The trade deficit of India  has widened sharply due to a jump in the country’s imports. A trade deficit – also known as a negative balance of trade – is an economic term related to international trade. A trade deficit, in short, means that a nation’s imports exceed its exports. In other words, a country with a trade deficit spends more money in a year than it receives from its exports. India’s merchandise imports in May 2022 surged by 62.83 per cent to $63.22 billion in May 2022 as compared to $38.83 billion recorded in May 2021.

The trade deficit of India  has widened sharply due to a jump in the country’s imports. A trade deficit – also known as a negative balance of trade

India’s overall exports, merchandise and services combined, rose by 24.03 per cent year-on-year to $62.21 billion in May. India’s merchandise exports rose by 16.8 per cent to $37.9 billion in June 2022, while imports soared by 51.02 per cent to $63.58 leading to a trade deficit of $25.63 billion during the month.

Many nations around the world have trade deficits, including the United Kingdom, Mexico, Brazil, and the United States.The increase in India’s trade deficit was primarily on account of the sharp increase in petroleum imports due to the surge in global crude oil prices. The trade deficit of a country increases when the value of its exports fall below the value of its imports. India’s trade deficit has been increasing on the back of its increasingly higher imports, while exports have been lower than expected as well. Imports have increased by 57 percent, year-over-year.The value of imports has been increasing not due to increased volumes but increased commodity prices, mainly fuel.

While a trade deficit is not inherently bad or good, it can have different effects, depending on the economy in context. In India’s context, the simplest cost will be increasingly higher costs of imported goods for consumers while domestic workers also earn less due to a weakened rupee.