Merchandise exports registered a “record” 57 per cent growth to $26 billion in May thanks to a spectacular performance by engineering, oil and electronics sectors.
But imports jumped to a four-year-high at $41 billion at an equally scorching pace of 54 per cent mainly due to rising oil prices and a surge in gold imports.
This resulted in the gap between imports and exports widening to $15 billion (a 67 per cent increase) – the largest since August 2008 – prompting the authorities to caution that the trade deficit for 2011-12 could touch a record $145-150 billion.
Exports in the first two months of this fiscal (April and May) grew by 45.3 per cent to $49.8 billion, while imports rose by 33.3 per cent to $73.7 billion. This took the trade deficit to $23.9 billion.
Releasing the data on Friday, the Commerce Secretary, Dr Rahul Khullar, told reporters it was a preliminary estimate and would be revised upwards soon. He added that the Government will get the destination/country-wise break-up of the data only later this month.
The high export growth in May was mainly due to engineering exports registering a whopping 120 per cent rise to $8 billion. Exports of iron, steel, copper, aluminium, automobiles and auto-components are doing relatively better than industrial machinery, Dr Khullar said.
Oil exports grew by 75 per cent to $4.5 billion due to high oil prices, while electronic goods grew by a remarkable 117 per cent to $1.03 billion. Man-made fibres rose by 50 per cent to $0.44 billion, while drugs, pharmaceuticals and chemicals recorded high growth.
Dr Khullar said the country's export market has radically changed as exporters are now being able to compete in new markets, adding that shipments from Special Economic Zones are also contributing significantly to the export growth story.
The increase in imports in May was due to oil imports rising 18 per cent to $10.6 billion, while the growth in gold and silver imports went up by over six times to $8.96 billion. In April-May, oil imports were $20.3 billion (13 per cent growth), while gold and silver imports were worth $13.5 billion (222 per cent).
The huge surge in gold imports could be due to the high prices of gold and silver and people seeing these as safer assets to possess, Dr Khullar said.
He, however, cautioned people against jumping to a conclusion that the increase in imports has to do with an investment boom or a decline in industrial output. The high level in trade is due to an investment demand, domestic consumption and export demand, he said.
Dr Khullar said if the country's export markets contract, the sectors such as engineering, gems and jewellery that are now importing to re-export, after doing value-addition, would then import less. Along with this, if oil prices come down, the oil import bill would also be lower, he said.
Reacting to the trade data, the Federation of Indian Export Organisations President, Mr Ramu Deora, said the 57 per cent export growth is “an all time high.” This is sign of robust global scenario particularly in advanced economies coupled with effective government initiatives, he said.
Exports will continue to do well if stability of the policies is maintained and credit cost is lowered, he said.
However, terming the rising trade deficit as a cause of concern, he said domestic manufacturing should be encouraged to offset this huge deficit.