Imports in July kept up the tempo, although there was a slight easing from the previous month as commodity prices came off recent highs with synchronised monetary tightening across the world. Growth in crude oil and coal imports during the month pulled down the average rates for April-July, and gold imports declined with the imposition of a duty. Machinery imports – a marker of India’s growth prospects – remained buoyant, as did edible oils, where the scope for import substitution is limited. Filtering out crude oil and gold – admittedly, a big filtration – imports during July grew faster than the average for the first four months of 2022-23.
The trade deficit in July at $31.02 billion is almost three times the $10.63 billion it was a year ago, and at $100.01 billion so far in 2022-23, it is over twice the $42.07 billion clocked up in April-July 2021-22. Capital flight since last year is exerting pressure on the rupee and a widening current account deficit (CAD) limits the scope for managing the currency’s descent. As foreign exchange reserves dwindle – these are now below the 11 months of import cover considered safe – the option to restrict imported energy inflation may become too costly.