JOIN USExports rise 0.8%
India’s exports rose 0.8 per cent in January, for the first time in nine months this fiscal, but a huge surge in imports widened trade deficit to a record $20 billion in a single month, raising concerns that an already ballooning current account deficit (CAD) may get worse.
India earned $25.59 billion through exports in January but spent $45.58 billion in imports mainly driven by oil, the inbound shipment of which rose 6.9 per cent from a year earlier, to $15.9 billion.
Since April 2012, petroleum and crude oil imports have shown an upward trend. While in August, imports grew 3 per cent, in September it jumped 30 per cent and in October, 31 per cent.
"There was a huge surge of imports of petroleum goods, which we believe was essentially due to added consumption in the power sector," said Commerce Secretary, S R Rao after releasing the data on Wednesday.
Commerce Minister Anand Sharma too said in Mumbai that the trade gap should “close” soon.
The trade deficit was $17.7 billion in December and a deterioration of about $2.5 billion from the December figure has worried the market; analysts apprehend this does not augur well either for the Indian rupee or CAD, which was 5.4 per cent of GDP in July-September quarter.
A higher trade deficit print could be because of higher gold imports in January in anticipation of a 50 per cent rise in gold import duty that the government had announced in the beginning of January but imposed only after a fortnight.
Analysts said the root of gold import problem lies in high inflation and high interest rates leading to capital flight.
India’s exports during April-January period were at $239.6 billion while imports while imports stood at $ 406.8 billion, leaving a gap of $167.16 billion. Officials admitted that the $360-billion export target for this fiscal year may not be met.
The weak exports are mainly due to a slump in demand in markets such as the US and Europe, but the fall in macro economic indicators this month suggest India’s economic growth may slump below government’s expectations this fiscal.
‘Would narrow trade gap’
Union Commerce and Industry Minister Anand Sharma on Wednesday exuded optimism saying a slight uptick in January exports, which rose 0.8 percent, will help close the trade gap, that stood at $167.16 billion in the first 10 months of the fiscal.
"I hope with exports growing marginally in January, it should help us narrow the trade gap at the close of the fiscal," Sharma said.
Sharma blamed rising oil and gold imports for the widening trade gap. He conceded that gold imports are a matter of concern and called for a balanced approach towards gold import duty.