Trade deficit narrows to $9.8 billion in January

Exports grew 4.3% to $22.12 bn while imports rose at highest pace in more than two years to $31.9 bn

Rising for the fifth straight month, merchandise exports grew by 4.32% in January as compared to the 5.7% rise seen in the previous month of December.

Exports registered $ 22.11 billion in January after reaching a 21-month high in absolute terms in December to $23.88 billion, according to data issued by the Commerce and Industry Ministry on Wednesday.

However, imports grew by 10.70% to $31.95 billion, the highest pace seen in more than two years, on account of a sharp uptick in international crude prices.

This also led to higher realization from petroleum exports, which rose by nearly 29% in January, after rising by 8.2% in December. Among other major exchange earners, export of engineering goods rose by 11.89% while ready made garments rose by 2.13%.

Total exports for the financial year up to January, the first ten months, touched $220 billion, a marginal 1.09% higher than the corresponding period in the previous year.

Rising protectionist measures globally had resulted in international trade growth estimates by the World Trade Organisation falling to the range of 1.8% to 3% for 2017. Earlier, the intergovernmental organisation had revised its estimates for growth in 2016 to just 1.7%, the slowest since the financial crisis of 2009.

"Going by the current trend, we are expected to reach around $270 billion this fiscal." S C Ralhan, President, FIEO said.

However, drugs and pharma exports went down by 11.58% after rising by 12.5 % in the previous month of December. The same was true for gems and jewellery sector which registered a 4.49% fall in exports after rising by 27.9% in December.

This is tied to lesser import of gold, which continued to go down in January, falling by nearly 30% to $ 2.91 billion. Import of the yellow metal shrank by 48.5% in December to almost $2 billion, from $4.4 billion in November, which had been a 23% increase.

The November spike was partly due to demonetisation of high-denomination currency - it resulted in a sharp diversion of old Rs 500 and Rs 1,000 notes to buy jewellery on backdated bills.

On the other hand, petroleum imports in January reached $31.95 billion mainly due to a uptick in crude oil prices. Import of petroleum and other crude products rose by more than 61%, significantly higher than the 14.6% rise seen in December.

The Indian basket of oil prices have sharply risen to $54.79 a barrel, as compared to $44.46 a barrel in November and $39.8 in April.

However, non-oil, non-gold imports, taken as a measure of industrial demand in the country continued to rise. It rose by 4.16% in January, after rising by 4.4% in December.

The trade deficit widened to $9.84 billion in January. "The current account deficit is expected to rise sharply to US$ 11-12 billion or 2.0% of GDP in Q3FY2017 from $ 3.4 billion in the previous quarter, led by higher gold imports and crude oil prices.", Aditi Nayar, Principal Economist from ICRA said.