The country’s merchandise exports in October rose faster than imports for the first time in the last three years. Exports rose to $18 billion, up 21.3 per cent over $14.80 billion in the month last year. Imports, on the other hand, grew 6.8 per cent to $27.70 billion from $26 billion in October last year.
During the first seven months of the financial year through October, exports rose 26.8 per cent to $121.39 billion, over $95.75 billion during the April-October period last year, according to data released by the commerce and industry ministry today.
Trade deficit, or the amount by which imports exceed exports, widened to $9.7 billion in October, from $9.12 billion in the previous month. This has fuelled concerns over the country’s current account deficit.
“We expect the current account deficit (CAD) to remain at 3 per cent of the gross domestic product (GDP). However, a further widening in the deficit due to higher oil imports is a concern to CAD, since quantitative easing by advanced economies could further fuel the recent rally in commodities,” said Citibank economists Rohini Malkani and Anushka Shah in a research note.
The trade deficit for April-October stood at $72.77 billion, higher than $58.31 billion in the corresponding period last year.
According to Federation of Indian Export Organisations (FIEO) President A Sakthivel, diversification of markets is the main reason for such a rise in exports. He, however, said the expanding trade deficit scenario was “not alarming” due to a steady flow of foreign equity into the country.
On the contrary, according to Citibank, while capital flows are likely to be more than sufficient to finance CAD, composition and management of capital flows are the key issues.
Commerce Secretary Rahul Khullar had said while releasing the initial export figures last month that this was for the first time in the last three-four years that the rate of growth in exports was higher than that in imports.
“While the growth in exports is not bad at all, import growth has come down sharply, which is an area of concern. Fall in the growth of imports is an indication of the fact that industrial growth is not healthy, which was seen in the poor IIP (index of industrial production) numbers,” said Nomura India Economist Sonal Varma.
Oil and non-oil imports during the month grew by 0.3 per cent to $8.41 billion and 9.9 per cent to $19.27 billion, respectively. Cumulatively, during April-October, oil and non-oil imports grew by 24.6 per cent to $57.12 billion and 26.7 per cent to $137.04 billion, respectively.
Last month, Commerce and Industry Minister Anand Sharma had formed a group of top bankers and industrialists to advise the government on export competitiveness and doubling overseas shipments in the next three years. The decision was taken at a high-level Board of Trade meeting, comprising top industrialists, bankers, export promotion councils and government officials. This was done to help government meet the target of doubling exports to $400 billion by 2013-14. The group will submit its first report in the next three months.
