DNA Money Edit: Simmering oil jacks up India's import bill, trade deficit

Once again, the increasing crude oil prices have begun to jack up India's import bill and the trade deficit, which is the difference between exports and imports. As per the commerce ministry data, trade deficit has widened to $14 billion during October as against $11.13 billion in October 2016, riding a 7.6% jump in the import bill (to $37.1 billion), especially the 27.9% year-on-year growth in oil bill to $9.2 billion. Crude prices have surged in the last two months after some oil-exporting countries triggered production cuts to drain the global oversupply.

Since India imports nearly 80% of its oil needs, fluctuation in global oil prices has an unavoidable impact on India. On an average a $1 increase annually in oil price can jack up India's oil import bill by $1.56 billion annually, according to SBI chief economic adviser Soumya Kanti Ghosh. True, the country is badly exposed to the vagaries of the international oil market. The spurt in trade deficit was compounded by a 1.12% fall in exports for the first time in 15 months to $23 billion.

What is important is that the jump in import bill is despite a 16% drop in gold imports (for the second straight month) to $2.9 billion. The World Gold Council has predicted that the demand for gold might slow down under the new tax regime of GST.