Trade deficit narrowed to $9.12 billion in September, as the pace of growth of imports slowed.
Exports touched a two-year high of $18.02 billion in September, an increase of 23.3 per cent over that in the month last year. Imports grew at a faster pace of 26.1 per cent to $27.14 billion, according to official data released by the government today.
The trade deficit during the month stood at $9.12 billion, compared to $6.91 billion in the corresponding month last year. It was lower than $13 billion recorded in August.
Analysts had estimated trade deficit for the month to be higher and expected it would widen further.
“India’s trade deficit, which had averaged over $11 billion for the first few months of the financial year, unexpectedly narrowed down to $9 billion. Going forward, we expect the base effect to take a greater toll on exports and trade deficit will widen to $140.3 billion,” said Rohini Malkani, economist, Citigroup India.
In 2009-10, the trade deficit had stood at $108.2 billion.
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The increase in imports was seen by analysts as a sign that the domestic demand continued to be robust. “Domestic demand remains robust, as non-oil imports accelerated sequentially, even as oil imports declined...It is too early to tell whether this (export growth) can be sustained, given the likelihood that the weakness in external demand would continue. The current account deficit will continue to increase through the remainder of FY11 due to robust domestic demand and weak external demand,” said Tushar Poddar, vice-president and India chief economist, Goldman Sachs.
In the first six months (April-September), the exports rose 28 per cent to $103.64 billion compared to the same period in the previous financial year, making the government’s export target of $200 billion achievable by the end of the financial year.
The Federation of Indian Export Organisations expressed confidence that the export target for 2010-11 would be achieved as the growth has been good. But the rapid rise in imports remains a weak area, which in the first half of the financial year stood at $166.4 billion, an increase of 29.9 per cent on an annual basis. This translated into a trade gap of $62.83 billion during April-September.
Trends in commodity exports show that exports have been led by petroleum products, ores, engineering goods and gems and jewellery while garments and handicrafts posted negative growths.
Oil imports rose 14.4 per cent to $7.49 billion in September and non-oil imports wre up 31.2 per cent to $19.6 billion. Cumulatively for the current financial year, oil imports increased by 30 per cent year-on-year to $48.71 billion and non-oil imports grew by 29.9 per cent to $117.76 billion.