Trade deficit balloons

Wed, Jul 2 12:50 AM

Slowing exports and a sustained surge in cost of oil imports pushed the country's trade deficit to a record $10.77 billion in May, according to official data released on Monday. The news of a wider trade deficit, which pushed the rupee to a 15-month low against the US dollar, added to investors' concerns about inflation spiking further and hurting the momentum of the Indian economy.

The rate inflation has already touched a new 13-year peak of 11.42 percent, prompting banks to raise lending rates to levels that companies say could hurt their plans to expand and invest in new projects. Exports in May stood at $13.78 billion, up 13 percent from $12.21 billion in the same month a year ago.

Imports grew by an annual 27.1 percent to $24.55 billion in May, driven mainly by oil purchases, which surged by 50.8 percent to $8.47 billion. Analysts said the relentless surge in global oil prices would keep pressure on the deficit and rupee in months ahead with demand for oil products in India remaining robust despite a hike in fuel prices.

The trade deficit in May widened from $7.1 billion in the same month a year ago, and was up from $9.87 in April 2008.

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