India's trade deficit shrunk again in August after having widened in July to $18.5 billion. The situation unfolded as high import prices driven by inflation met dwindling demand for Indian exports from major buyers like the U.S., which is battling economic problems. The deficit has been increasing significantly since May, as data by the Ministry of Commerce and Industry shows.
As the dollar has been strengthening against global currencies - aided by early and decisive action of the U.S. Fed to reign in inflation -, an unfavorable rupee exchange rate further contributed to Indians foreign trade pains. Other factors driving up spending on trade included much higher fossil fuel imports, including many shipments of oil from Russia, as well as elevated gold buying, which has now been reigned in by a higher custom duty.
