to monetary tightening in advanced economies, particularly in the United States. 

The minister further said that global factors such as the Russia-Ukraine conflict, soaring crude oil prices, and tightening of the global financial conditions were the major reasons for the weakening of the INR against the U.S. dollar.

She added that another contributing factor to the decline of the Indian currency was that foreign portfolio investors had withdrawn about $14 billion from the Indian equity. 

“The depreciation of a currency is likely to enhance export competitiveness, which, in turn, impacts the economy positively.

“The depreciation also impacts imports by making them more costly.

“The RBI regularly monitors the foreign exchange market and intervenes in situations of excess volatility,” the minister stated.

Listing the measures initiated to soften the blow of the INR’s depreciation, she said that the Reserve Bank of India (RBI), India’s central bank, had raised interest rates in recent months which increased the attractiveness of holding the Indian currency for residents and non-residents. – Xinhua