Why in news?

  • Growing current account deficit.
  • Surging imports and slowing exports will make the current account deficit rise.

About News

  • India’s merchandise trade deficit record high of 25.6 billion in June.
  • The deficit was more than double the level observed last year.

Trade deficit

  • A trade deficit happens when the value of a country's imports exceeds the value of its exports with imports and exports referring both to physical goods and services.
  • In simple terms, a trade deficit means a country is purchasing more goods and services than it is selling.

Measures to counter Trade deficit

  • Increasing imports duty on gold
  • Levying taxes and imposing restrictions on the export of petroleum.

Trade data

  • According to analysts, CAD is upwards of 3% of GDP up from 1.2% last year.
  • This will add further pressure on Indan currency.
    • On Tuesday rupee fell to a low of 79 against the dollar.
  • Overall export grew under 17% in June in oil products, growth moderated sharply to 5.5%
    • Weakness was observed in engineering products, drugs and pharmaceuticals, farms and plastics.
  • Merchandise imports grew by 51% in June. Driven by the continuation of high commodity prices and healthy domestic products.
    • Three commodities resulted in the hike of imports in June.
      • Gold
      • Coal
      • Crude Oil
    • Imports in gold rise by 170%, petroleum by 94%, and coal by 24%.


  • Private consumption and investment remain lack lustre capacity of Central and state governments to direct growth is constrained by high debt burdens.
  • Exports could provide much-needed stimulation to growth.
  • A weaker currency could provide some tonic too but it might exert pressure on Trade Deficit.
  • It must be pointed towards the fall of currency Ruppe against dollars but simultaneously has increased risen against other currencies as well.
  • The policy of RBI is that it intervenes in currency markets only to smoothen out excess uncertainty.