Oil is one of India's major export items, the country exports petroleum products to various countries, with the Netherlands being the top destination, followed by Singapore, Australia, and South Africa, as per trade data from the Ministry of Commerce.
"A fall in the price of crude--one of India's top export items--is impacting oil exports," said CRISIL. The report also highlighted that imports have been growing at a faster pace than exports, contributing to a widening trade deficit.
CRISIL also noted that the fiscal year began on a positive note, with merchandise exports showing steady growth during the first quarter. However, by July and August, export growth had slowed, and overall exports contracted. Several issues have contributed to this decline, with one of the key factors being a shortage of containers, which has disrupted major trade routes.
In addition to these challenges, the US has announced plans to increase tariffs on Chinese goods, further affecting global trade flows.
"The fiscal started on a good note, with merchandise exports logging steady growth in the first quarter. However, exports contracted in July and August. Issues such as container shortages amid trade-route disruptions and the US's impending tariff hikes on Chinese exports seem to be at play," the report added.
The report also emphasized that the situation involving US tariffs on Chinese goods is a key concern, as it is expected to have a broader impact. The slowdown in China's economy may also be leading to an increase in Chinese exports being dumped in the Asian market, including India.
For example, the report noted a significant rise in the import of steel from China and Vietnam in recent months, which could further widen India's merchandise trade deficit.
Despite these challenges, the report pointed out that there are positive factors that could help offset the growing trade deficit. India's services trade continues to show a surplus, and the country is experiencing strong inflows of remittances from overseas workers. These factors offer some comfort and are expected to help maintain India's current account in a stable position, even as the merchandise trade deficit increases.
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