India's trade deficit to hit $276 billion in FY25? Here' how $10 rise in oil prices will impact economy

livemint.com:

high crude oil prices threatens to widen the trade deficit in the current fiscal. According to a research report by ICICI Bank, if crude oil prices remain in $80-90/barrel range, trade deficit should be $266 billion for FY25. It could go up to $276 billion if oil prices move up by another $10 per barrel.

For FY24 as a whole, India's merchandise exports stood at $437.06 billion, down from $451.07 billion during the previous fiscal. Goods imports fell to $677.24 billion from $715.97 billion recorded during the same period. India's service exports stood at $339.62 billion in FY24, up from $325.33 billion in the previous fiscal while imports fell to $177.56 billion from $182.05 billion in the same period.

The overall trade deficit, including merchandise and services, shrank to $78.12 billion in FY24 from $121.62 billion in FY23. During FY24, the main drivers of merchandise export growth included electronic goods, drugs and pharmaceuticals, engineering goods, iron ore, cotton yarn/fabric, handloom products, and ceramic products & glassware, the commerce ministry said. However, the overall export of refined petroleum products and jewellery declined during FY24.

Merchandise trade deficit narrowed in March which can be attributed to sharp fall in gold imports. The non-oil-non-gold deficit is also lower at $1.5 billion on account of sharp pick-up in non-oil exports. FY24 trade deficit fell to $240 billion from $265 billion FY23, led by lower oil and non-oil-non-gold imports.

Gold imports are much higher at $46 billion. The current year has begun with much higher oil prices, which imply India’s trade deficit could be higher if oil prices sustain at current levels. ‘’Our base case is for oil prices to remain in $80-90/bbl.