India’s trade deficit halved to $9.92 billion in January from $18.87 billion in the same month last year, with the Government succeeding in cutting down gold and silver imports through higher import duties and other curbs.
Total imports fell 18.07 per cent year-on-year to $36.57 billion due to a 77 per cent drop in gold and silver imports, while exports increased a modest 3.79 per cent to $26.75 billion over the same month last year.
The marginal rise in exports was largely due to a fall in outbound shipments of gems and jewellery, petroleum products and some chemicals due to weak global demand and a decline in crude prices.
“The continued upward trend in exports and the sharp decline in the trade deficit is a cause for satisfaction,” said Commerce Secretary Rajeev Kher, addressing a press conference on Tuesday. Kher’s optimism stemmed from a steady month-on-month increase in exports since November 2013. However, exporters and analysts feel that the growth is ‘too modest’ to bring cheer.
Deficit under check A low trade deficit is necessary to contain the current account deficit, and this in turn helps to maintain a healthy balance of payments. A high current account deficit, on the other hand, weakens the domestic currency and keeps away foreign investors.
“The continued modest growth in exports is worrisome. The data for December 2013 and January 2014 indicate that Indian exporters need immediate attention to bring exports back on track,” said Federation of Indian Export Organisations President M Rafeeque Ahmed.
Factors such as inadequate flow of credit, blockage of legitimate refunds like duty drawback and excise rebate are affecting exports, Ahmed added.
While readymade garments exports declined 17.42 per cent in January 2014, gems and jewellery went down 13 per cent and petroleum by 9.39 per cent.
According to ratings body Crisil, export growth might have been capped by a continued fall in the value of petroleum exports in the month, as crude oil prices averaged $107.4 a barrel in January against $112.9 a barrel at the same time last year.
Crisil observed that export growth had remained in single digits for the third consecutive month in January, and merely edged up to 3.8 per cent from 3.5 per cent in the previous month.
April-Jan growth With exports in the April 2013-January 2014 period barely touching $257 billion (5.71 per cent growth over the corresponding period), achieving the $325-billion export target in the current fiscal year could be difficult.
“It is a tough call, but achievable. Usually, the month of March shows reasonably good numbers. One should hope things will improve,” Kher said. Gold and silver imports fell 77 per cent to $1.72 billion from $7.49 billion in January 2013.
Oil imports, too, fell 10.1 per cent to $13.18 billion in January.
The Commerce Ministry has now sought removal of import restrictions on gold, mainly the 80:20 scheme notified by the Reserve Bank of India, which specifies that 20 per cent of the gold brought into the country by importers has to be re-exported before further imports are made.
“While exports of gems and jewellery should not be getting affected because of the 80:20 scheme, we have recommended a relaxation in the restrictions (on gold),” said Kher.
Overall imports during the April 2013–January 2014 period declined 7.81 per cent to $377.04 billion while the trade deficit came down more than 40 per cent to $119.95 billion.