(Bloomberg) -- India’s trade deficit in July widened the most in more than five years, worsening the outlook for the rupee that hit a record low, dragged down by fears sparked by the Turkish lira.

The trade deficit -- gap between exports and imports -- was at $18 billion in July, data released by India’s commerce ministry showed on Tuesday. That compares with the $15.7 billion median estimate in a Bloomberg survey of 24 economists and $16.6 billion in June.

The fall in the Turkish lira roiled emerging market currencies, pushing the rupee past the 70-mark to a dollar Tuesday. While a weaker rupee is positive for exports, it poses an inflation risk for a nation that imports more than 80 percent of its crude oil needs and adds to the stress on current-account.

Every rupee change in exchange rate against U.S. dollar impacts India’s crude oil import bill by 108.8 billion rupees ($1.58 billion), according to the oil ministry.

Inbound shipments of oil in July were at $12.4 billion, up 57.4 percent from a year ago. Overall imports rose 29 percent to $43.8 billion, while exports grew at 14 percent to $25.8 billion. Trade deficit was at $19.1 billion in May 2013, according to data compiled by Bloomberg.

“Factors such as broader emerging market currency movement, dollar strength, and the trend in crude oil prices will drive the outlook for the rupee in the immediate term, which will have an impact on the landed cost of imports as well as various commodity prices, thereby transmitting into wholesale price inflation,” said Aditi Nayar, principal economist at ICRA Ltd.

The monetary policy committee led by Governor Urjit Patel has increased interest rates twice since June to curb price pressures, while the central bank used foreign reserves to check currency volatility. The rupee reversed losses to close 0.1 percent higher at 69.8963 on Tuesday in Mumbai, with traders saying state-run banks sold dollars, probably on behalf of the RBI.

The current level of reserves at about $402 billion will provide import cover of less than a year. The nation’s current-account gap has come under pressure and is expected to widen to 2.4 percent of gross domestic product in the financial year to March 2019, from 1.9 percent in the October-December period.

--With assistance from Manish Modi.

To contact the reporter on this story: Vrishti Beniwal in New Delhi at vbeniwal1@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Karthikeyan Sundaram, Unni Krishnan

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