Merchandise exports reached $303.7 billion in 2011-12, a rise of 21 per cent over $251.1 billion in 2010-11, while imports stood at $488.6 billion, rising 32.1 per cent compared with $369.8 billion in the previous financial year. Thus, though exports surpassed the government’s target of $300 for 2011-12, the surge in imports led to the highest-ever trade deficit of $184.9 billion, and this is expected to raise the current account deficit (CAD) to four per cent of the gross domestic product, against the forecast of 3.6 per cent by the Prime Minister’s Economic Advisory Council.
Swelling of the trade deficit to record levels was primarily attributed to a huge surge in the import of petroleum products and gold. “What has primarily driven trade deficit is petroleum and gold. In these, imports were higher by about $69 billion, compared to 2010-11, and that almost entirely accounts for the rise in the trade deficit from $118 billion in 2010-11 to $185 billion in 2011-12,” Commerce Secretary Rahul Khullar said, while releasing the initial numbers.
The official data on foreign trade would be released on May 2.
Exports in March topped $28.7 billion, the highest monthly figure in the entire previous financial year. Ironically, this was a 0.71 per cent fall compared to March 2010, when exports stood at $30.9 billion. Imports in March stood at $42.6 billion, propelling the trade deficit to $13.9 billion.
“The year-on-year growth is irrelevant. Last year was a boom period for exports. Comparison should be done on a month-on-month basis. The export market had effectively collapsed from September in the previous financial year.…The first six months were almost schizophrenic, while the remaining six months saw a marked deceleration,” Khullar said.
On the outlook for the current financial year, Khullar said exports would face a slowdown, while imports might taper slightly, as he expected petroleum prices and the consumption of gold to moderate. “The silver lining in the cloud is hopefully, while our import bill may increase this year, it would not increase 40 per cent compared to 2011-12. In 2012-13, there would be some rein on gold imports,” he said, while maintaining trade deficit had become a major “cause of worry” for the government.
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Rupa Nitsure, chief economist, Bank of Baroda, said, “Such a trade deficit is definitely very concerning. But the problem is there is no way we can contain this rising trade deficit. Some of the items that have propelled the trade deficit are crucial for our economy and cannot be controlled by domestic factors. The rise in the CAD could have been managed if foreign inflows were robust. This financial year is going to be extremely difficult for India’s external sector.”
Khullar said it was high time nodal ministries such as those of coal, fertilisers and agriculture addressed policy issues to reduce the dependence on imports. Imports of coal, fertilisers and edible oil have added an additional $16 billion to the country’s import bill.
M Rafeeque Ahmed, president, Federation of Indian Export Organisations, said there was “very little scope of maneuvering”, as far as controlling trade deficit was concerned. To boost exports in 2012-13, Ahmed said the government should lower credit rates, provide interest subvention and rebate state and local taxes.