India’s trade deficit widened to the most since October last year as higher oil prices and resilient domestic demand inflated the import bill.  

The gap between exports and imports stood at $24.16 billion in August, the Trade Ministry said, exceeding a $21 billion deficit seen by economists in a Bloomberg survey. This is the widest since a $26.9 billion deficit in October 2022.  

Exports fell 6.9% from a year earlier to $34.48 billion in August while imports stood at $58.64 billion, down 5.2%. The decline in exports and imports slowed from July onwards.

“Firming oil prices may impact commodity prices and may impact exports,” Commerce Secretary Sunil Barthwal told reporters in New Delhi on Friday. “The exports are stabilizing now and we can say green shoots are visible.”

The rupee declined 0.2% to 83.18 against the dollar after the data was announced, closing near to a record low. 

Rising inflation in the US and EU — the South Asian country’s major export markets, and higher interest rates hit demand for Indian goods. Stronger oil prices and the weaker rupee against the dollar have increased the import bill, though this also shows domestic demand in Asia’s third largest economy remains strong.

Upasna Bhardwaj, an economist with Kotak Mahindra Bank, said local demand is normalizing after a pent up surge last year when pandemic restrictions were lifted. With oil, it was a different story. 

“The tide is turning slowly for India as it no longer enjoys the kind of discount on oil it did last year,” she said. “We must remain watchful on the export side.”

The widening trade balance could lead to an expansion in the current account deficit — a broad measure for trade in goods and services. It narrowed in the January-March quarter, the lowest in seven quarters.