6-qtr high: Trade deficit in July-Sept widens to $49.2 b

Reason attributed to crude import

India’s trade deficit in the second quarter (July-September) of this fiscal has reached its highest level compared to the past six quarters, prompting the Directorate General of Foreign Trade (DGFT) to do a brainstorming with export promotion councils on how to reduce the gap.

The trade gap or the difference between exports and imports reached $49.2 billion in the July-September quarter this year mainly due to crude import, official data showed.
A whopping trade deficit, which is also putting pressure on the fiscal deficit and current account deficit, rose mainly because a high crude import, the demand for which is nearly $725,000 per day on average.

Prior to this, the trade deficit had risen to $48.1 billion in October-December quarter last year.
The government has said that the global economic crisis, sovereign debt crisis in Europe and economic slowdown in developed economies have adversely impacted the demand for Indian goods abroad, at the same time demand for petroleum, fertilizer, gold and edible oil in India have led to higher value of imports of these commodities. 

Consequently India has been running a trade deficit with 48 countries including China, Australia and Iran during the last three years. During the first six months (April-September) of the financial year, the country’s exports dipped by 6.79 per cent to $143.6 billion from $154.1 billion in the same period last year. India had the highest trade deficit of about $40 billion with China in 2011-12.

The government had announced a number of measures in June this year to perk up India’s falling exports. Some sectoral policy reforms may also be expected as there is an urgency within the government to arrest a slide in exports, which worsens India’s already wide current account deficit, according to government officials.

The DGFT, responsible for the formulation of guidelines for Indian importers and exporters has also undertaken a mid-term review and held detailed discussions with all export promotion councils to look for ways to enhance India’s trade with overseas countries.

India is aiming for annual exports of $500 billion in two years. It plans to expand exports by 20 per cent in the current fiscal year through March from last year’s $303.7 billion, but the target looks difficult unless further steps are taken, a top official in the Commerce Ministry had said recently.